Over the weekend, the ARB token experienced a decline in value. Arbitrum grappled with a governance crisis resulting from the first vote of its DAO. The initial proposal faced an overwhelming opposition of over 78%, leading the organizers to pledge to hold smaller votes in the future.
Earlier this month, the Ethereum scaling solution’s leadership announced the formation of a decentralized autonomous organization or DAO. Furthermore, it correlates with the launch of the governance token, ARB. ARB’s value stems from its role in the ArbitrumDAO, enabling ARB holders to vote on proposals such as AIP-1, which outlines the structure of the DAO and its associated Foundation.
However, the AIP-1 proposal received massive opposition of over 78% of ARB tokens cast. Initially, an Arbitrum employee named Patrick McCorry clarified that AIP-1’s proposal was meant as a formality. The negative sentiment around it resulted from confusion regarding its ratification rather than a request. McCorry explained that “decentralizing a network involves a chicken and the egg issue, and the point of AIP-1 was to inform the community of all of the decisions made in advance.”
AIP-1 Implementation on Arbitrum
Late on Sunday, in response to critics, Arbitrum announced that it would divide AIP-1 into separate parts that would be voted on individually, reversing its initial position. One aspect of AIP-1 that received significant scrutiny was the allocation of 750 million ARB tokens to the Arbitrum Foundation for grants, reimbursing service providers, and covering administrative and operational expenses.
In a blog post, McCorry attempted to justify the figure by comparing it to similar decisions made by other networks. He also disclosed that the Foundation had already used some of the tokens. The team converted them into stablecoins for operational purposes, which amounted to approximately $10 million. In addition, Arbitrum plans to propose measures to address transparency concerns about the spending of the allocated tokens.
The price of ARB fell as far as $1.15 or 11.5% on Sunday before edging back up to $1.19 amid the network’s about-face, according to CoinGecko. ARB is currently the 41st largest cryptocurrency by market capitalization with a total value of around $1.5 billion.
What is Arbitrum?
Arbitrum is a Layer 2 scaling solution for Ethereum. It aims to improve the speed and efficiency of transactions on the Ethereum network. It is built on the Ethereum Virtual Machine (EVM). Therefore, developers can use Solidity to build and deploy smart contracts on Arbitrum. Learn more about Arbitrum on MEXC Blog now!
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