On a Sunday, questions about Arbitrum’s governance are being raised after its centralized, self-titled foundation sold ARB tokens before the conclusion of a major governance vote, therefore rendering the democratic process useless.
The Arbitrum Foundation will get 750 million ARB governance tokens (worth approximately $1 billion) under the “special grants” program to spend without the express permission of token holders.
The Arbitrum Foundation says “decentralized governance is working as intended” via both the official Arbitrum Twitter account and a long governance forum post, while rebranding the fundamental Arbitrum Enhancement Proposal vote as a “ratification.”
It further claimed it did not sell 50 million governance tokens, but rather assigned 40 million “as a loan to a sophisticated participant in the financial markets arena” and converted 10 million to fiat for “operating expenditures.” Wintermute, a prominent market maker, confirmed the former via retweet.
The saga follows last week’s high-profile airdrop of Arbitrum governance tokens to users of the Ethereum Layer 2 scaling solution, in which more than one billion ARB tokens were distributed to nearly 300,000 wallets, resulting in the formation of a so-called decentralized autonomous organization, ArbitrumDAO.
Token holders and the broader crypto community have flocked to Twitter to express their worries (and make jokes) about the seeming lack of decentralized autonomy. A broader theme is that some people don’t believe the Arbitrum Foundation’s extensive argument, stating it’s just a bunch of jargon for “we sold.”
According to the Arbitrum Foundation, this is simply a “chicken and egg dilemma,” as “certain parameters must be set” before true decentralized governance can be achieved. It further asserts that the large “special grants” help to prevent “voter fatigue” and are critical to the project’s viability in the face of competition.
As of 3:00 p.m., AIP-1 was poised to fail, with more than 77% of the total vote against its passage. EDT. Arbitrum’s governance token has dropped by 8% in the last 24 hours.
