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Is Governance All It’s Chalked Up To Be? Arbitrum’s First Governance Vote Sparks Debate

Governance and decentralization go hand in hand. Since Bitcoin’s inception, crypto maximalists have embraced core components of decentralization, and while ‘governance’ isn’t specifically mentioned in the Bitcoin whitepaper, it’s widely regarded as one of the most important aspects of decentralized environments across the crypto ecosystem.

We’re fifteen years removed from the Bitcoin whitepaper, and the debates over governance are as heated as they’ve ever been. But not everything is in sync. Arbitrum, one of the hottest chains on the market, was the site of some governance-related drama over the weekend. The Arbitrum token (ARB) has been around for less than a month (the chain, of course, has been around much longer) and is already the center of attention – a true ‘crypto moment.’

Last week, the chain’s first DAO proposal (or what many seemed to perceive as such) went live, and community members voted against “AIP-1: Arbitrum Improvement Proposal Framework” by a vote of 100M ARB tokens to 16M tokens (with 14M abstaining).

The token allocation assignment, which detailed 750M tokens beginning allocated to the Foundation – roughly 7.5% of the total allocation, was a major point of contention. 

Despite the fact that the vote did not pass, the 750M tokens had already been transferred to the Foundation, which claimed that AIP-1 was a ‘notice’ (or, as they put it, a ‘ratification’) rather than a vote. Arbitrum is effectively ‘telling’ community members the tokenomics, rather than ‘asking’ for them – which is, in fact, quite common (at least the tokenomics part)… just not through these means.

Life, death, taxes, and, yes, token allocation squabbles. But this one was different.

As our team at Bitcoinist explained earlier in the day on Monday, the ARB token took a 20% drop and then rebounded, which many would argue is a ‘better than expected’ performance. Arbitrum’s total value has largely remained unaffected, indicating optimism from the defi crowd, sitting at over $2.2B at the time of publication.

Beyond the numbers, the situation surrounding Arbitrum reflects a need for greater communication between Foundations and their larger communities; broadly, crypto communities have accepted and unprovoked token allocations for Foundations with the understanding that organizers require some sort of capital allocation in order to operate.

Whatever your stance on tokenomics, proper communication with community stakeholders is critical and largely at the root of this situation – but it is far from ‘irreparable damage’ to the chain.


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