Governance and decentralization go hand in hand. Since the inception of Bitcoin, crypto maximalists have embraced the core components of decentralization, and while ‘governance’ is not specifically mentioned in the Bitcoin whitepaper, it is widely considered to be one of the most important aspects of a decentralized environment across the entire crypto ecosystem.
We’re fifteen years removed from the Bitcoin whitepaper, and the debate over governance is as hot as ever. 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 longer) and is already in the limelight – a true ‘crypto moment’.
Last week, the first chain DAO proposal (or what many seem to presume) went live, and members of the community voted against “AIP-1: Arbitrage Enhanced Proposal Framework” by voting 100 million ARB tokens to 16 million tokens (with 14 million abstentions). ). ).
The assignment of token allocations, which details the 750 million tokens that will be allocated to the Foundation – roughly 7.5% of the total allocation, is a major point of contention.
Despite the fact that the vote did not pass, 750M tokens have been transferred to the Foundation, which claims that AIP-1 is an ‘announcement’ (or, as they say, ‘ratification’) rather than a vote. Arbitrum effectively ‘tells’ community members about tokenomics, rather than ‘asking’ them – which is actually quite common (at least the tokenomics part)… just not in this way.
Life, death, taxes, and, yes, token allocation squabbling. But this one is different.
As explained by our team at Bitcoinist the previous Monday, the ARB token fell 20% and then recovered, in what many think is a ‘better than expected’ performance. Arbitrum’s total value remains largely unaffected, showing optimism from the defi crowd, sitting at just over $2.2 billion at the time of publication.
Beyond the numbers, the situation surrounding Arbitrum reflects the need for greater communication between the Foundation and their larger community; broadly speaking, the crypto community has accepted and has not provoked the allocation of tokens to the Foundation with the understanding that administrators need 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 far from ‘irreparable damage’ to the chain.