Disputed Arbitration Vote Over $1B in Tokens ‘Ratification Not Request’, Foundation Says
The Arbitrum ecosystem’s first community vote on everything from protocol governance to billions of dollars in funding was intended as a “ratification and not a request,” Arbitrum Foundation employee Patrick McCorry said in a forum post early Sunday.
To that end, many of the positions outlined in AIP-1 — including the allocation of 7.5% of all ARB tokens to the Foundation, a centralized company in the Cayman Islands — have already been implemented, McCorry said. He apologized for the Arbitrum’s failure to convey this reality before the vote.
“The point of AIP-1 was to inform the community of all the decisions that were made beforehand,” McCorry said of the Arbitrum Improvement Proposal Framework, the omnibus governance package that outlines the Arbitrum Foundation’s role in shaping the chain, a faster and cheaper way to trade Ethereum.
McCorry’s post provided Arbitrum’s first official response to a debacle that erupted Friday after governance hawks called out the Arbitrum Foundation’s “special grant” program. According to the proposal, the foundation gets 750 million ARB tokens (around $1 billion) to use which it can spend without token holder approval.
Last week, Arbitrum began sending over 1 billion ARB tokens to nearly 300,000 wallets as part of efforts to share power over the network with its users, a common trope in the crypto community. Holders of the ARB token are considered part of the ArbitrumDAO, the so-called “decentralized autonomous organization” that votes on proposals like AIP-1.
But AIP-1 wasn’t much of a voice at all, according to McCorry’s explanation; at least not when it came to the budget requests. He said the Arbitrum Foundation has already started using the tokens it was apparently earmarked for.
The post may serve to confuse what has become an early crisis for Arbitrum governance. Votes for “ratification” prevailed until the last hours. But the tide has now turned strongly towards rejection, raising questions about what will happen if AIP-1 is defeated.
McCorry said there is a “chicken and egg problem” in setting up decentralized governance structures. As for the Arbitrum, “certain parameters must be decided” in advance, including the structure of a “security council” that has emergency powers, decisive voting mechanics and, of course, its funding.
While AIP-1 framed the foundation’s power to issue “special grants” without a community vote as an effort to avoid “voter fatigue,” McCorry said these blank checks are “fundamental” to the ecosystem’s competitive advantage. He referred to recent attempts by Polygon and other blockchain companies to get deals with the likes of Starbucks, partnerships that happened behind closed doors.
“While it would be amazing if all traditional companies agreed to do everything on the chain, this is not going to happen realistically,” he said.
