ARB drops 11% as Foundation dumps tokens for Stablecoins
Arbitrum’s decentralized governance plan has gotten off to a rocky start after the foundation began selling ARB tokens for stablecoins prior to community ratification.
The Arbitrum Foundation had sold 50 million tokens from the 750 million ARB tokens it allocated itself before requesting authorization from the community.
In a blog post on April 2, an employee of the foundation attempted to clarify the actions.
AIP-1
In March, Arbitrum airdropped its users with its token and announced plans to switch to decentralized governance. Prior to the announcement, the foundation had made some decisions, including allocating 7.5% of the total token supply to itself.
The Arbitrum Foundation launched the Arbitrum Improvement Proposal (AIP-1) to ratify these decisions. However, problems arose after it was revealed that the foundation did not wait for the voting results before selling the tokens. Voting closes on April 3, but an overwhelming majority of the community, 70%, have voted against.
Arbitrum’s Foundation Response
Patrick McCorry explained that the foundation sees the AIP-1 proposal as mere ratification. According to him, this is why it started using tokens in the DAO’s interest, including converting some ARB tokens into stablecoins.
McCorry said setting up a DAO creates a chicken and egg problem. In this case, certain parameters require a decision before the DAO is even formed.
From McCorry’s explanation, AIP-1 is not a vote, but a way to inform the community about decisions that have already been made. He added that AIP-1 provides the foundation with some blank checks because they are fundamental for the network to maintain its competitive edge.
Community Lashes Arbitrum
Meanwhile, several members of the crypto community have criticized the foundation’s actions, with some suggesting they buy back the sold tokens.
Crypto investor Zaheer said the foundation has only one way to repair its reputation. According to Zaheer, the foundation should submit a “proposal to buy back the sold ARB and issue a new proposal to the DAO to decide how, when and how much ARB should be sold for the foundation.”
Zaheer added:
“If they double down and keep selling after the community clearly voted against it, all goodwill will be dead in the short term.”
In the meantime, the foundation’s action has negatively affected ARB’s price development. The token has fallen 10.79% in the past 24 hours to $1.17 at press time, according to BeInCrypto data.
Disclaimer
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