The Arbitrum Foundation sold 750 million ARB tokens for stablecoins without approval, even before receiving permission for these tokens. The Foundation stated that it spent some of these funds for the benefit of ArbitrumDAO. However, the Foundation’s announcement that it had already started spending ARB tokens created new uncertainties in community governance. The disclosure of transparency issues was criticized by the community as not conforming to established good governance standards.
Following a debacle on Friday, the Arbitrum management launched the Foundation’s private grants program. According to the proposal, the Foundation would have the authority to spend 750 million ARB tokens without the consent of token holders. However, ARB token holders voted against this proposal, halting the Foundation’s plan.
ArbitrumDAO is considered a “decentralized autonomous organization.” However, the Foundation’s pre-spending of ARB tokens raised concerns about community governance. In addition, a proposal called AIP-1 led to a governance crisis. The Foundation planned to allocate 750 million ARB tokens to implement various proposals mentioned in the proposal. However, ARB token holders voted against this proposal, and the Foundation stated that it had already spent some of the tokens mentioned in the proposal, stating that the vote was merely a formality.
The Arbitrum management highlighted the importance of community governance and transparency issues once again. Questions arose about what would happen if AIP-1 was rejected. Arbitrum is trying to solve governance crises using a “security council” structure that uses emergency powers. While AIP-1 framed the authority to give “private grants” without community votes to prevent “voter fatigue,” McCorry stated that these open check authorities were “fundamental” for the ecosystem’s competitive advantage.