Arbitrum’s new ARB token sank on Sunday as the network sought to dispel a cloud of confusion that descended on its DAO’s first vote, which organizers said was effectively meaningless.
The direction behind the Ethereum scaling solution announced earlier this month that it was forming a Decentralized Autonomous Organization or DAO, which coincided with the launch of a governance token named ARB.
The token’s value comes from its role within the ArbitrumDAO. ARB owners can play a role in shaping the future of the network by voting on proposals such as AIP-1which outlines details like the structure of the DAO itself and its associated Foundation.
More than 70% of the ARB tokens cast in the AIP-1 proposal have voted against the measure, at the time of this writing. However, an Arbitrum employee Patrick McCorry explained that the AIP-1 proposal was only a formality.
“We believe much of the negative sentiment around AIP-1 was driven by confusion around the notion that AIP-1 was a ratification and not a request,” McCorry said. writing in a blog post. “There is a chicken and an egg [issue] that needs to be resolved when decentralizing a network, and the purpose of AIP-1 was to inform the community of all decisions that were made in advance.
For example, McCorry said there were several elements of Arbitrum’s transition to DAO governance that needed to be established and put in place beforehand, including the formation of a foundation that would be responsible for administration of DAO decisions and the allocation of certain funds.
Since the measures outlined in AIP-1 have already been implemented, community opposition and votes against the proposal are essentially moot.
One of the elements of AIP-1 that has received the most attention is the allocation of 750 million ARB tokens to the Arbitrum Foundation for grantmaking, service provider reimbursement, and coverage of its administrative and operational costs.
McCorry’s post included a rationale for the figure comparing similar decisions made by other networks. He added that the Foundation has already “started using these tokens for the benefit of the DAO, including converting some funds into stablecoins for operational purposes.”
Arbitrum later clarified on Twitter that the total amount of ARB converted into stablecoins was around $10 million.
The price of ARB fell 7.7% on Sunday to $1.18, according to CoinGecko. ARB is currently the 42nd largest cryptocurrency by market capitalization with a total value of around $1.5 billion.
Arbitrum dropped its new ARB token on March 23, and over 1 billion ARB has been claimed by over 550,000 digital wallets, according to a Dune dashboard.
Arbitrum is a scaling solution for Ethereum built by Offchain Labs. It is designed to make Ethereum transactions cheaper and faster by processing them on a separate network and then relaying their receipts to Ethereum en masse.
The AIP-1 proposal was created by Lemma LTD, which McCorry says is one of “a few different service providers” the Arbitrum Foundation is working with to “get started and be able to properly serve the DAO “.
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