Contentious Arbitrum Vote Over $1B in Tokens ‘Ratification Not Request,’ Says Foundation

The Arbitrum ecosystem’s first community vote over everything from protocol governance to billions of dollars in funding was meant 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 allocating 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 Arbitrum’s failure to convey that reality ahead of the vote.

“The point of AIP-1 was to inform the community of all of the decisions that were made in advance,” McCorry said of the Arbitrum Improvement Proposal Framework, the omnibus governance package that outlines Arbitrum Foundation’s role in shaping the chain, a faster and cheaper way of transacting on Ethereum.

McCorry’s post offered Arbitrum’s first official response to a debacle that exploded Friday after governance hawks called out Arbitrum Foundation’s “special grants” program. According to the proposal, the Foundation is getting 750 million ARB tokens (around $1 billion) to spend that it can use without tokenholders’ approval.

Last week, Arbitrum began airdropping over 1 billion ARB tokens to nearly 300,000 wallets as part of its effort to share power over the network with its users, a common trope in crypto communities. Holders of the ARB token are considered part of ArbitrumDAO, the so-called “decentralized autonomous organization” that votes on proposals such as AIP-1.

But AIP-1 wasn’t much of a vote 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 spending the tokens it was apparently earmarked to get.

The post may serve to confound what has turned into an early crisis for Arbitrum governance. Votes in favor of “ratification” were winning until the past few hours. But the tide has now shifted strongly toward rejection, raising questions of what will happen if AIP-1 is defeated.

McCorry said there’s a “chicken and egg problem” in setting up decentralized governance structures. In the case of Arbitrum, “certain parameters need to be decided” ahead of time, including the structure of a “security council” that wields emergency powers, deciding voting mechanics, and of course, the funding.

Whereas AIP-1 framed the Foundation’s power to issue “special grants” without community votes as an effort to avoid “voter fatigue,” McCorry said these blank check powers are “fundamental” to the ecosystem’s competitive edge. He referred to recent efforts by Polygon and other blockchain companies to land deals with the likes of Starbucks, partnerships that happened behind closed doors.

“While it would be incredible if all traditional companies agreed to do everything on-chain, this is not realistically going to happen,” he said.

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