Decentralization and governance go hand in hand. Since Bitcoin’s inception, crypto maximalists have embraced core components of decentralization, and while ‘governance’ isn’t called out specifically in the Bitcoin whitepaper, it’s considered one of the largest elements of decentralized environments throughout the crypto ecosystem.

We’re fifteen years removed from the Bitcoin whitepaper, and the concepts surrounding governance are certainly as loud as they’ve ever been. But it’s not all in unison. One of the hottest chains on the block, Arbitrum, was host to some governance-related drama over the weekend.

Stop And Governance

The Arbitrum token (ARB) is less than a month since it’s public inception (the chain of course, has been around much longer) and is already in the focal point of drama – a true ‘crypto moment.’

The chain’s first DAO proposal (or at least what many seemed to perceive as such) went live last week, and community members voted against “AIP-1: Arbitrum Improvement Proposal Framework” by a count of 100M ARB tokens to 16M tokens (with 14M abstaining).

A major point of disagreement lied in the token allocation assignment, which detailed 750M tokens begin allocated to the Foundation – roughly 7.5% of the total allocation. However, despite the vote not being passed, the 750M tokens had actually already been moved to the Foundation, which argued that AIP-1 was a ‘notice’ (or as they described it, a ‘ratification’) rather than a vote. Arbitrum is effectively ‘telling’ community members the tokenomics, not ‘asking’ for them – which in fact is quite common (well, the tokenomics part)… just not through these means.

Life, death, taxes and yes, token allocation disagreements. But this one had a new twist.

Arbitrum (ARB) has seen relative volatility during community debate around an unusual governance vote. | Source: ARB:USD on TradingView.com

Why It’s Not All Doom & Gloom

As our team at Bitcoinist outlined the movement behind the ARB token’s price action earlier in the day on Monday; the token took a ~20% dip and then rebounded, which many would argue is a ‘better than expected’ performance. Total value locked on Arbitrum has largely gone untouched as well, showing optimism from the defi crowd, sitting at over $2.2B at time of publishing.

Beyond just the numbers, the situation surrounding Arbitrum reflects a need for greater communication between Foundations and their communities at large; broadly, crypto communities have generally accepted and unprovoked token allocations for Foundations with the understanding that there needs to be some sort of capital allocation for organizers to operate.

Regardless of your stance on tokenomics, proper communication with community stakeholders is critical and largely the root of this situation – but certainly isn’t ‘irreparable damage’ for the chain.