ArbitrumDAO to Redo Controversial First Vote: Here’s What Happened

The Arbitrum Foundation has already sent itself 750 million ARB even though the DAO vote hasn’t ended yet.

A hand holding an ARB token casting a vote
  • The Arbitrum Foundation has sent itself 750 million ARB and even sold some, even though the DAO vote hasn’t ended.
  • Over 80% of voters have voted against the proposal allowing the foundation to allocate and use the tokens.
  • The Arbitrum Foundation acknowledged the failed first vote and said it would redo it by breaking the proposal into smaller parts.

Setting up decentralized autonomous organizations (DAOs) is hard. It’s so hard that despite being the main governance mechanism for crypto projects, there are only a handful of examples where a DAO functions as intended.

The latest instance illustrates why DAOs are incredibly complex to create and maintain the ArbitrumDAO, which received extensive criticism for managing the first proposal of its newly-created DAO.

Arbitrum Foundation Holds a Sham Vote

Arbitrum, an Ethereum Layer-2 scaling project that just launched its governance token, ARB, has found itself in a difficult situation following the controversial vote on the first proposal of the ArbitrumDAO.


Last Tuesday, the Arbitrum Foundation, a newly-created entity responsible for governing the Arbitrum protocol through the DAO, released AIP-1. This first proposal proved a colossal mistake in some people’s eyes.

The foundation proposed to transfer 750 million ARB tokens, worth around $1 billion at the time of writing, to itself for making grants, reimbursing service providers, and covering its administrative and operational costs.

The Arbitrum Foundation then set up a vote for ARB holders to vote in favor or against the proposal. 


However, the vote turned out to be a sham since once ARB holders started voting overwhelmingly against the proposal, the Arbitrum Foundation came out and clarified that the proposal was a “ratification” rather than a “request.”

The Arbitrum Foundation has already transferred the 750 million ARB tokens described in the proposal. On top of that, the centralized entity said it has already sold ten million ARB for fiat to cover operational expenses and allocated 40 million ARB “as a loan to a sophisticated actor in the financial markets space.”

More than 80% of ARB holders have voted against the proposal at the time of writing. Around 14% voted for it, and 3% abstained.

However, with most of the Arbitrum community disapproving of the move and heavily criticizing the Arbitrum Foundation, the entity decided to redo the controversial vote.

ArbitrumDAO to Redo Controversial First Vote

The Arbitrum Foundation went to Twitter on Sunday to say that the initial vote shows that the proposal will “likely not pass” and will be split into smaller parts.

“AIP-1 is too large and covers too many topics. We will follow the DAO’s advice and split the AIP into parts. This will allow the community to discuss and vote on the different subsections.”

One of those parts that ARB holders will get to vote on separately is the 750 million ARB tokens the foundation sent to itself. In addition, the foundation said that it would provide more transparency on how these funds will be spent.

“AIP-1 does not discuss transparency over how the funds will be spent. As part of the budgeting AIP, we will propose transparency reports to make the community aware of how the funds are spent over time.”

Arbitrum’s governance token reacted negatively to the news. ARB went down as much as 17% from $1.40 to $1.16 and is now trading at $1.18, according to data from CoinGecko.

On the Flipside

  • It’s unclear what Arbitrum will do with the funds it has already sold and allocated as a loan to a “sophisticated actor in the financial markets space”.

Why You Should Care

Arbitrum is the leading Ethereum Layer-2 scaling solution. It must have transparent and effective governance for the industry’s and its users’ sake.

Read more about how an Arbitrum airdrop hunter sold millions of ARB:
Arbitrum ‘Super Airdrop Hunter’ Sells All ARB for $1.27M Profit

Read more about Citi’s report on asset tokenization:
Trillions in Assets Could Be Tokenized by 2030: Report

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Arturas Skur

Arturas Skur is a cryptocurrency news reporter at DailyCoin who covers Web 3.0 domains, DeFi, and Ethereum Layer-2s. With over five years of experience in journalism and public relations, Arturas brings his critical thinking and analytical abilities to deliver insightful news stories. In his free time, he enjoys hiking, playing with his dog, and reading.