Market Analysis Report (03 Apr 2023)

Arbitrum, the popular layer 2 scaling solution, recently airdropped its governance token, ARB, to users who interacted with its platform. The token is supposed to enable decentralized governance of the protocol and its parameters, but its governance has led to significant community backlash.

The first governance proposal made by the Arbitrum Foundation, the entity behind the project, dubbed AIP-1, sought to allocate 750 million ARB, worth around $1 billion, to the Foundation’s budget for special grants, reimbursements, and operational costs.

The Foundation claimed that the proposal was only a ratification of a decision that had already been made and that some of the tokens were already sold for stablecoins. In response, ARB token holders accused the Foundation of being undemocratic, untransparent and possibly fraudulent.

The backlash was so strong that the Foundation had to backtrack and hold redos. The Foundation pledged to split the proposal into parts and provide more context and accountability for its budget and actions, while making it clear it has no near-term plans to sell more tokens.

Arbitrum is a layer-2 scaling solution for Ethereum that aims to provide fast, cheap and secure transactions, using a technique called optimistic rollup, which allows users to execute transactions on a sidechain and periodically submit proofs to the main chain.

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• Source: https://www.cryptocompare.com/email-updates/daily/2023/apr/03/