Selling ARB Tokens Without Approval, Arbitrum Gets Criticism From Crypto Community

ARB token. (Photo; Doc. Cryptocoin)

JAKARTA - The Arbitrum Foundation, an organization that is building an Ethereum Layer 2 scaling solution, has received strong criticism for selling 50 million ARB tokens without community approval. As a result, the ARB value fell by 11 percent after the sale.

Meanwhile, the Arbitrum Foundation explained that they used the proceeds from the sale for DAO's interests. Arbitrum also revealed that they borrowed 40 million ARB tokens from total on-chain transfers to financial market players. In addition, Arbitrum converted the remaining 10 million ARB tokens into fiat and directed them to operational costs.

The Arbitrum Foundation began selling ARB tokens for stablecoins before obtaining approval from its community, which caused a negative reaction. The Foundation quickly addressed the concerns that arose, including the proposal for a controversial ARB token worth 750 million (approximately 1 billion dollars).

Arbitrum revealed that they sold 50 million ARB tokens out of 750 million tokens allocated to fund current operating costs. The Foundation also states that they have no plans to sell more tokens in the future.

The Arbitrum Foundation responded to several central issues raised by DAO in the decentralized governance setting scheme. On the issue that AIP-1 is too broad, Arbitrum expressed its willingness to follow DAO's advice. The protocol governance setting platform will break AIP into smaller parts to allow communities to discuss and vote on those parts.

"One of the errors in compiling AIP-1 was a failure to note from the start that this proposal was intended to act as a ratification of the initial DAO and Foundation setups made to serve DAO," reads Arbitrum's statement, quoted by CoinSpeaker.

Although the Arbitrum Foundation ratification ends today, the results of the token decision-making process have been seen. As many as 70 percent of the community have chosen to reject the proposal.

In an effort to improve product quality, Arbitrum considers it important to have a empowered Foundation to act in the interest of DAO, but admits that they need to improve communication in order to become more open to the community.

Arbitrum emphasized that the total inventory of ARB tokens of 7.5 percent sent to the Foundation should be more accountable. According to Arbitrum, these recorded tokens will have a binding period of 4 years and cannot be used to vote.

Arbitrum hopes that by increasing transparency and listening to input from the community, they can continue to build the best Ethereum Layer 2 scaling solution product.