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News/Arbitrum Governance Controversy Shakes Up Crypto Prices

Arbitrum Governance Controversy Shakes Up Crypto Prices

Apr 3 2023

last year4 minutes read
Coin360Arbitrumrobot (1).jpg



Source: Cryptopolitan

The world of cryptocurrency prices never fails to surprise us. The story of the Arbitrum Foundation and the recent governance controversy is no exception. In this article, we will delve into the details of the controversy surrounding the Ethereum-based Arbitrum token and its impact on crypto prices. Buckle up, as we unfold the story of a decentralized platform facing criticism over centralized decisions.

The Arbitrum Foundation’s Governance Fiasco

The Arbitrum Foundation, known for its popular Ethereum Layer 2 solution, has faced some backlash recently. The issue arose when its first governance proposal, AIP-1, was criticized for being centralized and lacking transparency. The proposal would have allowed the foundation to control 750 million Arbitrum tokens, worth around $1 billion.

Imagine this: you’re part of a community that prides itself on decentralized governance, only to find out that the governing body is making centralized decisions without consulting you. That’s precisely what happened with the Arbitrum community. Eden Au, a research director at The Block Research, raised concerns about the foundation’s decision-making process, noting that it utilized nearly $1 billion worth of ARB tokens before the governance proposal was ratified, without disclosing how the tokens were used.

Responding to the Backlash

The foundation attempted to clarify its actions by stating that the goals of AIP-1 were to engage the community and have token holders signal their support via DAO voting. They reportedly loaned 40 million ARB tokens to market maker Wintermute and sold 10 million tokens for fiat currency to cover operational costs. Despite the clarification, some in the community still objected to the Foundation receiving 750 million ARB tokens ($1 billion) without the approval of token holders.

ARB Tokens Take a Hit, but Whales Hold On

As a result of the controversy, the price of ARB tokens dipped by 12%, sliding from \(1.28 to \)1.14, before bouncing back to $1.2 at the time of writing. Surprisingly, on-chain analysis reveals that many large token holders, or “whales,” haven’t sold their ARB tokens. In fact, several large investors have bought significant amounts of ARB governance tokens in recent days.


Source: Coin360

Whales like 0xe04d and 0xadf5 haven’t sold any tokens, while another whale, 0xa252, received around 676,000 tokens from Binance and now holds a total of 1,679,798 tokens. The largest buyer, 0xb154, still holds almost 10 million tokens with an average cost of $1.26 per token.

While some are still accumulating more tokens, others have sold their tokens at a loss. For example, 0x1dd9 sold 2.03 million tokens for ether at an average price of \(1.15, resulting in a loss of approximately \)141,000. However, they still hold 500,102 ARB. On the other hand, 0x09d4 sent 700,000 ARB tokens n has agreed to divide its governance package into a series of separate votes, following a revolt by holders of its ARB token. The community had expressed anger over how the foundation had held a ratification vote on decisions it had already implemented, including sending close to $1 billion in tokens to itself.

The move comes after the impending failure of the ratification vote on Snapshot. A 750 million ARB token allotment will now be subject to a standalone vote, while Arbitrum’s central grants program, at the center of the controversy, will be rebranded as the Ecosystem Development Fund. Additionally, a transparency report on the foundation’s budget will be provided.

FAQ about Arbitrum

  • Q1: What is Arbitrum?

A: Arbitrum is an Ethereum Layer 2 scaling solution designed to improve the performance and reduce the costs of Ethereum-based decentralized applications (dApps). It uses a technology called Optimistic Rollups to enable faster and cheaper transactions.

  • Q2: How to use Arbitrum?

A: To use Arbitrum, you need to connect your Ethereum wallet, such as MetaMask, to the Arbitrum network. This allows you to interact with dApps built on Arbitrum and perform transactions using the network’s lower fees and faster processing times.

  • Q3: How to add Arbitrum to MetaMask?

A: To add Arbitrum to MetaMask, follow these steps:

  1. Open your MetaMask browser extension.
  2. Click on the network dropdown at the top of the extension (usually set to “Ethereum Mainnet”).
  3. Select “Custom RPC” at the bottom of the list.
  4. Fill in the following details:
  5. Click “Save” to complete the process.

Now, your MetaMask is connected to the Arbitrum network, and you can interact with dApps on Arbitrum.

  • Q4: How to bridge to Arbitrum?


Source: Consensys

A: To bridge assets from Ethereum to Arbitrum, you can use the official Arbitrum Bridge:

  1. Visit the Arbitrum Bridge website (
  2. Connect your MetaMask wallet to the bridge.
  3. Select the token you want to transfer from the Ethereum network to Arbitrum.
  4. Enter the amount you want to bridge and click “Deposit.”
  5. Confirm the transaction in MetaMask and wait for it to be processed.

Your assets will now be bridged to the Arbitrum network and available for use on Arbitrum dApps.

  • Q5: How to buy Arbitrum (ARB)?

A: To buy ARB tokens, follow these steps:

  1. Register and complete the KYC process on a crypto exchange that supports ARB tokens, such as Binance or Coinbase.
  2. Deposit a supported cryptocurrency like Bitcoin (BTC) or Ethereum (ETH) into your exchange wallet.
  3. Search for the ARB trading pair with the deposited cryptocurrency (e.g., ARB/ETH or ARB/BTC).
  4. Execute a buy order for the desired amount of ARB tokens.
  5. (Optional) Transfer your ARB tokens to your personal wallet for safekeeping or to interact with the Arbitrum ecosystem.

Remember to keep an eye on crypto prices and cryptocurrency prices when making a purchase, as they can fluctuate.

In conclusion, the Arbitrum Foundation has faced some hurdles in its journey towards decentralization, but it appears to be taking steps to address these issues. By dividing its governance package into separate votes and providing more transparency, the foundation aims to rebuild trust with the community. Although ARB token prices experienced a temporary dip, large holders have shown confidence in the project’s future. As the world of crypto continues to evolve, it’s essential for projects like Arbitrum to adapt and remain committed to their core principles.

The recent events surrounding Arbitrum have highlighted the importance of transparency and community involvement in the governance of decentralized projects. By addressing these issues head-on, the Arbitrum Foundation has shown its willingness to adapt and grow alongside its community. As we continue to watch the developments in the world of crypto and blockchain, it is essential to keep track of projects like Arbitrum and their impact on the broader ecosystem.

In the rapidly changing landscape of cryptocurrency prices and market fluctuations, staying informed and up-to-date is crucial for investors and enthusiasts alike. By understanding the intricacies of projects like Arbitrum, their underlying technology, and the forces that drive their success, we can make better-informed decisions and contribute to the growth of the crypto ecosystem as a whole.

So, whether you’re a seasoned investor or just starting to dip your toes into the world of crypto, keeping an eye on projects like Arbitrum and staying informed on the latest news can help you navigate the exciting and ever-evolving landscape of cryptocurrency.

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