The price of Arbitrum is down 18% in three days and some big news broke over the weekend. The Arbitrum Foundation is calling it a “blunder of communication”, but is that what this really is? In this video, I’ve got a lot to tell you about the sale of 10 million ARB tokens, and why there’s backlash against the Arbitrum foundation for moving 40 billion ARB before voters were notified.
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0:00 Intro
1:00 The Controversy
1:49 The Airdrop
3:48 Blog Post
4:38 AIP-1
6:01 Wintermute
6:46 Why Didn’t the Vote Happen On Chain?
7:46 What is the Foundation Supposed to Do?
8:05 API-1 Was Too Big
8:48 Conclusion
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Sources:
https://cryptoslate.com/arbitrum-foundation-said-it-sold-10m-arb-tokens-to-fund-operating-cost/
https://www.forbes.com/sites/leeorshimron/2023/03/30/arbitrums-token-airdrop-sends-network-adoption-soaring/?sh=74a8587b56ed
https://query.nansen.ai/public/dashboards/cQsdv5lvYWeZldyrifurgWEvZk7dSxmR1KYYDUIw?org_slug=default&p_w330_SMSegments=All&p_w331_Airdrop_Eligibility=%5B%22Yes%22%5D&p_w332_action_select=Claim&p_w334_cex_filter=Off&p_w374_claimed_=All&p_w415_SMSegments=All
https://www.coindesk.com/tech/2023/03/29/arbitrum-shows-just-how-messy-and-tricky-crypto-airdrops-can-be/#:~:text=In%20the%20hours%20leading%20up%20to%20the%20airdrop%2C,tokens%20crashed%20in%20response%20to%20high%20server%20demand.
https://twitter.com/cole0x/status/1638000431002718209
https://forum.arbitrum.foundation/t/clarity-around-the-ratification-of-aip-1/12864
https://twitter.com/wintermute_t/status/1642572067752013826?s=20
https://www.wintermute.com/
https://forum.arbitrum.foundation/t/clarity-around-the-ratification-of-aip-1/12864
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The price of Arbitum is down 18% in three days. And some big news broke over the weekend. The Arbitrum Foundation is calling it "a blunder of communication." But is that what this really is? I've got a lot to tell you about the sale of 10 million ARB tokens And why there's backlash against the Arbitrum Foundation For moving 40 million ARB before voters were notified. Find out more. Let's get it! Welcome to BitBoy Crypto! My name is Ben. No channel works harder to keep you in the know about crypto and controversy. Today, we're going to be talking about the Arbitrum controversy That started over the weekend because of the first Arbitrum improvement proposal, AIP-1. ARB is a governance token and supposed to be used to vote on updates to the network. What ended up happening is the proposal had so many moving parts, The holders were left wondering if the wool had been pulled over their eyes. Are the holders being paranoid? Or are they correct for being suspicious? To be clear, The part of the proposal under the most scrutiny is the foundation's Allocation of 750 million ARB tokens to itself. Total supply of ARB tokens, by the way, is 10 billion. Oh, and, also, they've already moved 40 million and sold 10 million Without the community's consent. So let's take a look at the airdrop. It's already not looking good, but there's more to the story. Let's Quentin Tarantino this video and go back to how it all started. The handling of the airdrop. As most of you already know, Arbitrum just airdropped its ARB token to early users, And the whole community has been waiting on what was supposed to be One of the biggest and most profitable airdrops in recent history.
Redemption went live on March 23, With a distribution of 1.162 billion tokens, Which is just over 11% of the supply. They used the point system to decide who will get what. And it all came down to how many transactions people made on the network, When they made them and how much ETH they used to transact. The average user got 1,859 ARB tokens With some users getting as many as 10,000. When ARB token started trading, The price jumped over $11 And drops significantly within minutes to under $2. Users were able to claim a billion dollars worth of ARB tokens within hours. But there were lots of bugs, issues, crazy fees and scammers Making things frustrating and complicated. In the week leading up to the airdrop, Crypto Twitter went into a frenzy of speculation on the new token price. Some were even buying ARB tokens over the counter hoping for a huge win. A lot of people were thinking this project was so hyped That it had nowhere to go but up. Projections were being shared from anywhere from $1 to $10 after launch. But we should have known. History tells us airdropped coins notoriously fall hard. And crypto is pretty committed to "buy the hype, sell the news" price action. In the hours after redemptions, Crypto Twitter turned from euphoric to frantic. As token claimed, website crashed, gas fees for redeeming tokens spiked. About half of the claimants were able to get their tokens within an hour of the airdrop, But most weren't so lucky. Around 10,000 people were successfully scammed by fake Arbitrum accounts. The price stabilized and even recovered in the following days. That's until stonecoldpat published a blog about AIP-1, And a bunch of people sold their tokens. So let's check out this blog post by stonecoldpat, An Arbitrum employee.
It was purposed to engage with the questions being raised over AIP-1. The first thing he did was admit That the foundation should have been clear with communication and quicker to respond. He said they've staffed up the foundation, I guess after they sold all them tokens, And will be able to improve communication going forward. Pat compared setting up the DAO to the problem of the chicken and the egg With the ultimate question being whether the parameters of the DAO Should be decided by the community Or whether the parameters are set and the community gets to govern What they've been given. The Arbitrum Foundation was established to make those preliminary decisions Before infrastructure was established for holders to vote and made decisions. But when the first improvement proposal was given to the DAO, Holders felt like they were getting lied to. The problem with AIP-1 is that it was supposed to ratify or validate Steps the foundation took to set up the DAO and the foundation in the first place. This wasn't communicated properly to holders. According to the Arbitrum Foundation, They want voters to agree or disagree with what the foundation has already done. According to the holders, They weren't told why they need so many tokens for operating costs And why it seems like this is being pushed through. Selling 10 million tokens, Moving 40 million to a sophisticated actor Just wasn't enough clarity for voters. Can you blame them? After all, the purpose of the airdropped tokens is to help govern the network. The ARB token is supposed to give users the ability to vote on how the protocol works. I'm not saying Arbitrum can't come back from this. I think they will. But it's pretty obvious their community is super upset about how this played out. Moving forward, Wintermute confirmed on a Twitter post they received 40 million ARB tokens as a loan
And only the remaining 10 million was converted to fiat. This fiat was allocated to operational costs. On the post, They called Wintermute a sophisticated actor in the financial market space. Wait a minute. What is a Wintermute? Wintermute is an algorithmic market maker that specializes in digital assets. They provide liquidity to over 50 exchanges Including Binance, Coinbase, Kraken and many others. So moving these funds could make sense for the overall health of the Arbitrum ecosystem. I mean, after all, traders need ARB tokens liquidity on exchanges and so does the network. But I agree. Their user base should have known about this before it happened. Another big question was why they did the vote this way And why the Arbitrum Foundation needed such a big token budget. Reasoning came down to the need for the foundation To engage with companies and organizations in real life. It's for business reasons, competitive advantage. Traditional companies can't do everything on-chain. And Arbitrum needs to have access to those companies to stay competitive. Legitimate or not, The price of ARB token has fallen 18% in three days, Which is almost expected after all this hype leading up to the airdrop. A lot of people got free money. And when people get free money, A lot of times, they're going to sell. Only so many people will have the diamond hand mentality when they're chasing airdrops. You can't blame the ones out there just trying to make a quick flip. I understand why people would have diamond hands for Arbitrum though. It's designed to be multifunctional through DAO governance. To our knowledge, Arbitrum is the only layer 2 Where token holders can simultaneously control upgradability Via on-chain executable governance,
Appoint and remove foundation directors and directly control an on-chain treasury. So what does the Arbitrum Foundation supposed to do for its holders? Governing documents have been drafted that it has to abide by. Significant governance authority has been given to ARB holders. ARB holders are given unique authority more than other L2s To appoint and remove foundation directors and amend the foundation's governing documents. But the real problem with AIP-1 was it was too big. That's what she said. A lot like a huge all encompassing bill, The Congress tried to pass and to sneak in some other stuff they want us to agree with When there are too many pages and the people sign it away With a TLDR mindset. It stands for "too long, didn't read," folks. ARB token holders felt that AIP-1, Well, it tried to pass too many things with one vote. The voting package had everything from governance, emergency powers, funding and grants. I agree with the sentiment that these things should be voted on individually. According to Patrick McCorry of the Arbitrum Foundation, The point of AIP-1 was to let the community know the decisions that were made in the past So that they can move forward. The network had its airdrop and first governance vote. And things didn't go smoothly. What that means now for the price of ARB is? This is make or break time for Arbitrum. And look. I'm not saying this is the end from Arbitrum. It's just a shame that it's only been running for a few days And it's already had these problems. Right now, it's a good time to be patient. Because Arbitrum has yet to prove whether or not they're going to be a solid layer 2 protocol. First impressions mean a lot, But that doesn't mean they can't turn it around. Let's wait and see how the next few months play out. Overall, I would like to say this.
I'm very bullish on Arbitrum. I think this is going to pass the test. I think this will become one of the top layer 2 platforms and protocols out there. I think right now it's bumped its head and made some mistakes. But will they can learn from this? And to be honest with you, while the price has dropped 18%, Look over the last week. It went up and then came back down. So this doesn't mean that Arbitrum is going to go to 20¢ or 2¢ or something like that. What this means is that Arbitrum now has got to move past the hype And build some real momentum. Also, make sure to tune in tomorrow night at 10PM Because, in that video, we're going to talk about some new airdrops coming on the horizon Where you can make some real money, hopefully, with less hiccups. Isn't that annoying when you get the hiccups for like a really, really long time? That's all I got. Be blessed. BitBoy out.
