Governance Token

Arbitrum proposal to return 700M ARB fails, whale calls it a “power play”

The AIP-1.05 was defeated by 118 million votes. The proposal was introduced after the Arbitrum Foundation transferred funds without community approval.

A controversial proposal seeking the return of 700 million ARB governance tokens to Arbitrum’s DAO Treasury was rejected by a massive number of votes on April 15. The Improvement Proposal AIP-1.05 was introduced after the Arbitrum Foundation transferred funds without community approval in March. 

The AIP-1.05 was defeated by 118 million votes, representing 84% of the total votes received, while 21 million ARB tokens voted for the proposal, nearly 14.5% of the total. Around 2 million ARB tokens abstained. The proposal asked the Foundation to return the tokens as a “symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation.”

Screenshot – AIP-1.05: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO. 

On the governance forum, a whale with 4.8 million ARB tokens said the proposal “seems to only serve as a power play” that would add an “unnecessary step” and delay the Foundation’s ability “to support the growth of the Arbitrum ecosystem.”

Another whale voting against the proposal with 18 million ARB tokens stated that balance is necessary to promote decentralization and progress in the ecosystem: 

“There is a balance that we need to try to accomplish between advocating for decentralization and preventing progress in the ecosystem. I believe that decentralization on its ideal form is nowhere to be seen in this industry yet.”

Arbitrum’s community and its Foundation are engaged in a dispute over the Foundation’s governance proposal AIP-1 — which called for investment of nearly $1 billion worth of ARB tokens to fund its operations. After facing community backlash, the Foundation later said that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins.

The AIP-1 proposal was Arbitrum’s first attempt at governance after its tokens airdrop in early March. The Foundation has already released a new set of improvement proposals aimed at reestablishing dialogue with the community.

Magazine: The legal dangers of getting involved with DAOs

Arbitrum proposal to return 700M ARB fails, whale calls it a “power play”

AIP-1.05 was defeated by 118 million votes after the proposal was introduced following the Arbitrum Foundation’s transfer of funds without community approval.

A controversial proposal seeking the return of 700 million ARB governance tokens to Arbitrum’s DAO treasury was rejected by a massive number of votes on April 15. The improvement proposal called AIP-1.05 was introduced after the Arbitrum Foundation transferred funds without community approval in March. 

The proposal was defeated by 118 million votes, representing 84% of the total votes received, while 21 million ARB tokens voted for the proposal, nearly 14.5% of the total. Around 2 million ARB tokens abstained. The proposal asked the foundation to return the tokens as a “symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation.”

Screenshot of AIP-1.05: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO. 

On the governance forum, a whale with 4.8 million ARB tokens said the proposal “seems to only serve as a power play” that would add an “unnecessary step” and delay the foundation’s ability “to support the growth of the Arbitrum ecosystem.“

Another whale voting against the proposal with 18 million ARB tokens stated that balance is necessary to promote decentralization and progress in the ecosystem: 

“There is a balance that we need to try to accomplish between advocating for decentralization and preventing progress in the ecosystem. I believe that decentralization on its ideal form is nowhere to be seen in this industry yet.“

Arbitrum’s community and its foundation are engaged in a dispute over the foundation’s governance proposal AIP-1, which called for an investment of nearly $1 billion worth of ARB tokens to fund its operations. After facing community backlash, the foundation later said that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins.

The AIP-1 proposal was Arbitrum’s first attempt at governance after its tokens airdrop in early March. The foundation has already released a new set of improvement proposals to reestablish dialogue with the community.

Magazine: The legal dangers of getting involved with DAOs

Uniswap funds DAO incentive improvement project

The project will provide at least three proposals for Uniswap incentive mechanisms by June.

Financial modeling platform Gauntlet has been awarded a grant from Uniswap Foundation to improve DAO incentive mechanisms, according to an announcement from Gauntlet.

Gauntlet describes itself as a “crypto-native financial risk management solutions provider.” It uses economic models to optimize fees and rewards for decentralized finance (DeFi) protocols, according to the announcement. The company is creating a new division, Gauntlet Applied Research, which will specifically focus on problems related to the growing decentralized autonomous organization (DAO) ecosystem.

In its announcement, Gauntlet said that it would provide three pieces of research to UniswapDAO. The first will be a quantitative framework that the DAO can use to evaluate the success or failure of the Uniswap protocol. The second will be an analysis of trader and liquidity provider behavior, and the third will be at least three proposals for incentive mechanisms to allow the DAO to achieve its goals.

Gauntlet said that it expects all three of these deliverables to be completed by June.

Devin Walsh, executive director of Uniswap Foundation, expressed hope that Gauntlet’s research will help to improve not only the Uniswap protocol but also the crypto ecosystem as a whole, stating:

“One of our goals at the Uniswap Foundation is to build long-term relationships with the most talented and values-aligned teams in the space, and work with them on the most complex and interesting questions facing the Uniswap Protocol.”

DAOs have become a basic feature of the crypto economy over the past few years, with DAO analytics provider DeepDAO currently listing over 2,300 existing DAOs. Most DAOs are governed by tokenholders, who are allowed to vote directly on the blockchain to support or reject proposals for changes to a protocol.

However, token-based DAO governance has also been criticized by some industry experts, including Ethereum Founder Vitalik Buterin, who stated that this system could lead to “vote-buying” and “outright attacks.”

Over the past few months, some DAOs have attempted to provide better incentive mechanisms in the hopes of preventing vote-buying attacks. For example, MakerDAO passed a constitution on March 27 to formalize governance processes and provide checks and balances to prevent concentration of power.

Community wants Arbitrum Foundation to return 700M ARB to DAO Treasury

A new proposal asks the Arbitrum Foundation to return 700 million ARB tokens after community backlash. Voting ends on April 14.

The Arbitrum community has initiated a new proposal requesting the Arbitrum Foundation to return 700 million ARB tokens to its DAO Treasury. The move comes after the Arbitrum Foundation transferred the funds without receiving the community’s approval in March. 

According to the proposal, the foundation should proceed with its budget plan only after returning the tokens. “This is a symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation,” said a community member.

Voting will end on April 14. At the time of writing, 55% of voters supported the proposal, 42% opposed it, and 2% abstained.

Screenshot: AIP 1.05: Return 700M ARB to the DAO Treasury. Source: Arbitrum’s DAO.

The dispute between Arbitrum’s foundation and its community started at the end of March, following the foundation’s first governance proposal (AIP-1), which called for funding its operations with 750 million ARB tokens — worth nearly $1 billion.

Following backlash from community members, the foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins. At that time, the foundation noted that its symbolic first governance attempt failed due to communication problems and decisions that were “clearly not articulated correctly.”

A few days later, the Arbitrum Foundation released a set of new improvement proposals aimed at restoring community dialogue. The new proposals include AIP-1.1, which covers a smart contract lockup schedule, spending, budget and transparency. The other, AIP-1.2, tackles amendments to current founding documents and lowers the proposal threshold from 5 million ARB tokens to 1 million ARB “to make governance more accessible.”

The efforts, however, did not resolve the issues with ARB holders. “The foundation has unilaterally been allocated $750M tokens from the DAO that was not approved by the governance tokenholders. Any funds must be returned until it has been properly allocated by the DAO and the DAO only,” the proposal says.

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Arbitrum’s first governance proposal sparks controversy with $1B at stake

The Arbitrum Foundation announced that it was only ratifying an existing decision when it proposed a 750 million ARB tokens budget.

A proposal to fund the Arbitrum Foundation with 750 million ARB tokens — nearly $1 billion — raised controversy in the ARB community over the weekend after the foundation announced that the vote was only to ratify a decision that had already been made. 

The conflict comes after a few days the layer-2 protocol airdropped its governance token.

According to the AIP-1 proposal on Arbitrum’s DAO, the 750 million tokens would be used to cover “Special Grants, reimbursing applicable service providers […] and covering ongoing administrative and operational costs of The Arbitrum Foundation.” Over 70% of tokens taking place in the vote had been cast against the move at the time of writing:

Screenshot: AIP-1: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO. 

After facing backlash from community members, the foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal. It added that somof the tokens were already sold for stablecoins. In other words, its billionaire budget and allocations would not be subject to an on-chain governance process. 

Nearly 50 million ARB tokens were moved on-chain in the past few days. The foundation said 40 million tokens had been allocated as a loan to a sophisticated actor in the financial markets space, while 10 million tokens have been converted to fiat currency for operational costs. 

The Arbitrum Foundation said the symbolic first governance attempt failed due to communication problems and decisions that were “clearly not articulated correctly,” writing:

“One of the mistakes in the drafting of AIP-1 was a failure to note at the outset that this proposal was intended to act as a ratification of the initial setup of both the Arbitrum DAO and the Foundation that has been created to serve the DAO. […] the point of AIP-1 was to inform the community of all of the decisions that were made in advance.”

Commenting on the governance forum, members of the community pointed out that Arbitrum’s team “has been dumping tokens that were initially informed to the community as locked tokens,” claiming that “all tokenomics page shows only User airdrop + DAO airdrop tokens as unlocked” with remaining “tokens to unlock in March 2024.”

Others highlighted that under the United States securities laws, the anticipated sale would be considered fraud and that U.S. citizens who have bought ARB tokens or claimed the airdrop “are eligible for legal remedies.”

“I will be pursuing this with my lawyers and expect to file a securities fraud lawsuit in the next few days. […] Immediately, the Arbitrum Foundation is advised to halt all illegal sales of the token that are being done without any authorization and against the provisions of the law,” said a community member.

Arbitrum’s blockchain holds 65% of the Ethereum layer 2 market share, according to data from the layer-2 analytics site L2Beat. The highly anticipated launch and airdrop of its native governance token took place on March 23, with hundreds of thousands of eligible users and DAOs claiming ARB. Overwhelming user demand led the airdrop claim page to crash shortly after its launch, Cointelegraph reported. 

Hodler’s Digest: FTX EU opens withdrawal, Elon Musk calls for AI halt, and Binance news

Update (April 2, at 21:03 UTC): This article has been updated to insert information about 50 million ARB tokens moved on-chain. 

Uniswap’s BNB deployment should use multiple bridges, claims LIFI CEO

The LIFI executive proposed that a team of four researchers be appointed to study the idea of a multi-bridge approach.

As Uniswap DAO’s vote to deploy to BNB Chain continues, LIFI CEO Phillip Zentner argued in a Feb. 6 forum post that the current proposal is flawed. According to Zentner, the plan to use Wormhole as the sole governance bridge for Uniswap should be abandoned. Instead, he claimed that Uniswap researchers should work on a standardized system for using multiple bridges to handle governance decisions.

In the post, Zentner stated that LIFI strongly recommends “that Uniswap not select one bridge provider for its BNB Chain Deployment Proposal” because “no single AMB [arbitrary messaging bridge] is tested enough to be considered a robust and secure solution that a project of Uniswap’s size can solely rely on at this point.”

As evidence of this, Zentner reminded readers of the slew of bridge hacks the crypto community has suffered over the past two years, stating:

“Lest it be forgotten, two major AMBs were exploited in the past twelve months (Nomad and Wormhole), while LayerZero has also come under fire recently for its security model (Prestwich 2, L2Beat). We do not say this as condemnation, rather, we point this out to highlight just how difficult it is to build secure AMBs and the subsequent risks a dApp is exposed to by choosing a single bridging solution.”

For this reason, LIFI wants to see “a multi-bridge, agnostic approach” to Uniswap governance. Zentner proposed that this could be accomplished by appointing a team of four engineers to study the subject and submit a proposal.

Related: Wormhole wins second ‘temp check’ become bridge for Uniswap

The LIFI CEO seemed to imply that the current proposal should be voted down and the date of BNB Chain deployment postponed until at least March 27. According to an image posted by Zentner, the Uniswap team had previously set a deadline of March 27 for a “final report published with community recommendations.” Zenter said that he believes this deadline can still be met, even if the current proposal is voted down.

Venture capital firm a16z recently attempted to use its 15 million UNI tokens to vote the BNB proposal down, due to the firm’s concerns about Wormhole bridge security. However, Metamask developer ConsenSys has used its 7 million UNI votes to support the proposal. The vote is scheduled to end on Feb. 10.

Wormhole wins second ‘temp check’ to become bridge for Uniswap governance

Wormhole got over 60% of the vote in the Uniswap DAO referendum, with LayerZero coming in second.

The Uniswap DAO has approved a second non-binding proposal, called a “temperature check,” to make Wormhole the official bridge for cross-chain governance of the protocol between BNB Chain and Ethereum, according to the official proposal page.

The proposal will now become part of a final plan to deploy Uniswap v3 to the BNB Chain, which will go up for a binding governance vote at some point in the future.

Wormhole was up against three rival bridge solutions in the DAO’s referendum: LayerZero, deBridge and Celer. It got a clear majority with 62.31% of the vote. LayerZero was second with 37.58%, while DeBridge and Celer each got less than 0.1%.

This is the second time the Uniswap DAO has attempted to reach consensus on the choice of bridging solutions. On Jan. 21, the DAO voted in a temp check to deploy Uniswap v3 on the BNB Chain and to utilize Celer bridge to handle cross-chain governance votes. However, even before this vote had finished, some community members had started to express security and centralization concerns regarding the Celer bridge.

Related: DeFi auditor gets $40,000 for identifying Uniswap vulnerability

On Jan. 27, DAO members began voting on this second temperature check to decide specifically on the choice of bridge, with the understanding that the decision to deploy to BNB chain had been settled in the previous vote.

The Solana-Ethereum version of Wormhole was hacked in February 2022, allowing the attacker to gain $321 million worth of crypto in one of the largest decentralized finance exploits ever. However, the Wormhole team replaced the Ether (ETH) in the bridge to reimburse users, and the BNB-Ethereum version of the bridge doesn’t seem to have been affected by the exploit.

LayerZero was recently the subject of controversy, as a rival developer accused the bridging protocol of having security vulnerabilities. The LayerZero team has rejected the accusation, claiming it is misleading.

Binance delegates 13.2M UNI tokens, becoming Uniswap DAO’s second-largest vote-holder

This move will allow Binance to propose governance votes, but is not enough to meet the quorum 4% requirement.

Crypto exchange Binance is now the second-largest entity by voting power in the Uniswap DAO, sitting just behind the venture firm Andreessen Horowitz, or a16z, according to the on-chain list of delegates. 

On Oct. 18, Binance delegated 13.2 million UNI (UNI) tokens from its own books, which represents 5.9% of the voting power — a percentage of tokens delegated to the exchange. Compared to the total supply of UNI, the amount delegated represents 1.3%.

The move will allow Binance to propose governance votes, as it exceeds a threshold of 0.25%, but it’s still below the 4% quorum requirement to pass votes. A recent governance vote reduced the threshold for proposing votes.

On Twitter, Uniswap’s CEO, Hayden Adams, labeled the change as a “very unique situation, as the UNI technically belongs to its users.”

Adams also claimed that it’s unclear how Binance intends to engage with Uniswap decisions, stating that “Binance users would prob prefer to keep these gov rights (similar to what compound has done with cUNI).”

Adams also called on Binance CEO Changpeng “CZ” Zhao to speak about the company’s plans “in the spirit of transparency.” CZ did not respond to Adams’s questions or other users’ inquiries at the time of publication.

Uniswap disclosed on Oct. 13 a $165 million Series B funding round led by Polychain Capital with additional existing investors, including Andreessen Horowitz, Paradigm, Variant and SV Angel. According to the company, the funding will be used to expand its existing product offerings and improve user experience through new web applications, developer tools and a shift toward mobile. The company also intends to launch nonfungible tokens (NFTs) projects in the future. 

The decentralized exchange became prominent during the decentralized finance hype in 2020. The cumulative trade volume of Uniswap surpassed $100 billion for the first time in February 2021. The cumulative volume of the platform’s trading has grown to $1.2 trillion, according to Adams.

Cointelegraph reached out to Binance, but did not receive a response as of the time of publication.

Pro sports league Karate Combat to launch DAO for fan, athlete governance

Karate Combat’s DAO will be launched as part of a three-year sponsorship deal with Hedera’s HBAR Foundation, expected to go live in December 2022.

Karate Combat, a prominent full-contact martial arts league, announced the decision to form a decentralized autonomous organization (DAO) to transition its governance to fans and athletes.

Karate Combat’s DAO will be launched as part of a three-year sponsorship deal with Hedera’s HBAR Foundation, expected to go live in December 2022. Holders of Karate Combat’s in-house governance token, KARATE, will get to vote on various decisions, which include determining the league’s budget, resource allocation, supplier selection, marketing strategy and rule changes.

In addition, the DAO will enable fans to vote on athlete-related decisions such as fighter contracts and fight match-up selections based on predetermined boundaries of influence. Karate Combat plans to distribute 50% of its in-house tokens to the community for free, to be used for participation in the DAO and a gaming application.

Participation in Karate Combat’s DAO is expected to span globally as the league broadcasts in more than 100 countries through mainstream and online channels, including CBS Sports, Eurosport, YouTube and TikTok. Adam Kovacs, the president of Karate Combat, highlighted the need for improving fan engagement, stating:

“The sporting world must evolve to increase engagement with a new generation of fans who have grown up on social media and digital gaming. They expect to be active participants in the action, rather than passive viewers.”

According to Karate Combat, the league hosts an online community of over 3.5 million fans who could potentially help steer future decisions. Shayne Higdon, the co-founder and CEO of HBAR Foundation, envisions the upcoming DAO to attract more users to the Hedera Network, which, in turn, will help bestow “tangible, real-world impact for end-users.”

Related: Tribe DAO votes in favor of repaying victims of $80M Rari hack

Unlike most crypto sub ecosystems that currently explore avenues for recovery, the GameFi industry lacks the involvement of blockbuster titles, according to Kevin Shao, executive president of the Asia Blockchain Gaming Alliance (ABGA).

Speaking to Cointelegraph, Shao highlighted the lack of attention to “game performance” and users’ enjoyment. Rather, he believed that the current GameFi titles focus solely on nonfungible tokens (NFTs) and play-to-earn (P2E) features.

While stressing the importance of accommodating different users’ tastes, he stated that the introduction of several “triple-A” titles in GameFi would be essential for the ecosystem’s comeback.