After an airdrop that got a lot of attention, the price of ARB, the new token in the Arbitrum ecosystem, shot up to an all-time high of $11.80 before dropping to $1.21, which is a 90% drop from the record high.
This huge drop is mostly due to a huge amount of selling pressure caused by the “buy the news narrative.” Investors got ready for the March 23 airdrop, but as soon as that happened, they started selling their ARB tokens.
In the last 24 hours, the price of Arbitrum has dropped by another 5%, but its trading volume is still above 1 billion, even though it has grown by 80% in the same time period.
The Arbitrum Foundation Races to Save First ARB Proposal
The first governance proposal for the ecosystem got off to a rough start over the weekend. It wanted to give the Arbitrum Foundation 750 million ARB tokens, which are worth about $1 billion.
According to what the foundation said, these ARB tokens would be put into a program for “special grants” that would help the layer 2 solutions protocol, Arbitrum, grow.
AIP-1 says that Arbitrum Foundation would have full control over how to spend the nearly $1 billion, and ARB holders would not be able to weigh in on the decision.
In other words, because the Arbitrum Foundation is centralized, the special grants program would go through a process called “full on-chain governance,” which lets token holders tell the ecosystem what to do.
Arbitrum’s AIP-1 is a Ratification, The Foundation Clarifies
The Arbitrum Foundation had to explain why it had made some decisions about the proposal and other issues without consulting the community.
In the clarification on the ratification of AIP-1, the foundation told members that some decisions and actions were crucial to the success of the ecosystem before the decentralized autonomous organization took over and that everything was done in good faith and “with the sole goal of making sure that Arbitrum is set up to succeed and compete with its peers.”
Foundation, for example, was set up to start and smooth out the decision-making process so that key “operational questions” like “who hosts the different governance forums where these discussions take place” and “who kicks off governance” could be avoided.
The Foundation admits that it did not make its plans clear to the community and that the “proposal was meant to ratify the initial setup of all the arbitrum DAOs and foundations that have been created to serve the DAO.” The Foundation also did not tell the community about important decisions that had been made earlier.
“Setting up an initial distribution of tokens to the Foundation is a common way to set up ecosystems like Arbitrum, and this was always the goal when AIP-1 was submitted for ratification at the same time that the Arbitrum DAO was announced,” the Foundation said.
The Arbitrum Foundation told the community that ARB “is unique among its peers in that the DAO currently controls the vast majority of community tokens on-chain.” This means that the DAO is in charge of most of the community tokens.
The Foundation says that it is the only foundation that has reached out to the community to help get decisions made before the DAO is approved.
On the huge $1 billion grant in ARB tokens, which is expected to happen off-chain, the Foundation said that it was common to give “a significant token budget” and to avoid “voter fatigue,” which many people might think is an effective way for smaller grants.
The proposal for $1 billion in special grants is a key part of making the Arbitrum ecosystem work.
Arbitrum Price Still Overwhelmed – Where to Next?
The price of arbitrum is now $1.21 after having hit support at $1.1. The new token that was given away for free was supposed to lengthen the leg to $1.4, which would have set off a 25% double-bottom pattern breakout to $1.73, but it seems to have lost speed.
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