Arbitrum DAO is central to a controversy of the voting manipulation after a user has spent 5 ETH worth around $ 10,000 to buy 19.5 million ARB ($ 6.5 million) votes. Crypto analyst Ignas shared the incident on X and noted that it could have enormous consequences for decentralized administration.
According to Ignas, the user bought Hitmonlee.eth the voices about lobby financing, a Defi protocol with which token holders can delegate their voting protection in a decentralized autonomous organization (DAO) to others. Through the protocol, those who want to influence DAO decisions can buy voting power for a fixed price or auction, while the people who delegate their tokens deserve proceeds.
Hitmonlee.eth spent 5 ETH to get $ 6.5 million to ARB in the voting power (Source: Ignas/X)
The user received enough voices for only 5 ETH, which meant that they appeared for large DAO representatives such as L2Beat and Wintermute. Interestingly, they spent all votes in support of Crypto developer Joseph Schiarizzi to be a member of the Arbitrum supervisory and transparency committee.
The incident has expressed concern in the arbitration community, with many who noticed the most important security risks. Attempts to manipulate DAO governance are not new because there have been cases where some users have tried to acquire more tokens so that they can influence decisions.
Ignas, however, noted that this is a major problem, because attackers can exploit Dao -Governance at minimal costs compared to earlier. In the recent case, the attacker only spent 5 ETH, while Schiarizzi, the beneficiary, could earn about 66 ETH for a year as a committee member.
He said:
“But lobby considerably (reduces) the costs of attacks. In the case of Joseph, he earns $ 7.5k for 12 months (47.1 ETH) as OAT member and potential bonus of 100k ARB (18.7 ETH). It is 66 $ ETH in total for paying 5 ETH in voting power.”
Interestingly, Schiarzzi said he had not asked for the votes and criticized the low costs, and noted that the undervalued voices DAO run the risk of attacks.
Arbitrum Community debates next steps while lobby financing defends its position
In the meantime, Arbitrum Dao debates what the community should do. The DAO is divided on whether or not to allow buying, prohibiting and disqualifying or punishing people who buy votes. However, many stakeholders believe that there is no simple solution, because this problem goes to the root of the current DAO model.
According to Ignas, ARB -Tokenomics must change, otherwise people will remain encouraged to delegate their tokens to other protocols to vote. He noted that as long as voices are the only use of ARB tokens, people have stimuli to use protocols such as lobby.
However, lobby financing has defended its approach and notes that it is very transparent because it offers disclosures about available proposals, and the bid process is open to everyone. It added that the essence of the protocol is to make DAO governance more interesting than the current system, in which few whales control all decision-making.
Nevertheless, Lobby.fi said that it would not change his process to ensure that proposals that pose a high risk for DAOs are not mentioned or that the auction model reflects their meaning.
It said:
“We would not refrain from making a proposal such as we/the community that it can be a considerable danger + our auction model is quite a bit adjusted to make it as safe as it can be, given the nature of things we do.”
Nevertheless, Ignas noted that the lobby’s mission to shake up the DAO board model is a great idea, but comparable platforms with less protection are likely to arise, and this can make manipulation possible. As far as Schiarzzi is concerned, he believes that this can be a good development, because it makes real contributors in Daos possible with limited voting authority to compete better against whales, while people with governance tokens can earn themselves.
