tl;dr
A recent incident in Arbitrum DAO raised concerns about decentralized governance as a user spent $10,000 to control $6.5M in votes, sparking governance worries. The user obtained voting power via Lobby Finance, raising questions about the integrity of voting and potential vulnerabilities. The benefi...
A recent incident in Arbitrum DAO raised concerns about decentralized governance as a user spent $10,000 to control $6.5 million worth of votes, sparking governance worries. The user obtained voting power via Lobby Finance, raising questions about the integrity of voting and potential vulnerabilities. The beneficiary of the activity acknowledged the threat posed by vote buying. Lobby Finance disagreed with potential security risks and claimed to aim for engaging and beneficial on-chain governance. The DAO is debating potential responses, including disqualifying purchased votes. Critics argue that significant changes to tokenomics may be necessary to counteract the effects of on-chain lobbying.
A recent vote-buying incident within Arbitrum DAO has raised concerns about the viability of decentralized governance as investors exploit on-chain mechanisms to acquire influence through borrowed voting power. According to an April 8 report by crypto analyst Ignas, a user identified as hitmonlee.eth spent 5 Ethereum (ETH), approximately $10,000, to obtain 19.3 million ARB tokens’ worth of voting power via the Lobby Finance (LobbyFi) platform.
Ignas highlighted that Lobby Finance’s economic structure significantly reduces the capital requirements for governance influence. By outsourcing voting power, token holders receive passive yield, while buyers can direct DAO decisions without long-term alignment or exposure. This introduces vulnerabilities similar to those exploited in past governance attacks, such as the 2021 Compound DAO incident, where a participant acquired tokens on the open market to approve a $24 million payout in COMP tokens. Schiarizzi, the beneficiary of the voting activity, publicly acknowledged the threat posed by vote buying, calling it “underpriced and risky.” He added that he did not solicit the votes and advocated for governance structures where the cost of extracting value from a DAO exceeds the value itself to discourage opportunistic behavior. Although LobbyFi acknowledged the report, it disagreed with the potential security risks the platform might present to governance models.
The Arbitrum DAO is now evaluating potential responses to vote-buying markets. Governance forum discussions have surfaced proposals ranging from disqualifying purchased votes to imposing penalties for confirmed violations, while some participants advocate allowing free-market competition to determine outcomes. Critics argue that significant changes to tokenomics may be necessary to counteract the effects of on-chain lobbying. As platforms like LobbyFi expand, governance participants are calling for technical, structural, and economic reform with increasing urgency. The events are an example of the growing tension between decentralized ideals and the realities of open market conditions in on-chain governance.