Arbitrum governance proposal suggests blacklisting scammers, refunding victims

An Arbitrum community member has put forward a proposal on its governance forum aiming to establish a reporting and blacklisting process for systematic scammers.

The proposal cites a recent case where a scammer utilized a bot to collect airdrops of Arbitrum's governance token. In doing so, it was able to steal more than half a million dollars from multiple wallets. (Arbitrum's airdrop totaled nearly $1.5 billion at current prices.)

"There has been no action taken against the scammer," the proposal stated. "This situation highlights the need for a more robust system for reporting and blacklisting scammers to prevent them from cashing out on centralized exchanges."

"Victims of these scams are left without recourse and suffer financial losses that could have been prevented," it added.

The proposal has only been recently published to Arbitrum's governance forum and will need to gather sufficient momentum for it to have a chance at getting implemented.

Report, investigate and refund

The proposal is primarily broken up into three parts.

First, it seeks to establish a process for reporting scammers by offering a form for victims to alert the DAO — reporting the scammer's wallet address and other information.

Second, it claims the DAO should investigate claims and determine whether or not the alleged scammer should be blacklisted. The blacklist would be public and shared with DeFi platforms and centralized exchanges — reducing the ease at which a thief could cash out.

Third, the proposal says victims should be eligible for refunds up to a certain undefined amount. "This will provide financial relief to victims and demonstrate the DAO’s commitment to protecting its community members," it said.

Implementing the proposal would require resources to be allocated from the DAO to establish reporting processes and refund guidelines. It also requires collaboration with DeFi teams and centralized exchanges, and continual monitoring and review of its effectiveness.

Ongoing governance issues

The proposal comes at a time when Arbitrum's governance, as a whole, is under intense industry scrutiny.

The high-profile Ethereum Layer 2 scaling solution recently backtracked on its key governance proposal after becoming the weekend's hot topic for — at least partially — going ahead with its plans before the governance vote was finished.

On the docket was a plan to send 750 billion Arbitrum tokens, worth roughly $1 billion, to the Arbitrum Foundation. Yet before the conclusion of the governance vote, the Arbitrum Foundation had already sold 10 million governance tokens to "fund pre-existing contracts and pay for near-term operating costs."

The governance vote — rebranded as a "ratification" — ultimately failed, causing problems for the Arbitrum team, which had already allocated the money, and it led to concerns that the DAO had little say in the allocation of funds. Afterwards, Arbitrum team members claimed to be committed to addressing the community's concerns.

"We will follow the DAO’s advice and split the [Arbitrum Improvement Proposal] into parts," community lead eli_defi wrote, noting that "this will allow the community to discuss and vote on the different subsections."