- The Arbitrum Foundation faces backlash over its governance voting system and the sale of 10 million ARB tokens before community ratification of its budget.
- The foundation admits the first governance proposal (AIP-1) is unlikely to pass and plans to split it into smaller parts for community discussion and voting.
The Arbitrum Foundation has faced significant backlash over its governance voting system and the sale of 10 million ARB tokens for fiat before the community had formally ratified its budget. In response to the community outrage, the foundation acknowledged that the first governance proposal – AIP-1 – is unlikely to pass and will be split into smaller parts for the community to discuss and vote on.
The Arbitrum team issued a clarification on Twitter, stating that the proposal was a ratification, not a request, and refuting the initial claim of a 50 million ARB token sale. They clarified that 10 million ARB tokens were sold to fund pre-existing contracts and cover near-term operating costs. The foundation also emphasized that it “does not exist to sell tokens” and has no plans to sell more tokens in the near term.
Notable community figures highlighted the importance of backtracking on the proposal, as it would have enabled the centralized Arbitrum Foundation to control over 750 million ARB tokens worth around $1 billion. Arbitrum admitted that the controversial governance package lacks transparency regarding fund allocation. In response, the team behind the protocol will propose transparency reports to inform the community.
The Arbitrum Foundation’s “special grants” program, criticized for its vagueness and lack of DAO involvement, will be renamed the “Ecosystem Development Fund.” Its focus will be to provide context on how the funds will benefit the ecosystem. Additionally, the DAO will have the ability to initiate new grant programs from its treasury at any time.
Despite the communication blunder, the Arbitrum Foundation reiterated its commitment to creating the most decentralized rollup. The recent drama surrounding the governance proposal affected the token’s price, causing declines over the weekend. However, whale activity remained largely unaffected. Data shows that two of the top six whales purchased $811,199 and $1.69 million worth of tokens in the last 24 hours, while two other whales offloaded over $1 million worth of tokens during the same time frame. The remaining two whales exhibited no significant movement.