Ethereum Layer 2 solution provider Arbitrum has backtracked on its governance voting system following community backlash from token holders.
On April 2, the Arbitrum Foundation tweeted that its first governance proposal, AIP-1, "likely will not pass" and added its "commitment to address feedback received from the community."
The move will break up the contentious governance package into smaller segments. The team noted:
โAIP-1 is too big and covers too many topics. We will follow the advice of the DAO and break the AIP into parts. This will allow the community to discuss and vote on the different subsections.โ
The U-turn follows a weekend of community backlash over the foundation's "ratification" vote for decisions it had already made. The proposal would have given the foundation, a centralized company, control of more than 750 million Arbitrum (ARB) tokens worth around $1 billion.
Critics, such as decentralized finance and decentralization advocate Chris Blec, argument the proposal was โtheater of decentralizationโ.
I just want to clarify:
There is NOTHING decentralized in Arbitrum or Optimism.
Just because you can use a network without permission doesn't mean it's decentralized.
Both can stop the chain, modify any code, censor any transaction, freeze any wallet, or steal from the DAO.
โChris Blec (@ChrisBlec) April 2, 2023
The foundation stated that the 750 million tokens received would be voted into their own AIP. โWe are working on options to add more liability,โ she stated, adding, โfor example, a 4-year vesting period. Also, tokens held by the Foundation cannot be used to vote.โ
There will also be a budget proposal, in which the foundation will propose transparency reports "so the community knows how funds are being spent over time."
The Special Grants program is vague and lacks DAO involvement, the foundation said. It will be renamed "Ecosystem Development Fund" and will provide context on how the funds will be used to benefit the Arbitrum ecosystem.
Related: Arbitrum's first governance proposal sparks controversy with $1B at stake
The new Arbitrum Improvement Proposals will be issued "earlier this week," the foundation concluded.
ARB token prices took a big hit over the weekend, falling 18% from an April 1 high of $1.40 to a low of $1.15 in the morning Asian trading session on April 3, according to CoinGecko.
ARB has seen a price drop of 86% since its airdrop on March 23.
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