Arbitrum to break up governance votes after community backlash

The Arbitrum Foundation has backtracked on a controversial proposal and ratification vote that gave it control of a huge chunk of tokens.

Ethereum layer 2 solutions 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 “committed to addressing the feedback received from the community.”

The move will break up the debatable governance package into smaller segments. The team noted:

“AIP-1 is too large and covers too many topics. We will follow the DAO’s advice and split the AIP into parts. This will allow the community to discuss and vote on the different subsections.”

The U-turn follows a weekend of community backlash over the foundation’s “ratification” vote for decisions it had already undertaken. The proposal would have given the foundation, a centralized company, control over 750 million Arbitrum (ARB) tokens worth around $1 billion.

Critics, such as decentralized finance and decentralization advocate Chris Blec, argued the proposal was “decentralization theatre.”

I just want to clarify:

There is NOTHING decentralized about Arbitrum or Optimism.

Just because you can use a network without permission doesn’t mean it’s decentralized.

Both can halt the chain, modify any code, censor any transaction, freeze any wallet, or steal from the DAO.

— Chris Blec (@ChrisBlec) April 2, 2023

The foundation stated that the 750 million tokens received would be voted on in its own AIP. “We’re working on options to add more accountability,” it stated, adding, “for example, a vesting period of 4 years. Furthermore, tokens held by the Foundation cannot be used to vote.”

There will also be a budgeting proposal, in which the foundation will propose transparency reports “to make the community aware of how the funds are spent over time.”

The Special Grants program is vague and lacks DAO involvement, the foundation stated. It will be renamed “Ecosystem Development Fund” with context provided on how the funds will be used to benefit the Arbitrum cosystem.

Related: Arbitrum’s first governance proposal sparks controversy with $1B at stake

The new Arbitrum Improvement Proposals will be issued “early this week,” the foundation concluded.

ARB token prices took a massive hit over the weekend, slumping 18% from an April 1 high of $1.40 to a low of $1.15 in the April 3 morning Asian trading session, according to CoinGecko.

ARB has seen an 86% price decline since its airdrop on March 23.

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