Arbitrum U-Turn: Foundation Listens to Community and Splits Controversial Governance Package into Separate Votes

The Arbitrum Foundation caused a stir in the crypto community when it started selling ARB tokens ahead of the vote to ratify its $1 billion budget. After considerable opposition, the Foundation promised to split the controversial governance package into separate votes, in an effort to appease the community.

The Arbitrum Foundation made headlines recently when it came to light that it had sold 50 million ARB tokens out of the 750 million ARB tokens it had allocated to itself without asking permission from the community. This revelation sparked a heated reaction from crypto investors, prompting the Foundation to respond and explain the move in an official blog post.

In the blog post, the Community Lead with the handle Eli_DeFi explained that the omnibus governance package Arbitrum Improvement Proposal (AIP-1) had been thought of as a “ratification” of decisions that had already been made. The Foundation had already started spending the tokens it was apparently earmarked to get even before the vote to ratify was conducted.

This sparked criticism from the Arbitrum community. The Foundation acknowledged the backlash and promised to listen to the community and split AIP-1 into parts to be voted on one by one. This would give the community an opportunity to weigh in on the important decisions that are being taken by the Foundation.

The Foundation also pledged to provide more context on the funds being used in the Ecosystem Development Fund and a transparency report on its budget. This move was seen as a step in the right direction by one of DAO’s biggest delegates, ChainLinkGod.

In addition to splitting the AIP-1 package into parts and granting the community more say in the proposal, the Foundation also pledged it has no plans to sell more tokens in the near future. This statement was seen as a sign of good faith by crypto investor Zaheer, who added that the Foundation has only one way to repair its reputation – to submit a proposal to rebuy the sold ARB and to issue a new proposal to share with the DAO how, when, and how much ARB will be sold for the Foundation’s use.

Since the Foundation’s announcement, sentiment towards the network has changed significantly, although ARB’s price performance has not been affected so far. Following its announcement, the vote to ratify AIP-1 has started to move in the direction of rejection. If it continues on this trajectory, it remains to be seen what the Foundation’s next move will be.

The Arbitrum Foundation’s U-turn to break up a controversial governance package and respond to the community’s feedback may be seen as a win by many in the crypto community. Nevertheless, this debacle shows the difficult path ahead for decentralized networks when it comes to governance. As McCorry pointed out, setting up DAOs often present a chicken and egg problem in terms of making decisions before the network is even formed. Perhaps it is something that the crypto community ought to be aware of before launching attempts at decentralized governance in the future.

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Chris Griffin
Chris has had a career as an advisor to the tech industry, incubating start-ups in the tech industry. Welcoming Chris to contribute his expertise covering the latest things he sees in blockchain