The governance drama unfolded over the weekend when ARB token holders backlashed Arbitrum Foundation’s “ratification” vote on already implemented decisions. This led to the Foundation’s decision to split a governance package into a series of separate votes.
On April 2, Arbitrum announced that its first governance proposal, AIP-1, would likely not be adopted due to community backlash, adding:
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 move comes after Arbitrum held its first governance attempt, which erupted following a proposal to give the Arbitrum Foundation control of 750 million ARB tokens, worth nearly $1 billion. The sum is intended to serve as a grant to those involved in fostering the Arbitrum, but the ARB holders would have no say in how and to whom the sum is given, as it would be a decision of the central authority, the Arbitrum Foundation.
Turning down the proposal won some voices. One of the Arbitrum DAO’s largest delegates, ChainLinkGod, told CoinDesk that the Foundation is “listening to the community and incorporating our feedback.” He added: “It’s a good move in the right direction in my opinion.”
Arbitrum Foundation said the allocation of 750 million ARB tokens will be subject to a separate vote. To increase accountability, the Foundation is considering implementing a four-year vesting period and will ensure that its own tokens cannot be used for voting.
It also plans to propose a budgeting system with regular transparency reports, so that the community can track how funds are spent over time.
The Foundation has acknowledged that the Special Grants program lacks participation from DAO and will therefore rename it the “Ecosystem Development Fund,” with clear guidelines on how the funds will be used to benefit the Arbitrum ecosystem.
ARB token price reacted to the news, losing 18% from a high of $1.40 on April 1 to a low of $1.15 on the morning of April 3, according to CoinMarketCap. At the time of writing, ARB regained and is now trading at $1.22. Since its airdrop on March 23, ARB lost 86% in price.
Related: Arbitrum to drop governance token
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