The governance voting system used by the Arbitrum Foundation recently caused controversy and backlash. This was due to the sale of 10 million ARB tokens for fiat prior to the formal ratification of its budget by the community.
As a result of the community outrage, the Arbitrum Foundation acknowledged that its first governance proposal, AIP-1, is unlikely to pass. Instead, AIP-1 will be divided into smaller parts to enable the community to discuss and vote on separate subsections.
The team has refuted initial claims that 50 million ARB tokens were sold, clarifying that only 10 million ARBs were sold to fund existing contracts and pay for short-term operating costs. The Arbitrum Foundation emphasized that its purpose is not to sell tokens, but the sale was necessary to finance current expenses. The Foundation has no plans to sell additional tokens in the near future.
Many influential members of the community pointed out that backtracking was necessary, as the original proposal would have given the centralized Arbitrum Foundation control over 750 million ARB tokens worth approximately $1 billion.
Moreover, the team admitted that the governance package did not provide transparency on how funds would be spent. As part of the budgeting AIP, the team will propose transparency reports to ensure the community is informed of spending. The “special grants” program will also be renamed the “Ecosystem Development Fund” to provide context on how the funds will benefit the ecosystem. The DAO will also be able to initiate new grant programs from its treasury at any time.
“The objective in setting up the Arbitrum DAO was to lead by example to create the most decentralized rollup, and despite this blunder of communication, we will continue to aggressively pursue this goal.”
On the run-up to the launch of ARB, on-chain activity of the popular layer-2 solution surpassed previous record highs. However, the recent controversy surrounding the proposal resulted in the token price experiencing a decline over the weekend.
Despite this, whales remained largely unaffected. Two out of the top six whales purchased $811,199 and $1.69 million worth of tokens in the last 24 hours, while two whales sold over $1 million worth of tokens. The remaining two whales have not shown any significant movement.