The Arbitrum community’s first governance vote failed.

The Arbitrum Foundation declined to hold the community vote on the first governance proposal because of negative user reaction.

Thanks to all the DAO participants and delegates for their feedback on AIP-1. It likely will not pass and we are committed to addressing the feedback received from the community.

More details in the thread ??

— Arbitrum (?,?) (@arbitrum) April 2, 2023

«Thanks to all participants and delegates DAO for their feedback on AIP-1. It is unlikely to pass, and we are committed to considering the feedback received from the community», — wrote the team.

The proposal drew a number of complaints from users, largely over the transfer of Arbitrum Foundation control of 750 million ARB tokens (~$0.9 billion at the time of writing). It was proposed that the foundation would use these funds to award grants to develop the ecosystem.

Users also noted that the organization sold 50 million ARB from the treasury ahead of the vote.

The Arbitrum Foundation explained that of this amount 40 million ARB were transferred to “an experienced market participant.” The remaining tokens were indeed sold for fiat to cover operating expenses.

«The Foundation is a separate entity from the developer firm Offchain Labs and was created without funding», the team reminded.

The Arbitrum Foundation noted that the aim of AIP-1 was to ratify the «initial decisions and structure» of the project’s decentralised governance. Accordingly, the package turned out to be too complex. The team also acknowledged shortcomings in community communication.

On the main issues raised during the discussion, the foundation decided to:

• follow the advice and split the AIP into parts;
• hold a separate vote on allocating 750 million ARB with new proposals for greater accountability of the DAO grant program and transparency of all expenditures;
• introduce a vesting period (for example, 4 years) for funds allocated to the initiative and exclude them from the vote.

The Arbitrum Foundation plans to present new AIP at the beginning of April.

ARB price over the weekend fell about 13% — from around $1.40 to near $1.22.

According to CoinGecko, the token is trading about 86% below the post-airdrop high of $8.67.

As noted, the ARB distribution began on March 23 and caused network issues. The total supply of governance tokens will be 10 billion.