Arbitrum Foundation proposes new AIPs after community pushback

The Arbitrum Foundation has acknowledged the negative reaction from users to the initial governance proposal, proposing new AIP as separate components — AIP-1.1 and AIP-1.2.

AIP-1.1https://t.co/qZA1gkUupb

AIP-1.2https://t.co/jFOi5It8Er

Transparency Reporthttps://t.co/XM5oN3F3Ks

— Arbitrum (?,?) (@arbitrum) April 5, 2023

Participants DAO can respond to the AIP within 72 hours. The latter will then be put to a vote within seven days.

The initial proposal sparked a number of complaints from users, which largely concerned transferring control of 750 million ARB tokens (~$0.9 billion at the time of writing) to the Arbitrum Foundation. It was proposed that the Foundation would use these funds to grant awards to develop the ecosystem.

Users also noted that the organization had 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 costs.

As a result, the Foundation acknowledged that the package was too complex and that communication with the community had not been well executed.

The new AIP-1.1 proposes a four-year vesting period, clearly defined budgeting principles and categories, and mandatory transparency reports.

AIP-1.2 covers amendments to the existing foundational documents and lowers the threshold for forming an AIP from 5 million ARB to 1 million ARB, in order to “increase governance accessibility”.

The Foundation also presented a transparency report outlining actions taken to launch the DAO. The parameters and their roles described in the document may change in subsequent AIPs.

“We have taken the feedback into account and have worked hard to ensure that the Arbitrum Foundation can represent the community’s interests,” the statement said.

9/10 We have heard the feedback, and have worked diligently to address it and make sure the Foundation can represent, and serve the DAO’s best interests with their support.

— Arbitrum (?,?) (@arbitrum) April 5, 2023

The Arbitrum Foundation pledged not to move any of the remaining 700 million ARB into wallets until the DAO approves an acceptable budget and vesting schedule.

AIP-1.1 and AIP-1.2 elicited predominantly positive responses from the community, although some users remained upset about the attempt to transfer 750 million ARB.

In an interview with The Block, Maple Finance’s head of marketing Charlotte Dodds noted that the situation around the AIP was caused by a misalignment between short-term incentives and long-term goals.

“Sometimes centralized decision-making is necessary when companies want to scale quickly,” she explained.

The Arbitrum Foundation described the transfer of 750 million ARB tokens as “ratification”, while the community believed that they should have “consulted” on it.

The expert said the problem lies in token holders’ focus on short-term profits rather than the long-term sustainability and mission of the protocol.

“You can achieve decentralization at a purely technical level, but it becomes more challenging at an ethical level. Some token holders have grown accustomed to profits from assets, while building a business is a long process,” she explained.

In the last 24 hours, the ARB price упала на 4%, to $1.21. Over two weeks, the asset has declined by 9.9%.

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