The developers of Arbitrum, one of the most popular Ethereum layer 2 scaling solutions, received backlash from the community for their initial proposal to allocate a large portion of the newly released ARB tokens to themselves and their foundations.
The proposal, known as AIP-1, was submitted to the Arbitrum DAO, a decentralized autonomous organization that manages the protocol, on March 28. The proposal proposed transferring 750 million ARB tokens (worth approximately $1 billion at the time) from the protocol treasury to the Arbitrum Foundation, a Cayman Islands-registered organization that oversees Arbitrum's development.
The proposal also stated that the foundation would have full authority over how the 700 million tokens remaining in the treasury would be used and would not be subject to any transparency or accountability measures.
Many members of the Arbitrum community were outraged by this proposal, which they saw as a betrayal of decentralization and a takeover by developers. They accused the foundation of being opaque, greedy and unreliable and demanded that the proposal be withdrawn or revised.
After the criticism, the developers behind Arbitrum took a step back and revised their proposal. They have released three new documents on the platform's website, which they say address key areas of concern.
The foundation claimed that it used 50 million tokens in 750 million ARBs for the benefit of the DAO and allocated 40 million ARBs as a loan to a financial institution and 10 million ARB for operational costs.
Arbitrum Foundation Announces It Will Not Move Remaining 700 Million Tokens Without Community Approval
The developers said that the Arbitrum Foundation will not move any of its 700 million tokens remaining in the Management Budget Wallet until an acceptable budget and smart contract lock-in program is approved by the DAO.
The first document is a transparency report detailing the Foundation's initial establishment. The report describes what has been done to activate the DAO, but the DAO is not asked to vote on them as they have already taken place. However, DAO will be able to change these parameters and roles through future AIPs.
The second document, AIP-1.1, proposes significant restrictions on the Foundation's spending, including a smart contract-backed lockdown program that has been rolled out linearly over four years. AIP-1.1 also provides mandatory transparency reports with well-defined budget principles and categories.
The third document, AIP-1.2, proposes changes to the DAO's core steering documents. It makes management more accessible by lowering the recommendation submission threshold from 5,000,000 to 1,000,000 tokens. It also edits the Foundation's charter to remove references to AIP-1.
1/10 With the ArbitrumDAO reaching consensus against AIP-1, it's now time to incorporate community feedback, and move forward with new AIPs and documentation that address key areas of concern.
— Arbitrum (💙,🧡) (@arbitrum) April 5, 2023
*Not investment advice.