Cryptocurrencies, blockchain, NFT and new trends

Arbitrum Backtracks On Controversial Proposal After Backlash

Arbitrum Backtracks On Controversial Proposal After Backlash

Ethereum Layer-2 solution provider Arbitrum has backtracked on its proposed governance voting system. This comes after a huge backlash from the community and token holders. 

Instead, the Arbitrum Foundation has released new Arbitrum Improvement Proposals (AIPs). 

Arbitrum’s U-Turn 

The Arbitrum Foundation tweeted that its first governance proposal, AIP-1, would not pass. It added that Arbitrum would address the feedback received from the community regarding the proposals. Instead, Arbitrum stated it would split the governance package into smaller segments, stating, 

“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.”

Arbitrum’s change in stance came after a furious backlash from its community following its ratification vote for decisions already made in the past. The proposal in question would have given the Arbitrum Foundation, a centralized company, control over 750 million ARB tokens valued at around $1 billion. Critics such as DeFi and decentralization advocate Chris Blec stated that such a move was decentralized theatre. 

“I just want to clarify: There is NOTHING decentralized about Arbitrum or Optimism. Just because you can use a network without permission doesn’t mean it’s decentralized. Both can halt the chain, modify any code, censor any transaction, freeze any wallet, or steal from the DAO.”

The foundation further added that it was working on options to add more accountability. It also added that it would also propose transparency reports which would help the community become aware of how funds with the protocol are utilized. The foundation concluded by saying that new Arbitrum Improvement Proposals would be issued later in the week. 

New Governance Proposals 

Arbitrum posted the new Arbitrum Improvement Proposals (AIPs) for the network’s governance on the 5th of April. The new proposals include AIP 1.1. AIP 1.1 covers spending, budgeting, transparency, and a smart contract lockup schedule. The proposal suggests placing the foundation’s 700 million ARB into a smart contract-controlled lockup, which will have an unlocking schedule spread over four years. The foundation would also not be able to use the tokens until the protocol’s community members approve a budget for token allocation. 

The second AIP, AIP 1.2, will look to amend several documents related to the governance of the Arbitrum ecosystem. It will also lower the threshold needed to post an Arbitrum Improvement Proposal on chain from 5 million ARB to 1 million ARB. Arbitrum had confirmed in a tweet on the 5th of April that the DAO had reached a consensus against the first AIP proposal. 

“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.”

The Arbitrum DAO will get three days to propose any feedback on the new proposals, after which the proposals will be put to a week-long snapshot vote. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.