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Arbitrum addresses governance disputes with new proposal: Foundation tokens to unlock over four years, lowers proposal token threshold

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Arbitrum addresses governance disputes with new proposal: Foundation tokens to unlock over four years, lowers proposal token threshold

After the second-layer solution Arbitrum airdropped its governance token ARB, its market value exceeded that of Optimism OP by more than double. Even though the airdrop has ended, the TVL of 22.3 billion USD is much higher than Optimism's 9.2 billion USD. However, dissatisfaction arose in the crypto community after the first governance proposal self-funded nearly one billion USD, casting a shadow on the integrity of the Arbitrum team. In response, the team is actively working on remedies in subsequent new proposals.

Arbitrum's First Governance Proposal Allocates $1 Billion

According to earlier reports, in Arbitrum's first governance proposal AIP-1, the community was dissatisfied as it allocated nearly $1 billion, equivalent to 750 million ARB tokens, to the Arbitrum Foundation as an administrative budget without allowing for resolution.

The voting results showed a high 76.67% opposition.

Interpreting Arbitrum Controversy: Arbitrum's First Governance Proposal Allocates $1 Billion, Criticized for Meaningless Vote as ARB Plummets

AIP-1 Voting Results

Arbitrum Team Releases Remedial Proposal

On April 6, the Arbitrum team announced a new governance proposal on Twitter:

AIP-1.1: Concerning Team Lockup, Administrative Budget, and Transparency

The proposal emphasizes the need for a representative to negotiate partnerships and sign new agreements, despite Arbitrum transitioning to decentralization and being managed by Arbitrum DAO. This is one of the reasons for the Foundation's existence, as the synergy between DAO and the Foundation is beneficial for the development of the Arbitrum ecosystem.

The controversy surrounding AIP-1 made the team realize the need to enhance transparency and introduce more restrictions to the initial funding of the Foundation, including:

  • The remaining 7% of ARB tokens in the administrative budget will be linearly unlocked over four years, releasing 175 million ARB annually through on-chain smart contracts.

  • The first year's operational budget will be paid half in USD and half in ARB, covering expenses such as marketing, research, and administration.

  • Unlocked tokens will be used for ecosystem growth initiatives, directly paid in ARB for strategic partnerships, donations, etc.

  • Transparency reports: The Foundation will provide semi-annual and annual updates for the community to have a comprehensive understanding of the Foundation's expenses and balance sheets.

AIP-1.2: Concerning Foundation and DAO Governance

  • The required tokens for proposing improvements have been reduced from 5 million ARB to 1 million ARB.

  • Changes in the administrative budget include clarifications on special grants, providing a more accurate picture of the Arbitrum Foundation's receipt of 7.5% ARB tokens.

AIP-1.1 and AIP-1.2 proposals will have a 72-hour comment and feedback period, followed by a seven-day voting period after appropriate adjustments.