The Arbitrum community initiated a new proposal that may require the Arbitrum Foundation to return 700 million ARB tokens to its DAO Treasury. This move comes in response to the Foundation’s transfer of funds without obtaining community approval in March.
As per the proposal, the Foundation should only proceed with its budget plan after returning the tokens. “This is a symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider or the Foundation,” said one member of the Arbitrum DAO.
The dispute between the Arbitrum Foundation and its community began at the end of March after the Foundation introduced its first governance proposal (AIP-1), which sought to fund its operations with 750 million ARB tokens, equivalent to nearly $1 billion.
The inaugural proposal however faced a backlash from community members. Some members supported the proposal as a way to reward early users and incentivize further adoption; others raised concerns about its fairness and potential negative impact on the platform’s decentralization.
In response to the community’s concerns, the Foundation stated in a forum post on April 2 that AIP-1 was not meant to be a proposal but a ratification. The Foundation also acknowledged that some of the tokens had already been sold for stablecoins, citing communication problems and unclear articulation as reasons for the failure of its initial governance attempt.
Subsequently, the Arbitrum Foundation released a set of new improvement proposals aimed at restoring community dialogue. These proposals included AIP-1.1, which covered a smart contract lockup schedule, spending, budget, and transparency, and AIP-1.2, which addressed amendments to current founding documents and lowered the proposal threshold from 5 million ARB tokens to 1 million to make governance more accessible.
Despite these efforts, the concerns of ARB holders remained unresolved, and the new proposal submitted by the community emphasized the need for the foundation to return the unilaterally allocated $750 million tokens from the DAO, which were not approved by the governance token holders. The proposal stated that “any funds must be returned until it has been properly allocated by the DAO and the DAO only.”
Voting on the proposal will end on April 15. However, as of press time, approximately 75% of the voters kicked against the idea, suggesting that the proposal may not be passed.
Over at the forum, a number of community members labeled the idea as “unnecessary.” One person said:
I think there are understandable reasons to be outspoken about the lack of communication and transparency that the Foundation provided to the DAO but this proposal seems to take an unnecessarily extremist approach.