The Arbitrum Foundation has abandoned a controversial proposal and approval vote that would have given it control of a large number of tokens.
Ethereum layer 2 solutions provider Arbitrum has backtracked on its governance voting system after receiving backlash from the token holder community.
On April 2, the Arbitrum Foundation tweeted that its first governance proposal, AIP-1, "may not pass," adding that it was "committed to addressing the feedback received from the community."
The move would break up the controversial governance package into smaller parts. The team noted:
“AIP-1 is too large and covers too many topics. We will follow the DAO’s recommendations and split the AIP into multiple parts. This will allow the community to discuss and vote on different subsections.”
The U-turn comes after a weekend of community backlash over the Foundation’s “approval” vote on a decision it had already made. The proposal would have given the Foundation, a centralized company, control of 750 million Arbitrum (ARB) tokens worth about $1 billion.
Critics, such as decentralized finance and decentralization advocate Chris Blec, consider the proposal “decentralized theater.”
The foundation said the 750 million tokens received will be used to vote in its own AIP. “We are investigating options to add more accountability,” it said, adding, “For example, a 4-year vesting period. Additionally, tokens held by the foundation cannot be used for voting.”
There will also be a budget proposal in which the foundation will present transparency reports "to allow the community to understand how funds are spent over time."
The foundation said the special grant program was vague and lacked DAO involvement. It will be renamed the Ecosystem Development Fund and provide background information on how the funds will be used to benefit the Arbitrum ecosystem.
The new Arbitrum Improvement Proposal will be released “early this week,” the foundation concluded.
The ARB token price took a big hit over the weekend, falling 18% from a high of $1.40 on April 1 to a low of $1.15 during early Asian trading hours on April 3, according to CoinGecko data.
Since the airdrop on March 23, the price of ARB has fallen by 86%.