Arbitrum Community Demands 700M ARB Token Return Amidst Governance Dispute

The Arbitrum Foundation is facing community backlash over the transfer of 700 million ARB tokens, prompting a new proposal to return the tokens to the DAO Treasury. The move comes as the foundation faced criticism for transferring the tokens without receiving the community’s approval.

The proposal, initiated by the community, calls for the foundation to return the tokens before proceeding with its budget plan, as a symbolic gesture to demonstrate that the governance holders ultimately control the DAO. The voting on the proposal will end on April 14, with 55% of voters currently in support, 42% opposed, and 2% abstained.

Screenshot: AIP 1.05: Return 700M ARB to the DAO Treasury. Source: Arbitrum’s DAO.

The dispute between the Arbitrum Foundation and its community began in March, following the foundation’s first governance proposal (AIP-1), which called for funding its operations with 750 million ARB tokens worth nearly $1 billion. However, community members voiced their concern, leading to a backlash against the foundation.

In response to the community’s reaction, the foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal, and some of the tokens were already sold for stablecoins. The foundation also admitted that its first governance attempt failed due to communication problems and decisions that were “clearly not articulated correctly.”

Despite the foundation’s efforts to restore community dialogue, the transfer of the tokens without approval continued to be a source of tension between the foundation and the community. The new improvement proposals, including AIP-1.1 and AIP-1.2, aimed to address the community’s concerns by covering smart contract lockup schedule, spending, budget, transparency, and amendments to current founding documents. The foundation also lowered the proposal threshold from 5 million ARB tokens to 1 million ARB to make governance more accessible.

However, the efforts failed to appease ARB holders, leading to the new proposal that asks for the foundation to return the funds. The community members believe that any funds must be returned until it has been properly allocated by the DAO and the DAO only. The voting result will determine the fate of the proposal and the future relationship between the foundation and the community.