Arbitrum Governance Proposal Fails to Return 700 Million ARB Tokens to DAO Treasury

Arbitrum, the Ethereum scaling solution, is facing a controversial governance issue that has caused heated debates among its token holders. The drama began in early April when the Arbitrum Foundation proposed sending 750 million ARB tokens to itself, citing the funds’ allocation would finance investment initiatives using Arbitrum’s technology.

However, the decentralized autonomous organization (DAO) that theoretically governs Arbitrum overwhelmingly voted against the proposal, calling it a clear overreach of the DAO’s power of treasury resources.

As a response, Arbitrum Improvement Proposal 1.05 (AIP-1.05) was introduced, aiming to return 700 million ARB tokens, worth over $1,050 billion, “unjustly allocated to the Foundation from the DAO.” The proposal, described as a symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation, is set to fail by an overwhelming majority. As of this writing, 83% of the total vote, representing 113 million Arbitrum governance tokens, have voted against the proposal, while only 20 million ARB tokens have voted in favor of it, and 2.2 million have abstained.

Some token holders have voiced their opposition to AIP-1.05, claiming that smaller voters may only be interested in maximizing the price of Arbitrum’s governance token, while larger holders, primarily delegates, are more focused on long-term sustainability and the Arbitrum Foundation’s ability to distribute tokens. Others view the proposed forced buyback as an “extremist approach” that is a call for attention rather than a realistic option.

This contentious issue has highlighted the significance of DAO governance and its challenges, which will continue to be a hot topic in the foreseeable future. Arnold Toh, a research analyst at The Block, suggests that “how Arbitrum’s governance pans out will likely set an example for many other rollup communities ahead.” Arbitrum is the largest Optimistic Rollup, both in total value locked and valuation, making it a significant player in the Ethereum ecosystem.

Regardless of the outcome of AIP-1.05, the price of Arbitrum’s governance token has increased by over 25% over the past 24 hours, currently trading at more than $1.50 per token. This increase in price may indicate that despite the controversy, the market remains confident in the platform’s potential.

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