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# Arbitrum's First Governance Proposal Caused Controversy and Concerns Over the Decentralized Nature of the Project
- URL: https://www.metatalks.ai/arbitrums-first-governance-proposal-caused-controversy-and-concerns-over-the-decentralized-nature-of-the-project/
- Published: 2023-04-03T07:20:51.000Z
- Updated: 2023-04-03T07:20:51.000Z
- Author: Katelyn Chow
- Tags: arbitrum, #helen, buzz

The very first ([AIP-1](https://snapshot.org/?ref=metatalks.ai#/arbitrumfoundation.eth/proposal/0x3be7368a662d1cf12fa4da768d626edbc013be0dc7b994fef2e24d9a54e4033a)) proposal voted with [newly airdropped governance tokens](https://www.metatalks.ai/what-we-should-know-about-arbitrum-airdrop/) ([$ARB](https://twitter.com/search?q=%24ARB&ref=metatalks.ai)) caused a conflict with the community of the project when it turned out that [Arbitrum Foundation](https://arbitrum.foundation/?ref=metatalks.ai) began [selling $ARB for stablecoins](https://cointelegraph.com/news/arbitrum-s-first-governance-proposal-sparks-controversy-with-1b-at-stake?ref=metatalks.ai) even before its community had "ratified" the organization's nearly $1 billion budget.

![](https://lh5.googleusercontent.com/mQryH9st7HVs9Ju0-1hJhT_UxvekQXvmcs5FHEqf8ySFGx9F2GwswlMN6zVs3OCFG1ODb1nX0k9W82DXETR5xUkFA5pz7cCWahWlu1tQbkNBbA4Jk38txcNSqGz-v3CnawacQK6qQ60Mi3HAjyq9TQE)

> Arbitrum foundation made a proposal (AIP-1) to allocate 750M ARB tokens for admin and op costs, but [$ARB](https://twitter.com/search?q=%24ARB&src=ctag&ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai) holders voted against it  
>  
> Now they said the vote was just a formality, and they have already spent 50.5M (6.7%) of the proposed 750M [$ARB](https://twitter.com/search?q=%24ARB&src=ctag&ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)  
>  
> Your vote is not vote [pic.twitter.com/lvhBbBesum](https://t.co/lvhBbBesum?ref=metatalks.ai)
> 
> — Eden Au (@0xedenau) [April 2, 2023](https://twitter.com/0xedenau/status/1642502145839890432?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)

The [AIP-1](https://snapshot.org/?ref=metatalks.ai#/arbitrumfoundation.eth/proposal/0x3be7368a662d1cf12fa4da768d626edbc013be0dc7b994fef2e24d9a54e4033a) proposal on Arbitrum's DAO suggests that the 750 million tokens would cover "Special Grants, reimbursing applicable service providers \[...\] and covering ongoing administrative and operational costs of The Arbitrum Foundation." But [$ARB](https://twitter.com/search?q=%24ARB&ref=metatalks.ai) holders voted [over 82% against this move](https://snapshot.org/?ref=metatalks.ai#/arbitrumfoundation.eth/proposal/0x3be7368a662d1cf12fa4da768d626edbc013be0dc7b994fef2e24d9a54e4033a) at the time of writing:

![](https://lh3.googleusercontent.com/B96TJ4j5SF53TjAifxBEJ_dzuViWOnEG1_IQ6iPevrcOPKRA5kQbVdiP1tC5rMV1lPlKFOhYaZdLyJqWS_eGnBntLczVanPNTv2xjQbRaxNXhS5pYyf7npNVGcRQebPPXo0Clw-cqmoObhR_6RsRQhM)

Following criticism from the community, the Foundation clarified in a [forum post](https://forum.arbitrum.foundation/t/clarity-around-the-ratification-of-aip-1/12864?ref=metatalks.ai) that AIP-1 was "not a proposal but rather a ratification." It further explained that a portion of the tokens had already been sold for stablecoins, meaning the allocation of its billionaire budget would not be subject to an on-chain governance process.

![](https://lh4.googleusercontent.com/TbKNiNF6lcwB0eujSLSMASCa8INunVdm87ojh8x3Xruf8ulv8bMke_w6emXI-YXl1eAqTRZD7df19-dpo__y0Y3u1jenVHkT2P-SIN38DCAww8RQaDQk9GYIud8kX8ValZaJdsxO_TQjTzgz9gSNzRE)

This caused reasonable annoyance in the community, to which the project team had to [respond urgently](https://twitter.com/arbitrum/status/1642567153067933697?ref=metatalks.ai)… but In a rather peculiar way:

> 4/ The goals of AIP-1 were to engage the community about initial decisions and ultimately have token holders signal their support by ratifying the initial decisions and framework via DAO voting, and we're grateful for community feedback.
> 
> — Arbitrum (💙,🧡) (@arbitrum) [April 2, 2023](https://twitter.com/arbitrum/status/1642567426049994752?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)

![](https://lh6.googleusercontent.com/yq9KwB5jb7tbGUkrtJIo_V1XQvSLEoM40ycRKv4W9lsl0sxMpwVID5BgmRkACZREVLaD-zr5kGWbLKn1j-CBi_Mw7wbzno8EOGkhSUMhP45Gk9skKl_3Nvj_Q9i-VE4Fh7738mB2ff4IxBtH8ZUn6LY)

![](https://lh5.googleusercontent.com/5adLPpqbb2wK4DSVCdAxR0jdol1AlKRtGwF3vCTDPqZiN5Sdi7wsAWuJtyDtXlkN7i8RaqDzTTvDf00qIhvpmmG2F7ZRhn8kdhd8FEqxKmpg1hODcoeL2x9H180nuY8AtgsHsyM033NrPN_8B4xGFCg)

Commenting on the governance forum, members of the community pointed out that Arbitrum's team "has been dumping tokens that were initially informed to the community as locked tokens," claiming that "all tokenomics page shows only User airdrop + DAO airdrop tokens as unlocked" with remaining "tokens to unlock in March 2024." Others highlighted that under the United States securities laws, the anticipated sale would be considered fraud and that U.S. citizens who have bought ARB tokens or claimed the airdrop "are eligible for legal remedies." ([Source](https://cointelegraph.com/news/arbitrum-s-first-governance-proposal-sparks-controversy-with-1b-at-stake?ref=metatalks.ai))

Basically, despite the proposal being rejected by the community, the Foundation had already spent 6.7% of the 750 million ARB tokens.

Even the project partners had to deny participating in this story:

> Blockworks Research is voting AGAINST AIP-1: Arbitrum Improvement Proposal Framework  
>  
> We are committed to improving DAO governance and transparency, and this proposal represents a step backwards in its current state. 👇[@arbitrum](https://twitter.com/arbitrum?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai) [@OffchainLabs](https://twitter.com/OffchainLabs?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)[https://t.co/jvqnEi1wam](https://t.co/jvqnEi1wam?ref=metatalks.ai)
> 
> — Blockworks Research (@blockworksres) [March 31, 2023](https://twitter.com/blockworksres/status/1641843788716060672?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)

[AIP-1](https://snapshot.org/?ref=metatalks.ai#/arbitrumfoundation.eth/proposal/0x3be7368a662d1cf12fa4da768d626edbc013be0dc7b994fef2e24d9a54e4033a) is clearly slated to fail, and Arbitrum [pledges](https://www.coindesk.com/business/2023/04/02/arbitrum-foundation-scraps-vote-pledges-redo-after-arb-tokenholders-revolt/?ref=metatalks.ai) no 'near-term" $ARB sales amid community revolt.

> Thanks to all the DAO participants and delegates for their feedback on AIP-1\. It likely will not pass and we are committed to addressing the feedback received from the community.  
>  
> More details in the thread 🧵👇
> 
> — Arbitrum (💙,🧡) (@arbitrum) [April 2, 2023](https://twitter.com/arbitrum/status/1642653013062868992?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)

> 1) AIP-1 is too large and covers too many topics. We will follow the DAO’s advice and split the AIP into parts. This will allow the community to discuss and vote on the different subsections.
> 
> — Arbitrum (💙,🧡) (@arbitrum) [April 2, 2023](https://twitter.com/arbitrum/status/1642653307993833473?ref%5Fsrc=twsrc%5Etfw&ref=metatalks.ai)

…And that was seemingly enough to win back some influential voices:

![](https://lh3.googleusercontent.com/K30trjgH_J2JsfWTkjj3kRhvbVoOGhb5AWzSjk4D7iph9ZUtUN2VNANdpCLxzX5kylsnW-50TWwfqIrP6afIdsb1ebkq9YLii23rK1POvwJNr-uJ3OAMaRouvxkbI2_40uHtdfpf7gB7QwFquLBtE3M)

But [Chris Blec](https://twitter.com/ChrisBlec?ref=metatalks.ai), among others, would like to clarify:

![](https://lh3.googleusercontent.com/LKAiKWqMxKKlWCYll2efIAGO-qAtsWup3tI6X0dAUpTI0FSrxoUKF85Tx7xg3Cj02qalUzhUVxl0dxBxo8d6rhFjUH-ID5sUckYJskp8KmqK7s9YJOa6f_1wqi4BpAA_WudvFX6XGAIv70LJL-sjRZU)