Arbitrum's Governance Woes Continue as Latest Proposal Is Shot Down

Arbitrum's Community and Foundation at Critical Juncture 

Arbitrum's new proposal, AIP-1.05, in which 700 million ARB governance tokens were sought to be returned to the DAO Treasury, was recently rejected by the community. Arbitrum initiated the proposal after the Arbitrum Foundation transferred funds without community approval in March. 

There were 118 million votes against the proposal, which accounted for 84.01% of the total vote. However, 21 million $ARB voted in favor of the proposal, comprising 14.57 percent of the total vote. There were, however, 2 million $ARB who abstained from voting.

The new Arbitrum governance proposal titled "AIP 1.05: Return 700M $ARB to DAO Treasury [REAL]" claimed that the allocation of 700 million ARB tokens, worth more than $1 billion, exceeded authority and was not indicative of decentralization.

The proposal sought to demonstrate that the governance holders ultimately control the DAO and neither Arbitrum nor the Foundation.

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Possible Reasons For AIP 1.05 Fail

There has been a mixed reaction from the community to the rejection of the proposal. The token holders who voted against AIP-1.05 include 0x0eB5, olimpio.eth, 0xBbE9, galxe.arb, chainlinkgod.eth, and blockworksres.eth, all of whom cast millions of ARB tokens. 

According to some, the proposal would have added an unnecessary step, preventing the Foundation from supporting the Arbitrum ecosystem's growth. Others, however, believe that balance is essential to promote decentralization and progress.

It is possible that voters who voted against the proposal were influenced by the perception that more-minor voters wanted Arbitrum's governance token to gain more value. At the same time, there was a perception that major holders - mainly delegates - prioritized Arbitrum's long-term viability and the ability to distribute tokens.

Some community members considered the forced buyback a radical measure intended less as a practical solution than a way to gain attention. Furthermore, some argue that AIP-1.1 already addresses the issue of contentious funds because the Arbitrum Foundation intends to transfer tokens to smart contracts with vesting, which DAOs can adjust. Therefore, AIP-1.05 could have potentially complicated matters.

Arbitrum ($ARB) is trading at $1.62, down 1.67% in 24 hours.