Arbitrum’s Plan to Return 700M ARB Fails

A controversial Arbitrum Improvement Proposal (AIP-1.05) seeking to return 700 million ARB tokens to the DAO Treasury met with overwhelming opposition on April 15. for himself, despite not receiving approval from the DAO.

Arbitrum, TVL’s largest tier 2 network, is now governed by a decentralized autonomous organization (DAO), which voted largely against AIP-1.05. According to certain reports, some holders of governance tokens found the proposal to be too unrealistic and ‘short-sighted’.

Origin of proposal AIP-1.05

The origin of the AIP-1.05 proposal dates back to the first weekend in April, when the Arbitrum Foundation backtracked on a critical proposal – Arbitrum Improvement Proposal-1 (AIP-1). The AIP-1 proposal included a plan to transfer 750 million ARB tokens to the Arbitrum Foundation, which would be invested in initiatives built on Arbitrum’s technology.

Although the ruling DAO voted vehemently against the AIP-1 proposal, it looked like it would pass anyway – without approval from token holders. However, after the decentralization of Arbitrum’s governance was questioned, the Foundation called AIP-1 a ‘ratification’, and a different set of proposals (including AIP-1.05) were created to address the initial proposal.

The proposal summary for AIP-1.05 states that “what happened with AIP-1 was a clear exaggeration of the DAO’s power over treasury resources”. He also states that the proposal “is a symbolic gesture to demonstrate that governance holders ultimately control the DAO, not the service provider Arbitrum or the Foundation”.

Reasons behind AIP-1.05 failure

However, the Arbitrum-1.05 Improvement Proposal was not favored by the overwhelming majority of ARB voters. As per reports, the move has not received support from most ARB token holders. 118 million ARB tokens voted against the proposal, representing 84% of the total votes received.

Meanwhile, 20 million tokens voted in favor of the proposal – approximately 14.57% of the total votes. Around 2 million ARB tokens chose to sit on the fence. As stated earlier, many voters were not in favor of the AIP-1.05 proposal because they believed that the foundation’s long-term ability to distribute tokens was more important than a short-term price increase.

Other crucial reason what is believed to have been opposed to the proposal is that it did not recognize that the issue of funding was already addressed in AIP-1.1. The foundation had already planned to transfer the tokens into a smart contract with takeover, which the DAO can modify. It is believed that implementing AIP-1.05 only complicates this situation too much.

According to data from CoinGecko, the ARB token currently trades at $1.64, with an impressive 40.9% price increase over the past week.

ARB trading at $1.6311 | Source: ARBUSD chart from TradingView