Arbitrum Faces Governance Crisis After Retracting $885M Budget Proposal

Arbitrum Faces Governance Crisis After Retracting $885M Budget Proposal

Arbitrum, a scaling project built on Ethereum, is facing a crisis regarding its governance after retracting a proposal that aimed to allocate a budget of 750 million ARB ($885 million) due to concerns from token holders.

The initial proposal was deemed overly broad, covering several topics, and token holders were anxious about the foundation’s control over the funds.

Despite voting on the proposal beginning last week, it was later discovered that nearly 750 million ARB had already been moved to a separate treasury without approval from token holders, causing significant concern in the community.

Arbitrum has since decided to split the proposal into smaller parts and allow community members to vote on different subsections. The team is also exploring ways to increase accountability, such as implementing a four-year vesting period.

Additionally, the Special Grants program has been renamed the “Ecosystem Development Fund,” and more details regarding fund allocation have been provided.

The team admitted that the proposal could have been communicated better and confirmed that it only sold enough tokens to fund current operating expenses, with no plans to sell more tokens in the near future.

The team expects to propose new AIPs early this week. The governance crisis has resulted in an 18% decrease in the ARB’s price over the weekend.

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