Arbitrum Foundation, which recently transitioned to a decentralized autonomous organization (DAO) following the ARB token airdrop, said it would likely not move forward with the controversial governance proposal that would have given the organization control over more than $1 billion worth of ARB tokens. The U-turn follows backlash from the community amid decentralization concerns.

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

AIP-1 Proposal is “Decentralization Theatre,” Critics Say

The Arbitrum Foundation has backtracked on its controversial governance proposal and ratification vote following significant backlash from the community. Arbitrum said the proposal, known as AIP-1, would “likely not pass,” adding the foundation remains “committed to addressing the feedback received from the community.”

Over the weekend, Arbitrum Foundation submitted a proposal that would have granted the organization control over more than 750 million ARB tokens, worth around $1 billion, through a ratification vote for decisions Abitrum had already made. The move raised concerns among the community, resulting in significant criticism against the Ethereum L2 solution provider.

The community members said AIP-1 would have given too much control to a centralized entity and would undermine the organization’s decentralized nature. Critics such as the decentralization proponent Chris Blec said the proposal was “decentralization theatre.”

Arbitrum to Split Up Governance Package Into Subsections

Following the backlash, the foundation was forced to make a U-turn. It conceded that AIP-1 was too large and covered far too many topics, adding it would follow the community’s advice and break up the governance package into smaller segments.

“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 wrote in the Twitter thread.

In addition, Arbitrum said that the 750 million tokens would be voted in a separate AIP. It is considering other options to improve accountability, including a vestige period of four years for the tokens. Further, tokens owned by the foundation cannot be used to vote, Arbitrum said.

The L2 scaling solution provider also said it would submit a budgeting proposal that will include transparency reports in an effort “to make the community aware of how the funds are spent over time.” Also, the Special Grants program, slammed by the community for its vagueness and lack of DAO involvement, would be rebranded to “Ecosystem Development Fund.”

Last month, Arbitrum announced the long-awaited ARB token airdrop, marking a landmark shift to DAO governance of its Arbitrum One and Arbitrum Nova networks. The network saw a substantial activity increase in the past several months amid the token airdrop speculation. ARB was down 5% in the past 24 hours and 89% since its airdrop.

This article originally appeared on The Tokenist

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