Today, a piece of news about Arbitrum, a star project, has sparked community controversy, which is still ongoing.

According to a blog post by an employee earlier Sunday, the Arbitrum Foundation began selling ARB tokens in the form of a stablecoin before its governance community of token holders “approved” the organization’s nearly $1 billion budget.

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What is the proposal that sparked controversy?

On April 1, the Arbitrum community has launched the Arbitrum Improvement Proposal 1 (AIP-1) proposal, which intends to introduce a decentralized autonomous organizational structure called ArbitrumDAO, which is managed by ARB holders and is located in the Arbitrum Fund in the Cayman Islands. It will serve and be managed by the ArbitrumDAO community, aiming to promote the growth and development of the Arbitrum ecosystem. Lemma, the entity behind the proposal, will also apply for a funding grant of 750 million ARB tokens (worth approximately over $1 billion).

Although the proposal has not yet been approved, a multi-signature wallet has been created with the address "Arbitrum DAO Treasury 2" and has received nearly 700 million ARB tokens, which a representative of the Arbitrum Foundation described as Administrative Budget Wallet.

However, Arbitrum DAO got off to a bad start, and the very first proposal sparked huge controversy.

According to the token economic model announced by the project party at the time of the airdrop, 42.78% (4.278 billion) of the total tokens should have been allocated to the community treasury of Arbitrum DAO. According to AIP-1, the 750 million ARB originally belonging to the community may be misappropriated to the foundation to establish an ecological fund. According to the official caliber, the purpose of this move is "a special donation plan to support the ecological growth of Arbitrum".

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(AIP-1 Voting Page)

In the governance forum, there have been more than one complaints from community members surrounding this proposal. Some investors reported that they held ARB airdrops but could not participate in voting; data on the chain showed that the 750 million ARB allocated in the proposal had been transferred before the proposal was passed; 750 million ARB had security risks and so on.

What is even more criticized is that the data on the chain shows that the Arbitrum Foundation transferred 50 million ARB tokens, and people suspect that the foundation has cashed out a large amount prematurely.

This evening, the Arbitrum Foundation made a clarification on the official Twitter: the foundation did not sell 50 million ARB tokens. 40 million of them were allocated as a loan to a savvy participant in the financial market,secondary title

"Request" or "Approve"? "Chicken" and "egg"?

As for the much-watched AIP-1, the foundation uses an interesting saying as a metaphor, "Which came first, the chicken or the egg?"

While the community has questioned many of the details in AIP-1, the content of these proposals is (at least in the eyes of the foundation) essential. The Arbitrum Foundation believes that considering the core technology transfer and upgradeability of the Arbitrum chain, many parameters need to be determined before the establishment of the DAO. Specifically, this includes handing over the code to the DAO, creating a security committee, setting a time delay for code upgrades, establishing initial rules, establishing an AIP proposal mechanism, initial validators on Nova, DAC, and more.

Therefore, "these rules should be formulated by the DAO" that community members believe is technically impossible. The Arbitrum chain cannot be handed over to the Arbitrum DAO without a series of initial setups. So, it's a "chicken and the egg" question - you can't create a DAO without initial operations by a foundation.

Regarding the token transfer that has already occurred, Arbitrum gave an official reply. The Foundation believes thatAIP-1 is not a grant "request" but rather a "ratification" from the community.

The Foundation believes that the community confuses the concepts of request and approval. The Foundation believes that what is happening now is that the Foundationdecision already made, the proposal is not asking the community for an action, "The purpose of AIP-1 is to inform the community of all decisions that have been made in advance."

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The community questioned, and the price of tokens fell

After a variety of operations that disappointed the community, the behavior of the Arbitrum Foundation has attracted constant criticism from the community, and the price of ARB tokens has also dropped accordingly.

According to the OKX market, the ARB token is currently trading at $1.18, down 9% in 24 hours.

Some community members believe that AIP-1 is not a real vote. What is the point of voting if the content of the proposal has been implemented without the consent of the community?

At present, doubts about this incident have extended horizontally to the industry, and Blockworks Research has voted against this proposal. Blockworks stated that it will work to improve DAO governance and transparency, and denounced AIP-1 as a regression of the current state of community governance. Blockworks believes that as many as 750 million ARB tokens may be controlled by the Arbitrum Foundation run by the three initial directors, Campbell Law, Edward Noyons and Ani Banerjee. They believe the foundation's move increases centralization and strips some power away from the upcoming Arbitrum DAO.

It is worth mentioning that at the time of the ARB airdrop, a total of 137 DAOs received the ARB airdrop.This is also the first large-scale airdrop for the DAO. It is not difficult to imagine that in the next few days, as this incident continues to ferment, many DAO organizations that hold a large number of ARBs will be forced to express their support, or opposition. And their stance will gain or lose the trust of community members.

As the AIP-1 voting deadline approaches, how will the Arbitrum Foundation react if this proposal is ultimately not passed? Odaily will continue to track and report on this incident.