Ethereum layer 2 solutions provider, Arbitrum, has made a U-turn on its governance voting system after facing backlash from token holders in the community.
The Arbitrum Foundation, which provides the layer 2 scaling solution, had proposed its first governance proposal, AIP-1, but faced criticism from decentralized finance and decentralization advocates over its “decentralization theatre” approach.
Critics argued that the proposal gave the centralized company too much control over 750 million Arbitrum (ARB) tokens, which are worth around $1 billion. After receiving feedback from the community, the Arbitrum Foundation announced that the proposal is likely to be rejected and that it will break up the proposal into smaller segments.
The foundation stated, “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.” The new proposals will be issued early this week.
The foundation also stated that it will propose transparency reports on its budgeting proposal to make the community aware of how funds are spent over time. The Special Grants program will be renamed “Ecosystem Development Fund,” and the foundation will provide more context on how the funds will be used to benefit the Arbitrum ecosystem.
ARB token prices suffered a massive drop over the weekend, falling 18% from an April 1 high of $1.40 to a low of $1.15 in the April 3 morning Asian trading session, according to CoinGecko. ARB has seen an 86% price decline since its airdrop on March 23.
As the Ethereum network grows and evolves, governance proposals will become more critical in ensuring a fair and transparent system. It remains to be seen how the community will react to the new proposals, but the decision to listen to feedback and break up the original proposal is a positive step towards decentralization.