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Arbitrum Proposal to Return 700 million ARB Fails by an Overwhelming Majority

AIP 1.05, the controversial Arbitrum Enhancement Proposal aimed at bringing back 700 million ARB governance tokens, was defeated by a majority.

118 million ARBs voted against the idea or 84.01% of all votes cast. In contrast, 21 million ARBs voted in favor of the proposition, accounting for 14.57% of all votes. 2 million ARB voted no.

AIP 1.05 was initially reported as a failure by The Block. Yesterday, 83% of the overall vote was against it. Arbitrum’s governance token has gained over 8% in the last 24 hours. Currently worth about $1.66.

Arbitrum’s governance proposal, titled “AIP 1.05: Return 700M $ARB to DAO Treasury (REAL),” claims that the unauthorized and premature allocation of 700 million ARB tokens, valued at over $1 billion, was a significant authority move — and does not show truly decentralized government.

The crisis started in early April, when the Arbitrum Foundation changed its position on AIP-1, a critical governance initiative. This controversial proposal seeks to transfer 750 million ARB tokens to the Foundation, stating that the tokens will be used to fund investment initiatives leveraging Arbitrum technology.

Despite not obtaining permission from token holders – decentralized autonomous entities in theory responsible for managing Arbitrum – the activity has occurred. Token holders are strongly against it.

According to AIP 1.05, this “serves as a symbolic act to demonstrate that the governance holder, rather than the Arbitrum or Foundation service provider, ultimately has authority over the DAO.” Notable token holders who voted against AIP-1.05 include “0x0eB5,” olimpio.eth, 0xBbE9, galxe.arb, chainlinkgod.eth, and blockworksres.eth, all voting with millions of ARB tokens.”

The perception that smaller electors are primarily concerned with increasing the value of Arbitrum’s governance token, while larger holders — especially delegates — prioritize the long-term viability of the platform and the Arbitrum Foundation’s capacity to distribute tokens could be one reason to vote against the proposal.

Additionally, some may perceive the proposed forced buyback as an extreme measure designed more for publicity than as a viable solution.

Additionally, others say that AIP-1.1 has addressed the controversial money issue because the Arbitrum Foundation wants to transfer tokens to smart contracts by granting rights that DAOs are subject to change. As a result, AIP-1.05 might make the situation even more complicated.

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