After facing a significant amount of backlash over the AIP-1 proposal, the Arbitrum Foundation has committed to allocating tokens only after the community’s approval.

In an announcement on Wednesday, the Arbitrum Foundation said it would keep the remaining 700 million ARB tokens in its wallet until the decentralized autonomous organization (DAO) governing it approves a budget and lockup schedule.

The Arbitrum Foundation also released a transparency report, going over details of how the entity was set up, and two governance proposals, presenting a prospective token lockup schedule, operating budget and a framework for DAO governance. 

The move follows a controversial first governance proposal – AIP-1 – which drew harsh criticism from the community after it was released over the weekend. The original AIP-1 proposal called for allocating 750 million ARB tokens, worth around $1 billion, to the Arbitrum Foundation to fund special grants and operational costs.

The team later notified the community that the proposal was more of a formality to inform them about steps that had already been put into action. On-chain data showed that 50 million ARB tokens had already been moved, with the Arbitrum Foundation later confirming that 10 million ARB had been converted to fiat and 40 million ARB was allocated to “a sophisticated actor” in financial markets.

This did not sit well with the community and the Arbitrum Foundation vowed to split AIP-1 into separate proposals to allow the DAO to deliberate on the best course of action. 

The two proposals put forth today appear to have done just that. The first, AIP-1.1, proposes placing the 700 million ARB tokens in a smart contract-controlled lockup, scheduled to be released over four years. It also presents the structure of a $36 million operating budget that will be composed of U.S. dollars and locked ARB tokens in equal parts. 

Meanwhile, AIP-1.2 calls for amendments to Arbitrum’s governance system and lowers the threshold of tokens required for a proposal to be posted on-chain down from 5 million ARB to 1 million ARB.

“We have heard the feedback, and have worked diligently to address it and make sure the Foundation can represent, and serve the DAO’s best interests with their support,” said the Arbitrum Foundation.