AIP-1 is a proposal aimed at ratifying several decisions made by the Arbitrum DAO, including setting threshold values for voting that allow for the adoption of certain proposals for governance and ARB coins allocation. By ratifying these decisions, the proposal aims to provide greater certainty and stability to the DAO management process.

The proposal also names the initial directors of the DAO as Campbell Law, Edward Noyens, and Ani Banerjee. These individuals will be responsible for managing the day-to-day operations of the DAO and ensuring that it operates in the best interest of its members.

In addition to the directors, the proposal also names a security council, which consists of twelve wallet signers with multiple keys. This council will be responsible for making quick decisions on any code changes required by the protocol. This is an important role because it ensures that the protocol can be updated quickly and efficiently without lengthy decision-making processes.

However, the proposal did not come without controversy; chiefly, the allocation of 750 million ARB coins that the foundation can then use for ecosystem development. This is where the biggest problem lies, as Arbitrum DAO started moving ARB during the voting process, rather than after its conclusion.

Recently, about 50 million ARB were transferred on-chain. The Arbitrum Foundation later clarified that 40 million ARB were allocated as a loan to a sophisticated entity in the financial markets (Wintermute) and 10 million ARB were converted to fiat and reserved for operational expenses.

Impact

This behavior had an impact on the price of ARB, which dropped from 1.28 USD to 1.133 USD within a few hours. After the Arbitrum explanation was released, the price recovered slightly to 1.22 USD. This move could significantly shake confidence in ARB, as it appears that the AIP-1 vote did not actually represent any sort of democracy. Instead, all the changes that were supposed to be brought about had already been prepared, regardless of the voting outcome. If this behavior were to be repeated in the future, the Arbitrum blockchain could experience tough times. It should be noted that the credibility of the project rests on its ability to be transparent and democratic towards its community. Therefore, it's important for Arbitrum to maintain transparency and pay attention to its credibility in the future in order to retain - and regain - the trust of its users.