DeFi
Uniswap vote delay shows DeFi stakeholders are not all in the same boat
Friday, the Uniswap Foundation announcement this delayed a key vote on whether to upgrade the protocol’s governance structure and fee mechanism to better reward holders of the UNI governance token. Nonprofit cited ‘stakeholder’ concerns thought having been an equity investor in the organization behind the largest decentralized exchange based on Ethereum.
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“Over the past week, a stakeholder raised a new issue related to this work that requires additional diligence on our part for a full review. Due to the immutable and sensitive nature of the proposed upgrade, we have made the difficult decision to postpone the publication of this vote,” the Foundation. written the (formerly Twitter).
Although the foundation said the decision was “unexpected” and apologized for the situation, it is far from the first delay in a vote on whether to initiate the “fee change” that would direct a modest amount of protocol trading fees towards token holders. This is also far from the only time the interests of token holders appear to be at odds with those of other Uniswap “stakeholders.”
“We will keep the community informed of any significant changes and will update you all once we are more certain of future timelines,” the foundation added.
Uniswap issued the UNI token following “DeFi Summer” in 2020 to ward off what was known as a “vampire attack” from Sushiswap, which launched with the SUSHI governance token and quickly began attracting liquidity. Sushiswap was considered relatively more community-aligned given that it was run by a DAO and directed trading fees towards token holders.
Uniswap version 2 contained code that would split the 0.3% of trading fees paid to liquidity providers (or those who contribute tokens to trade on the decentralized exchange), with 0.25% going to LPs and the remaining 0.05% to LPs. UNI token holders. But the “fee switch” was never activated.
Discussions have resumed on enabling the fee switch with the launch of Uniswap V3. GFX Labs, maker of Oku, a front-end for Uniswap, proposed a plan This would test the distribution of protocol fees across a few pools on Uniswap V2 that have received a lot of attention. But the talks ultimately broke down, in part due to concerns that activation could drive LPs and liquidity away from the platform, as well as legal fears.
The story continues
See also: Uniswap’s Hayden Adams: From Ethereum Idealist to Business Realist
One of the main concerns at the time was that the fee change could have tax and securities law implications for UniDAO, given that it would essentially pay a sort of income-based dividend to holders of tokens.
It is unclear what concerns the Uniswap Foundation was addressing in deciding to delay the vote again. Gabriel Shapiro, a prominent crypto legal expert, wrote that this is another example of a DeFi protocol treating token holders like “second class” citizens whose desires are subordinate to a smaller group of stakeholders.
Similar arguments were made late last year when Uniswap Labs imposed 0.15% trading fee on its front-end website and portfolio – this was the first time the development group had sought to directly monetize its work. The fees only applied to products managed by Uniswap Labs, not the exchange protocol itself, but came after a $165 million increase.
There is no reason to be completely cynical here and suggest that the hard-coded fee change to reward UNI token holders will never be implemented. Uniswap Labs and UNI token holders are separate entities with their own interests; ideally both would be aligned to do what’s best for the protocol itself
But if there’s a lesson to be learned from DeFi, it’s that token holders don’t always have the final say.