The Uniswap Vote to Delay the Voting in the DAO Proposal Demonstrates That DeFi Participants Are Not in the Same Boat
The revenue share change is continually promoted by the Uniswap Foundation as many are awaiting a “Fee Switch” proposal, which would allow for direct cuts of the fee revenues to Uniswap governance token UNI holders.
This Friday, the Uniswap Foundation stated that it was postponing a keen poll that seeks to decide on whether to upgrade the protocol to enhance the structure of the governance token as well as the fee for UNI, its native token. Its nonprofit said it noticed the phrase ‘stakeholder’ which was deemed to be an equity investor in the largest Ethereum-based DEX.
In the week, a stakeholder pointed out a potential problem concerning this work that we need to investigate further to appreciate sufficiently. As the proposed upgrade is hard coded and contains substantial privacy change, the foundation stated: ‘Because the matter will go to the persistent hard code and the upgrade is highly sensitive we have decided to delay this vote’, the foundation said on X( formerly Twitter).
While the foundation stated that this was an “unforeseen development” and has disclosed a formal apology for the occurrence, this is quite possibly not the first time whenever the public vote regarding the institution of the ‘fee switch’ that will send a small amount of trading fees from the protocol to token holders was put on hold. It is also important to acknowledge that it is by no means the first time token holders’ benefit appears to be inversely proportional to other Uniswap “stakeholders”.
It must be noted that the petitioners have not objected to the plans of the foundation; instead, they have asked the foundation to continue maintaining the websites for the benefit of the community, added the foundation: “We will keep the community informed of material changes and will communicate with you all when we are more confident regarding future timelines,” said the foundation.
Several decentralized exchanges including Uniswap which was launched in 2018 introduced the governance token as a way of preventing what was referred to as the ”vampire attack”, SushiSwap which launched with the token SUSHI and immediately started to attract liquidity. Sushiswap was considered less centralized compared to other platforms as it was operated by a Decentralized autonomous organization that distributed trading fees to SUSHI token holders.
Discussions emerged again regarding fee switch activation with the introduction of a new Uniswap v3. GFX Labs, the company behind the Oku – a front-end interface for Uniswert – put forth a plan that has divided an attempt at a seed capital funding of the fee distribution on the Uniswap V2 protocol to several popular pools on the platform. But the conversations eventually died down because of three reasons; The first is that activation will decrease LPs and liquidity from the platform while the second is a legal issue.
A concern that arose at the time was that the fee transition could create potential tax and securities law issues for UniDAO because it must pay out, in a manner, a revenue-sharing dividend in the form of fees to holders of tokens.
New players had to leave in red numbers, which led Uniswap Foundation to once again delay the vote, and it is not quite clear what it was responding to. Regarding the case, a well-recognized legal analyst in crypto, Gabriel Shapiro, said that this is another primitive example of how DeFi is creating token holders as ‘second-class’ citizens whose demands are subordinate to a more focused group.
The same arguments were deemed valid at the end of last year when Uniswap Labs put into effect a 0.15% trading fee on its frontend website and wallet – the first time the development group attempted to directly monetize their sleuth activities. Still, the fee only applied to the products developed by Uniswap Labs, such as Uniswap Studio, which isn’t the exchange protocol per se but arrived after the $165 million funding round.
Of course, there is no reason to be completely skeptical here, and position that the hardcoded fee switch to reward only UNI token holders will not be ever activated. Uniswap Labs is a company and has its own interests separate from the UNI token holders, but in the ideal world, both would act solely in the best interest of the protocol.
Still, if there’s been anything that DeFi has taught in its relatively short existence, it is that the token holders are not the ultimate decision-makers.
