Uniswap Vote Delay Shows DeFi Stakeholders Aren’t All in It Together

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For the past week, a concerned party has brought up a novel concern regarding our ongoing project that warrants thorough examination from our team. Given the unalterable characteristics and confidential nature of the planned modification, we’ve elected to delay the public vote announcement.

The foundation’s announcement of the “unexpected” delay in voting on the “fee switch” comes as no surprise, given the history of similar delays in Uniswap. Furthermore, this is not the first instance where the interests of token holders have clashed with those of other parties involved.

The foundation assured that it would inform the community of any significant developments and provide updates as soon as it had a clearer understanding of upcoming timelines.

As a crypto investor, I remember the excitement of DeFi Summer in 2020 when decentralized finance platforms saw unprecedented growth. Uniswap, one of the leading DEXs (Decentralized Exchange), faced a challenge from Sushiswap, a new platform that launched with its governance token SUSHI and quickly gained traction by attracting liquidity. The community perceived Sushiswap as more aligned due to its decentralized autonomous organization (DAO) management and distribution of trading fees to token holders. In response, Uniswap issued the UNI token as a means of strengthening its position and preventing what was referred to as a “vampire attack.”

In the second iteration of Uniswap, there was a provision in the code that allowed the 0.3% fees paid to liquidity providers to be divided. Specifically, 0.25% would have gone to the liquidity providers themselves and the remaining 0.05% would have been distributed among UNI token holders. However, this “fee switch” was never activated or implemented in practice.

Discussions resurfaced about enabling fee switching with the introduction of Uniswap V3. GFX Labs, creators of Oku, a user interface for Uniswap, suggested trialing the protocol’s fee distribution on several popular pools in Uniswap V2. However, these discussions lost momentum due to apprehensions that the activation could lead LPs (Liquidity Providers) and liquidity away from the platform, as well as potential legal risks.

See also: Uniswap’s Hayden Adams: From Ethereum Idealist to Business Realist

One concern during that period was the potential tax and securities law repercussions for UniDAO due to the proposed fee switch. This was because UniDAO would effectively be distributing revenue-style dividends to token owners.

The reasons behind Uniswap Foundation’s decision to postpone the vote once more remain vague. According to Gabriel Shapiro, a well-known legal authority in cryptocurrency, this situation illustrates how decentralized finance (DeFi) platforms can prioritize the interests of a select group of stakeholders over token holders, making them seem like secondary citizens within the ecosystem.

Last year, I observed similar criticisms when Uniswap Labs introduced a 0.15% trading fee on their frontend website and wallet for the first time. This was a new monetization strategy from the development team, distinct from the fees on the exchange protocol itself. Importantly, this change came after they had raised $165 million in funds.

As a crypto investor, I believe it’s important to maintain a balanced perspective instead of being overly cynical. Regarding Uniswap Labs and UNI token holders, let me clarify that they are two separate entities with distinct interests. However, aligning both parties to act in the best interest of the protocol is ideal.

In the realm of Decentralized Finance (DeFi), it’s important to note that token holders don’t necessarily have the ultimate control.