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The delay in the Uniswap vote shows that DeFi stakeholders are not all in agreement
The Uniswap Foundation on Friday announced was delaying to key vote on the opportunity to update the protocol’s governance structure and pricing mechanism to better reward holders of the UNI governance token. The non-profit organization cited concerns from a “stakeholder” Thought having been an equity investor in the organization behind the largest Ethereum-based decentralized exchange.
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“Over the last week, a stakeholder has raised a new issue related to this work that requires additional diligence on our part to fully review it. Due to the immutable nature and sensitivity of the proposed update, we have made the difficult decision to postpone the publication of this vote,” the Foundation wrote on X (formerly Twitter).
Although the foundation said the decision was “unexpected” and apologized for the situation, this is not the first delay in voting on whether to activate the “fee switch” that would direct a modest amount of the protocol’s trading fees to token holders. It’s also not the only time token holders’ interests are seemingly at odds with those of other Uniswap “stakeholders.”
“We will keep the community informed of any material changes and will update you all as we become more certain about future timing,” the foundation added.
Uniswap issued the UNI token in the aftermath of “DeFi Summer” in 2020 to avoid what was known as a “vampire attack” by Sushiswap, which launched with the SUSHI governance token and quickly began attracting liquidity. Sushiswap was seen as relatively more community aligned as it was run by a DAO and directed trading fees to token holders.
Uniswap version 2 contained code that allowed 0.3% of trading fees paid to liquidity providers (or those who contribute tokens to be traded on the decentralized exchange) to be split, with 0.25% going to LP and the remaining 0.05% to UNI token holders. But the “tariff change” was never activated.
With the launch of Uniswap V3 there was once again talk of activating the tariff change. GFX Labs, maker of Oku, a front-end interface for Uniswap, proposed a plan this would test the distribution of protocol fees across some pools on Uniswap V2 that have received a lot of attention. But talks ultimately broke down, partly due to concerns that the activation would drive LPs and liquidity away from the platform, as well as legal concerns.
A major concern at the time was that the fee change could have tax and securities law implications for UniDAO, as it would essentially pay some sort of revenue-based dividend to token holders.
It’s unclear exactly what the Uniswap Foundation was responding to when it decided to postpone the vote once again. Gabriel Shapiro, a prominent cryptocurrency legal expert, wrote that this is another example of a DeFi protocol that treats token holders as “second class” citizens. whose desires are subordinated to a smaller group of stakeholders.
Similar arguments were made late last year, when Uniswap Labs imposed a trading fee of 0.15%. on the frontend website and portfolio – it was the first time the development team tried to directly monetize their work. The fee applied only to products operated 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 fee change codified to reward UNI token holders will never be implemented. Uniswap Labs and UNI token holders are distinct entities with their own interests; ideally both would be aligned to do what is best for the protocol itself
But if there’s one lesson to be learned from DeFi, it’s that token holders don’t always have the final say.