Author: Daniel Kuhn, CoinDesk; Translated by: Wuzhu, Golden Finance
The Uniswap Foundation announced on Friday that it is postponing a key vote on whether to upgrade the protocol’s governance structure and fee mechanism to better reward holders of the UNI governance token. The nonprofit cited concerns from a “stakeholder” believed to be an equity investor in the organization behind the largest Ethereum decentralized exchange.
"Last week, a stakeholder raised a new issue related to this work that will require additional effort on our part to fully review. Due to the immutable nature and sensitive nature of our proposed upgrade, we have made the difficult decision to delay publishing this vote," the foundation wrote on X, formerly Twitter.
While the foundation called the decision “unexpected” and apologized, it’s far from the first time it has delayed a vote on whether to initiate a “fee switch” that would shift a modest amount of the protocol’s transaction fees to token holders. It’s also far from the only time the interests of token holders have seemed to conflict with those of Uniswap’s other “stakeholders.”
The foundation added: “We will keep the community informed of any significant changes and will update everyone once we have more certainty about future timelines.”
Uniswap issued the UNI token after the "Summer of DeFi" in 2020 to defend against the so-called "vampire attack" of Sushiswap. Sushiswap launched with the governance token SUSHI and quickly began to attract liquidity. Given that Sushiswap is managed by a DAO and transfers transaction fees directly to token holders, it is considered relatively closer to the community.
Version 2 of Uniswap included code that would have split 0.3% of trading fees paid to liquidity providers (or people who contribute tokens to trade on the decentralized exchange), with 0.25% going to LPs and the remaining 0.05% going to UNI token holders. But the “fee switch” was never activated.
With the launch of Uniswap V3, discussions about fee switching activation have resurfaced. GFX Labs, makers of the Uniswap front-end interface Oku, raised a plan to test protocol fee allocations on several pools on Uniswap V2, which attracted widespread attention. However, the negotiations ultimately fell through, in part due to concerns that activation could cause LPs and liquidity to leave the platform, and also due to legal concerns.
One of the main concerns at the time was that the fee conversion could have tax and securities law implications for UniDAO, as it would essentially be paying a revenue-based dividend to token holders.
It’s unclear exactly which concerns the Uniswap Foundation was responding to when it decided to postpone the vote again. Gabriel Shapiro, a prominent cryptocurrency legal expert, wrote that this is another example of DeFi protocols treating token holders as “second-class” citizens whose wishes are subordinated to a small group of stakeholders.
Uniswap Labs made a similar argument late last year when it imposed a 0.15% trading fee on its front-end website and wallet — the development group’s first attempt to directly monetize its work. The fee only applies to products maintained by Uniswap Labs, not the exchange protocol itself, but it was imposed after raising $165 million.
There’s no reason to be completely cynical here and suggest that a hard-coded fee switch that rewards UNI token holders will never be implemented. Uniswap Labs and UNI token holders are different entities with their own interests; ideally, the two would align to do what’s best for the protocol itself.
But if there’s one lesson from DeFi, it’s that token holders don’t always have the final say.
