Original and one of the largest Automated Market Makers.
Bigger underlying questions
These challenge illustrate a larger problem: the fundamental tension between the pressure faced by Uniswap Labs to have a coherent and competitive product offering, and its aspiration to create a thriving community culture.
Uniswap's protocol, and the product offerings built on top of it, are widely used in the crypto space, driving a need to provide a high quality user experience on the product and support front. This is compounded by prominent forks such as Sushiswap, which additionally place Uniswap Labs under significant competitive pressure. But treating community members as end-users conflicts with the desire to treat them as stakeholders, discussion participants, or governance leaders. This conflict is visible in the Discord where support crowds out other conversations, but also in the fragmentation of stakeholder types across different platforms, as we address in the next section.
Other crypto projects attempting to progressively decentralize are likely to face similar problems on their journey. The conditions around a retroactive distribution or other early phases of decentralization matter greatly in setting precedents for participation and space use.
Membership in the UGP Slack allows grantees to access influential community members and major token-holders by virtue of being in this chat, and governance discussions often take place here in private. While there is not a specific emphasis on community development within the Slack, the smaller member number and opportunities for repeated interactions over time have created an environment where respectful and meaningful discussion can take place.
If an "autonomous" community cannot be created without leadership and direction, ultimately Uniswap Labs must ask itself: what kind of community does it want to have? What should the community orbit around, and why? There are many possible directions this may take. A community of DeFi traders or developers is one opportunity; a thriving culture of governance participants or public goods builder-stewards is another. Each will require its own form of leadership, advocacy, and community development.
A deeper analysis of Uniswap and its Governance Protocol yields a multitude of questions that suggest the platform may not be as decentralized as advertised. As an initial matter, the Uniswap team provided the community with 60% of the genesis supply of UNI tokens (1 billion) while giving themselves, investors, and advisers the remaining 40%.
Moreover, as previously mentioned, Uniswap Labs has now released 3 versions of the Uniswap platform–the latest in May of 2021. The updated platform allows liquidity providers to set minimum and maximum prices on their portion of any given liquidity pool, otherwise known as “concentrated liquidity,” and allows different pools to be created with different fees.
In essence, the Uniswap team made changes to the Uniswap platform unilaterally, without submitting these changes to the same governance process as any other proposal. The team simply kept the previous version of Uniswap running and dressed up Uniswap v3 as a brand-new platform.
How is this any different from a central party having authority and control over a network so as to dictate the future value of that network’s native token? And what is to stop Uniswap community members from believing Uniswap Labs will continue to release updated versions of the platform, regardless of how the community votes to change the current protocol?
Reaching these totals is no easy task. And as more votes are spread across more delegates, the goal of achieving the required quorum becomes increasingly difficult. What is more, the issue of low voter turnout only adds to this difficulty. What results is a largely inefficient system where governance proposals seldom make it to the proposal stage; and, when they do get past the 1% threshold, rarely make it past the 4% quorum required to pass them.
On the other hand, several Ethereum addresses have accumulated a significant amount of UNI tokens by way of delegation. These addresses, also known as “whales,” act as proxies for UNI holders who do not want to vote themselves but trust the given address to vote in the best interest of the protocol and Uniswap community.
These whales include several major platforms such as Compound, Gauntlet, and Dharma, and many prestigious Universities, including Harvard Law, UC Berkley, Stanford, and MIT. Each of these addresses holds more than 2.5 million UNI tokens, with the largest holding up to 15 million. Can the governance protocol be described as decentralized when only a few addresses can team up and unilaterally change the protocol or governance treasury?
Additionally, Uniswap Labs announced on Twitter that they have started restricting access to a number of tokens at app.uniswap.org, stating “[t]hese changes pertain to the interface at app.uniswap.org – the Protocol remains entirely autonomous, immutable, and permissionless.” It is quite ironic that the Uniswap Labs team asserts that the Protocol remains autonomous, immutable, and permissionless in the same tweet they announced they will be restricting access to tokens.
How can the Uniswap team have control over the User Interface (UI) and access to tokens but claim that the platform is “entirely” decentralized? Is it even possible to have a decentralized network when the UI is controlled by a central authority?