Uniswap DAO Loses Vocal Advocate as Frustration Boils Over

Another day, another crypto idealist learns the hard way that decentralized governance moves at the speed of molasses—when it’s not being gamed by whales with bags to pump.

The DeFi darling’s community fractures as key member exits, citing bureaucratic gridlock and ’governance theater.’

Active verbs only? Try these: Dissent gets drowned out. Proposals gather dust. True believers walk. Meanwhile, the UNI token price... well, let’s just say the chart speaks louder than any DAO vote ever could.

Like many DeFi protocols, Uniswap is controlled and managed through a somewhat byzantine structure.

The protocol was created by Uniswap Labs, a for-profit company which is also responsible for its continued development. The Uniswap Foundation, a nonprofit, is tasked with supporting Uniswap and its community, while protocol changes and allocation of resources is controlled by the Uniswap DAO, a type of crypto collective governed by holders of the UNI token.

In March, the DAO granted the foundation $165 million to boost Uniswap ecosystem growth and development. This gave the foundation a mandate to do certain things in pursuit of its goals without directly consulting the DAO.

Some, like Pepo, feel the Uniswap Foundation’s actions are putting the DAO’s interests behind those of itself and Uniswap Labs.

This situation highlights the persistent struggle to balance the interests of DeFi protocol token holders with those of other stakeholders.

Not the first time

Pepo isn’t the only one to highlight a perceived lack of DAO control at Uniswap.

In October, Billy Gao, vice president of Stanford Blockchain Club, a Uniswap delegate, said Uniswap Labs’ sudden decision to launch its own blockchain “raised serious questions about DAO governance.”

Gao argued that the Uniswap DAO should have been told about the blockchain ahead of time and allowed to weigh in on key decisions in its implementation. “It calls to question (once again) how decentralized [Uniswap’s] governance actually is,” he said.

Uniswap Labs did not immediately respond to a request for comment.

Others have questioned how the Uniswap Foundation uses the funds granted to it, and have complained that it isn’t transparent enough about its spending and decision making.

“Transparency and communication are values that many delegates agree with,” Doo Wan Nam, Co-founder of DAO governance solutions provider StableLab, a Uniswap delegate, told CoinDesk. “There have been improvements.”

On May 1, the Uniswap Foundation responded to criticism by creating a Foundation Feedback Group, intended to ensure effective communication and strengthen accountability between the foundation and the DAO.

Additionally, as a nonprofit company, the foundation must legally publish its finances.

But the problem is that for some delegates, it’s not enough.

“It’s a loss for any DAO whenever a delegate feels the only way to make an impact is through stepping down,” PaperImperium, Governance Liaison at Uniswap DAO delegate GFX Labs, told CoinDesk.

Behind the scenes

Some governance participants also complained that a lot of Uniswap DAO communication and decision-making happens privately, instead of publicly on the Uniswap governance forums.

This has led to complaints that major decisions are all agreed on by large delegates behind closed doors before going to a public vote.

It’s necessary for proposals to receive a degree of feedback before being presented publicly, Nam said.

It’s not unlike traditional governance. “Congressmen won’t just blindly write bills without talking to relevant stakeholders or other Congressmen,” Nam said.

But it’s a double-edged sword. As DAOs mature, there’s also a sense that they are becoming more about politics and appearances rather than pursuing what’s best for the protocol.

Multiple Uniswap delegates declined to comment to CoinDesk when asked about the complaints highlighted by Pepo.