Consensus Check - UNI should fund a political defense organization for decentralized finance

This post outlines a framework for funding regulatory and political defense of the decentralized finance ecosystem with a grant from the UNI Community Treasury. We will refer to this fund as the DeFi Defense Fund here, which can be set up as a 501(c)(4) in the US for the greatest flexibility, accountability, and benefits.

The temperature check showed massive interest in the topic and almost two-thirds of the votes were in favor of moving forward. The biggest concern—raised by those both voting yes and no—was the lack of precise details. We planned to unveil more details in the Consensus Check as the next stage in this process, and do so here. We address the other concerns raised at the end of this post and plan to respond to concerns as they come up during this Consensus Check.

This proposal is both a response to external threats and a preemptive action taken to ensure the sustainability of Uniswap—and DeFi more broadly—for the long-term. Decentralized finance is increasingly under regulatory scrutiny, and we need to defend the ecosystem, its democratizing potential, and its decentralization ideals. To date, decentralized non-custodial protocols have logically been exempted from regulatory obligations designed for custodial financial intermediaries. But now governments and international organizations are considering policies that may halt the innovation, expanded access, and transparency it enables.

Similar organizations were essential to protecting the Internet from regulatory threats that would have destroyed the internet’s potential long ago. Over the decades, legal advocates had to win the US Supreme Court case “Reno v. ACLU” in 1996 (without which most websites would have had to verify that their viewers were over 18 and exclude minors), the Comcast-BitTorrent case in 2008 (without which the largest cable companies would have continued to block peer-to-peer protocols), the SOPA/PIPA bill in 2012 (which, had it passed, would have stifled web 2.0 by targeting platforms for user-generated content), and even the Apple-FBI case in 2015 (where the US government asserted the right to force companies to write new code for increased surveillance). Without these and other wins–by lawyers, advocates, and technologists–the internet could have never reached its potential.

As the most prominent and successful automated market maker protocol, Uniswap will not only receive legal and political questions but also will be well-positioned to lead the defense against rushed proposals that would restrict individuals’ ability to use DeFi protocols or attempt to obligate governance token holders to adopt changes that would fundamentally undermine the promise of decentralized finance.

We recommend that Uniswap governance allocate funds to set up a 501(c)(4) “policymaking machine” with the goals of 1) preempting regulatory, legal, political, and tax threats to decentralized finance; 2) achieving regulatory clarity for decentralized finance and related activity; 3) advancing laws that support decentralized finance and decentralized governance; and 4) spurring other DeFi protocols’ governance bodies to contribute to the effort (through this organization or their own).

The DeFi Defense Fund would fund all of the following: 1) Thought leadership: we need more think tanks and academics to write policy white papers, articles, and op-eds explaining the benefits of decentralized finance; 2) Legal firepower: we need to develop strong legal arguments ahead of enforcement actions or new regulations that threaten DeFi; 3) Top advocates: we need more people directly educating legislative and regulatory policymakers about DeFi and advocating for policy positions that favor DeFi; 4) Messaging: We need to better formulate ideas, prepare spokespeople, and communicate to policymakers and the general public the promise of DeFi; 5) Grassroots advocacy: we need to make it easy for individuals who already care about DeFi to voice their opinions to Congress and regulations. Advocacy campaigns usually require a combination of all of these working in concert.

Due to the importance of this work to the Uniswap community and the cost of doing this work well, we propose funding the DeFi Defense Fund with 1M UNI tokens. We expect the committee to allocate these funds over 4-5 years.

Outline of this post

  • The regulatory threat
  • Doing nothing is not an option
  • The Uniswap community is best positioned to lead the effort to protect decentralized finance
  • About the DeFi political defense organization
  • Addressing questions raised in the Temperature Check
  • Snap poll

The regulatory threat

Governments’ financial supervisory regimes are generally based on the regulation of financial intermediaries (think banks, stock exchanges, money transmitters, etc.). To date, decentralized finance protocols like the Uniswap protocol have generally been excluded from these regulatory regimes because users of the protocols retain “total independent control” over their assets and the protocols have been treated more like the Bitcoin, Ethereum, or HTTP protocols. For example, in the United States, the Financial Crimes Enforcement Network (FinCEN)—the agency responsible for implementing the Bank Secrecy Act—has said that when a cryptocurrency “…trading platform only provides a forum where buyers and sellers of [cryptocurrency] post their bids and offers and the parties themselves settle any matched transactions through an outside venue (either through individual wallets or other wallets not hosted by the trading platform), the trading platform does not qualify as a money transmitter under FinCEN regulations.” This conclusion makes sense and is worth defending.

Unfortunately, governments and international organizations are considering whether to move away from this relatively clear delineation of what is and is not a regulatable activity and essentially seek to “shift the goal posts” in order to capture decentralized finance protocols—and their governance token holders—as “regulatable entities.” For example, the Financial Action Task Force (FATF), an international organization that aims to coordinate countries’ anti-money laundering regimes, essentially suggests that decentralized finance doesn’t exist at all: “Where customers can access a financial service, it stands to reason that some party has provided that financial service, even if the act of providing it was temporary or shared among multiple parties”—such as governance token holders. The FATF suggests also that “…launching a self-propelling infrastructure to offer VASP services is the same as offering them, and similarly commissioning others to build the elements of an infrastructure, is the same as building them.” Switzerland is already proposing to expand the definition of money transmission to include the “enabling” of funds transfers—even when there is no intermediary taking custody of a customer’s funds—and so may capture decentralized financial protocols in their financial supervisory regime (and this definition may even capture Bitcoin and Ethereum).

Doing nothing is not an option

“If we do nothing proactive, governments will develop proposals modeled on TradFi regulation that was developed for different systems in a different time and with wholly different risks. “Doing nothing” will lead to “doing ineffective, irrelevant activities mandated by regulators because they were not yet properly educated.” The enormous costs of this potential future are much less likely to materialize if we invest resources in a defense fund—a modest cost by comparison.

If governance of DeFi protocols is to survive long term, we need to actively engage in the policymaking discussions happening right now to ensure the interests and positions of millions of DeFi users are represented.

The Uniswap community is best positioned to lead the effort to protect decentralized finance

Decentralized and non-custodial exchange over the internet is a net benefit to society that should be embraced by societies seeking to advance economic flourishing and individual liberty. The Uniswap protocol is universally recognized as the leading and most successful automated market maker protocol in the DeFi ecosystem. Uniswap v3 and v2 each have more volume than any other automated market maker protocol. The broader Uniswap community includes many of the crypto ecosystem’s most thoughtful leaders, both institutions and individuals, and the community prioritized properly resourcing the UNI Community Treasury from day one.

We have the technological leadership, community, and human and financial resources to win this policy debate over the foundational principle underlying not only automated market makers and decentralized finance, but crypto generally.

About the DeFi political defense organization

In light of the expense of hiring sophisticated lobbyists, lawyers, and experts, and in light of the urgent threat we see from poorly informed regulatory proposals globally, we recommend an initial infusion of 1 million UNI (less than one-quarter of one percent of the treasury). This entity will not replicate the great work of existing organizations such as Coin Center, Fight for the Future, the Blockchain Association, the Crypto Council for Innovation, the Defi Alliance, Blockchain for Europe, or others. Rather, it would fund these and other organizations to expand their capabilities to be able to more effectively protect DeFi. It would fund across areas including thought leadership, legal analysis, policy advocacy, messaging, and grassroots.

Further, this fund will extend its monetary impact by conditioning some of its grants with matching by other governance treasuries, crypto foundations, or crowd-matching.

Grants administration for political spending is a subjective process that cannot be easily automated, and thus we propose a grants committee overseen by an accountable entity. This committee would hire a grants-making leader or staff and create an efficient, predictable process for applicants.

We propose the following as committee members, with a subset of them serving as the entity’s board of directors. All have expressed their willingness to join the committee:

  1. Jake Chervinsky, General Counsel, Compound Labs & Strategic Advisor, Variant Fund. Jake serves as general counsel at Compound Labs and as an adjunct professor at Georgetown University Law Center.
  2. Larry Sukernik, co-founder, Reverie. Larry co-founded Reverie to steward the development of DAOs. Previously, he was an investor at Digital Currency Group.
  3. Rebecca Rettig, General Counsel, Aave Companies. Rebecca is a well-known DeFi lawyer who has advocated before government bodies around the world. Aave is based in Europe so she can help ensure connectivity with European based groups.
  4. Marc Boiron, General Counsel, dYdX Trading. Marc is a DeFi attorney who has designed the regulatory strategies and DAO structures for many of the leading DeFi protocols in addition to having educated regulators on DeFi.
  5. Marvin Ammori, Chief Legal Officer of Uniswap Labs. Marvin has spent his career advocating for new technologies from the internet to DeFi. He has served as a board member of multiple advocacy nonprofits.
  6. Katie Biber, Chief Legal Officer of Brex, Board of Directors of Anchorage. Katie is a fintech and crypto leader and political superlawyer who served as the General Counsel of the Mitt Romney presidential campaign in 2012.
  7. Sheila Warren, World Economic Forum, Executive Committee (Cryptocurrency Lead). Sheila is trained as a lawyer who used to represent 501(c)(4) nonprofits such as Planned Parenthood and the ACLU. She now convenes experts on cryptocurrency regulatory issues at WEF.

These committee members skew towards legal advocates for their expertise in policy formation and analysis and towards US residents as the US plays an outsized role in global financial regulation.

We expect that some members will be able to serve pro bono and that the total compensation across the entire committee will be less than $150K per year. Due to the dynamic and somewhat unpredictable state of global policy proposals, we believe the grant-making committee should have considerable discretion, subject to the necessary disclosure of its activities.

Addressing questions raised in the Temperature Check

Some concerns were raised in the Temperature Check.

  • Will a student group control these funds? We propose the committee named above, which includes some of the top thinkers and lawyers in DeFI across multiple top projects. In Temperature Check, several people assumed that the Harvard Law Blockchain and Fintech Initiative would control these funds, and we should have been clearer that this was never the intent of our proposal.
  • Why isn’t the budget small? Top lawyers, lobbyists, and educational public relations campaigns are very expensive. When the US Treasury Department proposed a “midnight rulemaking” in December, blockchain advocacy organizations were forced to spend millions in just a few months on agency comments and prepared litigation. Given the complexity and novelty of these issues, we need the world’s best talent, and many of them are paid more than professional athletes. The committee will be best positioned to allocate these funds dynamically in response to threats and opportunities. Given the current proposals, the industry needs funding sizable enough to support the multi-front campaign on multiple issues.
  • Considerable transparency will be ensured. There are considerable public reporting requirements for both 501(c)(4) organizations–regarding grant size and recipients–and also separately for any lobbying expenditures. Further, we expect this committee (and independently others in the community) to provide plain language summaries of these disclosures. Board members of 501(c)(4) organizations are also fiduciaries required by law to act not in their own interest but in the organization’s best interest.
  • Free-riding can be mitigated but is not worth any upfront delay. In this ecosystem, many of us get to free ride off of one another’s software contributions (e.g., Uniswap governance is a fork of Compound governance, all of DeFi benefits from Ethereum development). Groups also free-ride off of policy contributions. DeFi has benefited from expensive and time-consuming efforts of Coin Center, the Ethereum Foundation, and others as they educated policy makers and defended Bitcoin and Ethereum against attacks for many years. As noted, we expect the committee over time to condition grants on matching funds raised by other affected communities. Further, more funds will be needed over time if DeFi continues to grow—just as internet freedom organizations such as the Electronic Frontier Foundation remain busy and have expanded over time—and we expect other communities will contribute as they wake up to additional threats and rushed proposals targeting them directly. The need for this funding organization is too urgent to delay over negotiating free-riding concerns, and we expect those concerns to be mitigated in months, not years.
  • The grants would go far beyond lobbying. Nobody likes lobbyists. We get it. But to properly educate policymakers in a way that defends DeFi, the organization would provide some funding to lobbyists and more to the workstreams described above: (1) thought leadership, (2) legal firepower, (3) top policy advocates (some of whom would be “lobbying” on specific bills and some would be more generally educational), (4) messaging, and (5) grassroots advocacy.

Link to the snap poll: Snapshot

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Dear HarvardLawBFI
As I had commented in your twitter account before you uploaded this note here, it would be much more relevant to create a new product (we named our project for something similar DeFiDefense) that the DeFi community would potentially embrace. A great number of NFTs of this product could be distributed to the lawyers working on it (instead of actual payment). They would thus be working for and on it while creating it, and have a vivid interest in seeing it grow. The wider community would more easily accept and “adopt” it this way. If those working on it do not do a decent work, it will fail (along with their reward for it). Moreover, it should not be just a small group of people doing this. Rights litigators (iNGOs too) should first be well informed about it (educated) and then take part. For many reasons, which we can explain in detail. So, one point of objection is:
-Why UNI? UNI (and others) could fund it, if they think it is of worth. But it would stand a far better chance if it was a distinct project.
Other points are:
-The lawyer’s (let’s call it “DeFi defender’s”) group should be clearly distinct from the lobbying one. Lobbyists are not stricto sensu defenders. There is an issue here -if not an ethical one, then one of “aesthetics”.
-Why just US people? A group should cover many jurisdictions, and continents. Why not make it, to start with, an iNGO (that also seeks consultative status with the UN and regional monitoring mechanisms)?
-Why only “technical” people in the steering group? There should be diversity.
For sure, there is a strong absence of civil, political and economic rights strategic litigators in your proposal, which in my view undermines the whole proposal. It is primarily such a group that should and has, in some jurisdictions- start building up a DeFiDefense. Because it is economic freedom and related (fundamental) rights that will ultimately have to be defended. Before you tackle, legally, a technical inconsistency in a law, a new law may be enacted spoiling your litigation. It is fundamental rights’ litigation -and especially on a supranational level- that may halt the governmental apetite for a coordinated suppression. You can consider this as a given.
So, already, a few experienced (in litigation before the UN and supranational Courts and tribunals, because this is where the game will finally be played in case of Governmental crackdown) strategic litigators are preparing on how to respond to an imminent suppression of crypto. It will primarily be a matter of fundamental rights and it will have to take into account the consensus and adoption of DeFi, at the point this happens. However, preferably, the legal work that should be undertaken would be “preventive”, quietly creating precedents in different jurisdictions, that will be hard to undo when the Governments potentially decide to crack down on DeFi. Such work is already late.
-The costs you mention are extreme. Also, they should not be taken on by UNI alone, but by DeFi community more generally

TIP: Harvard (Kennedy) School had a very nice course on “Leading non violent movements for social change”. I believe some among those who took the course would love to be engaged in “peeling the onion” of resistance to the adoption of DeFi, coming up with a series of different tactics and strategies for defending DeFi in time, consolidating and mainstreaming the revolution that DeFi represents… Maybe, as Harvard students, you could discuss with the Kennedy School whether they can inform former students about the opportunity to participate in something like this. I bet many among them would engage pro bono or with minimal cost.

As a strategic litigator with thousands of representations, many of which condemning different countries, also trained in system dynamics and non violence (yes, one of those you would suspect their services cost heaps of money), I inform you that I would help in any such initiative pro bono or contribute to the making of a new asset with these characteristics, as long as it respects the ethos and aims of decentralization, and as long as it leaves a clear and big space for litigating DeFi related issues as a matter of fundamental rights, and no space at all for internal or external manipulation of the community.
Good luck.

6 Likes

Love the idea. I think having a Uniswap lead the way is important but there should also be room left for other groups to contribute.
I’m a member of the PoolTogether grants committee and I know we would be interested in being a part of this too.

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My previous concerns due to lack of clarity have been addressed, and having board members affiliated with other prominent DeFi protocols gives me hope that this will be a collaborative effort.

I now plan to vote FOR this proposal.

That said, though it is a small percentage of the treasury, the grant is large in absolute terms. It might make sense to allocate 6-12 months worth of funds initially and have governance reassess budgetary needs in the future. This is especially true given the current parallel discussion on proposal and quorum threshold reductions that is expected to result in a more nimble governance process.

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Yes, the sheer size of the grant has to be reduced. It doesnt make sense to start with such an exorbitant amount.

I fully agree with electra. This should be a project on its own and not funded by the UNI treasury.

I feel like the OP is intentionally skipping a large amount of arguments which are against the proposal on purpose. Addressing the budget issue by saying, “Top lawyers are expensive so we have to pay them MILLIONS in fees…” is questionable at the very best. Uniswap is not facing a lawsuit, why do we have to spend so much???
What about the point I raised that UNI is not so liquid right now to be able to ABSORB million dollar selling pressure without a considerable price drop?

We simply cant be building selling pressure on top of the token all the time, we do not have the necessary buying power to back it up. I do not think the OP even realizes how much this proposal would cost when all is done and dusted. The opportunity cost of implementing this proposal could be in the 100s of millions of USD…

I feel like this is very crucial aspect of the budget because all of a sudden the cost in the absolute terms could become 10/100x larger

With the full form outlined, I will vote NO .
This is NOT a responsible use of the treasury funds.

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Couple points from me:

  • I don’t think Uniswap should be the only DeFi protocol to fund this. I think we need something like a DeFi alliance to fund this
  • 1M UNI is in my opinion just a drop in the see for this proposals actual needs for funding. I am not an expert but I think cost of this is in $100Ms range

I do support how you expanded on the idea and like that a lot of DeFi protocols are included in this.

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Just to expand on BOR´s thoughts.

Saying that 1M UNI represents only 0,25 % is misleading. The UNI treasury might seem huge when you view its value based on the marketcap, but this is extremely inaccurate estimate of what wealth the UNI treasury currently holds. The real market value what you can get from the UNI treasury is multiple times smaller.

Think of it the same way as Vitalik was only able to get 38M USD for the 2B worth of coins he was donated…

My point is that we do not know how much % of the firepower from the treasury this proposal would take in the end. You can say its only 0.25 % of the treasury, but the selling pressure might result in a much larger, unexpected impact.

When I say there is huge opportunity cost, I have in mind the fact that we already have a proposal which exerts selling pressure on the UNI token´s price. If we add another one which is 20x larger, we might NOT enough room for additional proposals which have inherent selling pressure built into them because the price impact will start being very very palpable.

Therefore, I´d much rather support many more proposals which build on top of Uniswap and want funding to improve it rather than to throw it away on lawyers which is not our sole responsibility anyway. Who said Uniswap has to be the lawyer of DeFi?

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I will edit post. I wanted to say that 1M UNI won’t get this proposal far. I am not suggesting Uniswap governance should dedicate more funds.

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Am seeing a lot of conspiracy theories - would be nice to keep the discussion factual and on topic. As noted in the post, this would go to a multisig of the proposed committee members which includes the CG at Compound Labs, GC at Aave Companies, GC at dydx Trading, and CLO at Uniswap Labs.

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The proposal outlines that these funds are anticipated to be allocated over the next 4-5 years, so it wont have the same dilutive effect of selling 1M UNI all at once, which we agree would be a problem. We think it is important that the board has enough to work with so they can react quickly to regulatory threats without being hamstrung by the long governance process for every decision they make.

The issue with this proposal is that it’s a general purpose proposal that’s not specifically tied to Uniswap. It’s for the benefit of the entire Crypto space. Some of the people assisting include Compound Labs DYDX Aave. That’s good. But the proposal should be brought to a governance vote for all of these other major protocols (Aave DYDX Compound Maker Yearn) to vote to equally participate in this effort. If it passes for all i’d be open to supporting it for uni if not then I don’t support it.

Also, with the deal making that goes on in politics I’d hate to see photo-ops or press releases showing UNI support based on this initiative for some legislative measure that represents a compromise to what many people think the law should be.

Finally, what issues/gaps need to be filled that the other associations you reference (Blockchain Association, Crypto Council for Innovation, etc.) aren’t already addressing? I understand you’d support them but you also mention other organizations. How much financial support are these other organizations getting from other companies compared to what you’re asking UNI to allocate? (total figure not just percentage). Where/how did you come up with 1 mill UNI? It sounds like a one time allocation that you “expect to be allocated over 4-5 years.” Why do you need upfront funding for 4-5 years as opposed to getting a smaller allocation at first? Then, we can see what you’ve been working towards and then you can come back to the community for another vote for more funds every year.

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I think I´ve made it clear in my response that I do not specifically state that the UNI will be sold at once. The argument stating that the amount of dillution could be spread over multiple projects stays. If one proposal does it (grants), its fine, but if you go down the rabbit hole to propose a 20x bigger amount for the next project…where does that leave us?

Soon, we will have 10 proposals going through all of them arguing that their allocation of UNI is not dillutive. While it might be the case individually, as a whole it will have a significant impact. This is an extremely overlooked variable of your proposal and I urge strong caution.

1 Like

I will probably vote against this proposal for the following reasons.

Budget / Proof of work

For the current stage of this project, I believe the budget is exorbitantly high. Before supporting a proposal of this scale, I think it would be worth seeing a lot more proof of work.

A classic lesson from startup investing or even the early ICO era is that projects should be funded in correlation to their progress thus far, then given more funding as they prove their ability to use the capital to fuel success. This project requests a massive lump sum of cash despite not having done significant work besides writing a proposal.

Reassessment and evaluation

The Uniswap Grants Program was initially funded for only 2 quarters, and subject to reassessment and renewal after that amount of time. For a program with 10x the budget, I’d expect to see the same: evaluation after some initial period to determine if this is a success worth continuing.

I think it would make a lot more sense to move forward with a structure similar to the beginning of the Uniswap Grants Program: provide a smaller initial budget to fund this work for 2 quarters, then fund it at a larger scale based on the progress up to that point.

Additionally, this proposal anticipates that these funds will be allocated over 4-5 years, but there is no formal structure in that regard. Even with full approval, I’d hope to see these funds distributed over time, not sent all at once.

Team structure and payment

This proposal anticipates that the compensation across the entire committee combined will not exceed $150K, and the proposal positions this as a benefit. I see this as a huge weakness.

In my experience, committees and multi-sig wallets can experience coordination problems when signers are not properly incentivized to participate. In the case of this proposal, I believe the problem is compounded by the fact that most members of this committee have demanding full-time roles that demand their attention, and where they are paid and assessed by their organization.

For me to support this proposal, I’d prefer to see a different team structure. First, I would like to see at least one full-time, paid lead of this committee who is responsible for organizing and building consensus when funds need to be allocated.

Second, I’d actually prefer to swap out some members for legal experts who have more time on their hands to dedicate to this effort. It’s hard for me to imagine that people with some of the roles above will have the spare time available to read applications, evaluate talent, and allocate $27M dollars worth of funds effectively.

Team buy-in

The proposal states that all of the members listed have expressed their willingness to be on this committee. Do they actually want to be on the committee? What’s their level of excitement?

I’d like to see every member of this committee commenting here on the forums and describing their motivations and plans for this group. Again, a committee with 1M UNI worth of funds should consist of members who are determined to use that capital effectively.

For me, it would also be helpful to see writing or other work these members have done related to DeFi’s legal defense.

Conclusion

These are my initial concerns with this proposal. I believe there are significant structural changes that should be made before this moves forward.

7 Likes

The two major concerns we see so far are 1) 30M is a lot of money to begin with, and 2) Uniswap shouldn’t need to pay for this initiative on their own.

  1. We understand that $30M is not insignificant. As mentioned above, we anticipate that this will be allocated over 4-5 years. However, we think this amount is necessary up front in the event of emergencies. We want to impress upon you the urgency of this situation. Right now, if regulators decide to take action, we are left with very few options. Governance will not be able to react quickly enough to alleviate misguided action. We have seen how rash and quickly regluators can act (i.e., midnight Bitcoin rulemaking a few months ago). And once laws are set in motion, it becomes astronomically more difficult to change them later. With a fund set aside to protect us, the board will be able to react swiftly and appropriately.

To address a tangential concern here, the board is excited and extremely supportive of this proposal. For example, see Jake Chervinsky’s tweet. We anticipate you will be able to hear more of their specific thoughts soon.

  1. We actually 100% agree that Uniswap shouldn’t need to pay for DeFi defense on their own. However, given the urgency of the situation, waiting to coordinate all platforms at once would be a mistake. We will get to work on it ASAP, but in the meantime having something that can be used is better than being emptyhanded.

Furthermore, this Uniswap board can and will condition the release of these funds on matching contributions from other platforms. For example, if the board decides to fund a project, they can condition their contribution on recieving a commensurate amount from other platforms that will benefit from their action. One of our board members is the Chief Legal Officer of Uniswap (Marvin Ammori), and as someone primarily interested in the success of Uniswap, he would not allow freeriding beyond what is necessary.

Lastly, we can always adjust after the fact. We think given the urgency of the situation it is best to get funds in the hands of people who can protect us as quickly as possible, and adjust as needed going forward.

We are trying to address as many concerns as we can, and we appreciate your participation.

1 Like

But the cost of 30M is too HUGE no matter the argument. The opportunity cost of it are way too much to justify it by any means. This would effectively mean that we have to sacrifice other proposals which require grants otherwise the sell pressure from all of the proposals combined would utterly destroy the treasury´s value. How is this not even worse than strict regulation??

I feel like you want to promote this sense of urgency to force people into hastily decisions. This is just by NATURE not the right approach to handle such a large sum of money. It does in fact display some elements of nefarious behaviour.

To your second argument, this concerns all of DeFi…why should UNI holders bear the cost for everybody??? Just because you arbitrary decided that it has to happen ASAP? Meaning that UNI holders have to be the lawyer fund for all of DeFi??

You are not reasonable with your proposal and you do not want to compromise…

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y not just use coin center?

do these people have any experience with policy and regulatory?

coin center has done quite an incredible job. the uniswap protocol itself series A was WAY under $30 mm and now were just gonna destroy the uni price for lawyers? i dont think so.

the board? literally this is a decentralized protocol

jake chervinsky im sure is a nice guy but is new to crypto, was not involved in 2013 when it rly mattered… this is a similar situation so u should bring in the people that successfully dealt with it

this literally stinks of kids wanting to make a name for themselves

leave us alone, go raid someone else’s treasury.

EXPLAIN WHY COIN CENTER SHOULD NOT BE DOING THIS?

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Hayden,

  1. I love u, and am your biggest fan.

  2. I am a lawyer and was involved in crypto when FinCEN tried to make all miners and node operators obtain a MSB or else. Coin Center handled this incredibly well and allowed the p2p protocol to thrive in its form today (BTC).

  3. You are a legend, but you are only 26. I dont think you were heavily involved in crypto back then. We all acknowledge this is a threat, but its best to give people w real experience that have successfully done it before AS OPPOSED to just crypto lawyers who also were not around in 2013.

This is really important and you are a genius for getting these student groups involved bc thats the future … but this needs to be handled by OGs w/ deep experience not people that entered the game in 2017-18.

With much love and endless gratitude,

Peter

Leave the gun, take the cannoli.

1 Like

Defi is in part an experiment same with Bitcoin and it’s working. Governments can’t shut down BTC if they tried. If they could then the experiment fails. BTC lives not by the grace of governments but despite them. Similarly, Defi protocols will survive for the same reason. If it could be abrogated by government regulation then there’s something wrong with the protocol and its “decentralized” nature. It won’t be because we didn’t lobby for more favorable regulation. However, that does not mean we want to see unfavorable regulation that makes our lives more difficult. It appears to me that you’re asking for too much because we need to hire lobbyists, politicians, and attorneys to write persuasive articles and “strategically” litigate and create favorable legal precedent. Despite referencing the other crypto advocacy groups you make it seem as if they are not doing anywhere close to enough. You’re not making the case that these other advocacy groups aren’t doing enough and why. You want us to show you the money? Show us the proof they’re not doing enough.

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Thanks for the thoughtful comments, @jcp. I’ll address of few of your points and wrap into it some thoughts on other points laid out in responses above:

1. Payment and Commitment

Each member of the committee was asked whether he or she would like to participate as a member of the committee with an understanding of the time commitment and responsibilities. Speaking only for myself, the issues that this proposal seeks to address are issues that I deal with on a daily basis, whether in my job as General Counsel of dYdX or voluntarily because of the impact the current regulatory status has on the space. That eliminates the time commitment that it would take to understand the issues. Instead, the time commitment is one that would involve assisting with the proper formation of a 501(c)(4) in addition to properly evaluating uses of funds based on the knowledge that I have and continue to acquire on a daily basis. Thus, while the time commitment is meaningful, my job supplements it in a way that reduces the time commitment as compared to many others who could be part of the committee. The same is true for many, if not all, committee members.

Similarly, getting paid would not change my time commitment as these are issues that are important to me personally as someone who wants to see DeFi grow without the regulatory burdens that have existed and continue to get worse in addition to as General Counsel of a DeFi company who wants to see companies developing DeFi protocols able to do so without the current risks and lack of clarity that exists.

2. Budget / Proof of Work

A request for what is currently $30M is significant. It is very difficult to determine an appropriate budget at the outset but it is clear is that a smaller amount like $5M would not cut it. The scope of the regulatory/political matters that need to be addressed in DeFi is significant. Not only are we talking about risks in US securities laws, commodities laws, AML laws, the OFAC sanctions regime, banking laws, lending laws, and consumer protection laws, we are facing the same risks outside of the US. In some cases, those efforts are coordinated across the US and internationally, such as with FATF. There are other regulatory regimes where that coordination is happening as well but privately. Addressing these issues is no small task and, frankly, requires a war chest. I’m sympathetic to a potential request for a smaller amount than $40M but that will curtail potential efforts, which are multi-year efforts (more on that point below).

3. Reassessment and Evaluation

The efforts that the political defense organization would undertake will not be something that can be assessed over a short time period. Likely the shortest time period to see a real impact, that can be objectively measured, is over a 2-year time period. Certainly, there may be small wins in the meantime, but it would be difficult to measure the success of the organization over less than a 2-year period. So, the question then is whether a reassessment should exist following a period of 2 years or more. That would be a reasonable position to take. I think the proposal contemplates the fact that these types of political/regulatory efforts play out over a long period of time and in a fluid and continuous fashion. It is much harder to scope out small uses of funds for clear deliverables as is the case with the Uniswap Grants Program. Ultimately, this point is a reasonable one that I sympathize with while also understanding the purpose of a commitment that is to be used over 4-5 years.

4. Other Projects

As the proposal outlines, the hope is that other projects will participate in this effort. But, if Uniswap, the most well-funded and best-recognized project in the space, does not show a commitment to it, then it is very difficult to receive a commitment from other projects. Although I’m not sure anyone is in a position to ensure other projects will commit to this effort, I’m quite confident other projects will attempt to participate in these efforts as it is in the best interest of all of DeFi.

With other projects requiring similar proposals to be passed, it is impossible to obtain certainty at this stage that the other projects will be able to successfully pass a proposal. If we wait for them to pass proposals, then we’ll have a chicken and egg situation. One project needs to be the first to commit and hopefully bring the others along, and I believe Uniswap is best positioned and likely has the greatest interest in creating an organization of this nature.

5. Motives

Several posts as part of the Temperature Check and here as part of the Consensus Check appear to question the motives of those involved in the proposal or that funds may be used in a way that does not further the objectives set forth in the proposal. First, the proposer, @HarvardLawBFI, will not be receiving any benefit or influence (and the same is true for Harvard itself) from the proposal. I do not see anything in the proposal that even hints at that possibility. Second, the proposal contemplates that a 501(c)(4) be established. To establish a 501(c)(4) a specific purpose needs to be identified and that purpose has been outlined in the proposal (though I suppose the precise language could differ in some ways without changing the gist of it). Once that purpose is specified, board members have a duty to act with care and in the best interest of the organization and remain loyal to its purpose, as opposed to acting in their own interest. So, board members would be exposing themselves to a real risk of liability if they misuse the funds. Lastly, no single board member could take any action on behalf of the organization and I think it is fair to say that, objectively speaking, the board members are incentivized the use the funds in the way it is outlined in the post.

In sum, no proposal is perfect. The DeFi community as a whole faces significant regulatory risks, which include risks as users and token holders, that most people just aren’t able to identify and, thus, do not appreciate. There currently are no major efforts to protect DeFi against regulators and incumbents’ political efforts, which puts DeFi participants and projects at a huge disadvantage against those regulators and incumbents. While some believe that DeFi can survive regulatory and political attacks, I do not believe that is true for most DeFi projects at this time and, for those that can survive it, there will be a significant impact on users and those governing projects.

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