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

These are mostly red herrings, @miller !

1 - FATF guidance largely seeks to regulate digital assets providers in ways that are similar to how it regulates people who handle USD cash. The latest developments have generally been seen as surprisingly favorable to crypto by many insiders.

2 - This is an issue, but it about crypto. Not about DeFi. So we are the tail wagging the dog.

3 - None of this has been implemented or is generally seen to be implemented quickly, and it is about crypto - not DeFi. Again, we are the tail wagging the dog.

4 - This has nothing to do with DeFi. It is also extremely unlikely that there will be a global ban on crypto and that has never realistically been considered by any US regulator

5 - Yet again, mostly about crypto and not DeFi

6 - Same as 5

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this is bizarre; the proposal is asking to trust 6 people with $40M worth of funds; of course their character is relevant

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Some clarification:

If you believe a person associated with a proposal is dishonest, lacks the claimed expertise, or has a conflict of interest - there would be a valid case to argue against the proposal on that ground. But you should have some very credible evidence to back the argument up.

Example: Individual X is not to be trusted because they were previously involved in a scam token.

What is not valid is attacking an individual’s character for an unrelated and (typically) emotionally-charged social issue.

Example: Individual X is not to be trusted because they previously voted in favor of a given abortion, climate change, immigration issue, etc.

I want everyone putting in a good faith effort to have a voice and be heard, so most moderation will be me directly messaging you if I feel it will be helpful. I will (very rarely) delete posts that are clearly not in good faith.

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I’m Marvin Ammori, the CLO of Uniswap Labs. Since other committee members have commented somewhere publicly now, I figured I would add my voice.

For background, I spent much of my early career as a lawyer fighting for internet freedom and a more decentralized web. I lived in DC for over a decade and was privileged to work on many of the signature internet freedom cases of the era, including the net neutrality fights, some privacy and encryption fights, and some of the copyright/web 2.0 fights. And, while 20/20 hindsight is strong, the truth is we could have lost many of those fights over the internet’s future and were overwhelmingly expected to. But we won most of them.

So I saw what it takes to win. In many of these campaigns, I would help quarterback, direct, and allocate funds and resources. I even worked alongside some of the legendary engineers who helped design the initial internet protocols and across party and national lines. I have worked on policy more than most lawyers and on a bigger stage. I have put in 10,000 hours (twice over) on shaping policy and educating policy makers usually against long odds. It doesn’t mean I know everything, but it does mean I learned at least a few things the hard way. And I try to apply that every day in what I do now alongside this incredible community.

A lot of policymaking is surprising, counterintuitive, and completely bizarre. I understand why some people are confused. I also understand why people, like Matt Corva at Consensys, who have devoted so much time over five years in the policy arena, strongly support the proposal.

I support the proposal and think others should. I am reassured for several reasons:

  • This money will be well-allocated. The concern over “too much” or “too little” money seems to really be a concern that money will somehow be wasted, either through incompetence or (some suggest) nepotism or worse. I know many of the people on the committee and I know they are well-suited to manage this process. There won’t be some mad dash to over-invest or misuse funds. They have expertise, are committed to the growth of this space as evidenced otherwise in their own careers, and are also bound by fiduciary obligations, which cannot be taken lightly (as these folks know). We live in a world of imperfect alternatives, but, if you are going to trust a group, I don’t think there is another group of people I would trust more to make these allocations. (If there is simply no group someone would trust, then that is a different point regarding structure and tactics.)

  • We are not at the “seed fund” stage for politics. We are more like at the “Series F” stage. For those who think that the size of the proposal alone suggests mismanagement, this is simply (a fraction) of what it costs to win. Politics is sometimes an adversarial game, much like sports or litigation. If you had to beat, say, the LA Lakers at home … you can’t do it on a $2 million dollar budget. There is no point fielding a team of amateurs that will definitely lose, so you have to go big or go home. The top trade association bosses make over $2M each year (it is pretty sickening but there is often much more at stake, and democracy is better than the alternatives). Many of the most persuasive lawyers who lead teams that win these fights earn more than the average professional athlete. The proposed fund here is actually much too small to hire many of those people, but it could support the hiring of more good, hungry junior talent and a few targeted big hires–as needed on specific topics for limited hours–to field a solid team that can win consistently over time. This team could cost-effectively educate policy makers so that the community does not have too many last-minute, rushed, fire-drill, major threats. There will still be some unexpected major threats, and rebuffing those is where much of the budget will go. That cannot be easily predicted. The “seed” stage time for funding crypto policy was long ago; I was a consultant on a project for Coin Center back in 2015 and I remember having the luxury of time and seed stage budgets.

  • There will be a full-time hire. Someone has suggested we should name a full-time staff member because the committee members are busy. This is a great point. This overhead is necessary and there will be a full-time staff hire for the 501(c)(4) to focus exclusively on this organization and grant proposals. There would be a process to vet, select, interview, and hire the best person for the role. Interviewing the best people, likely in DC, willing to leave their current employers … is not something that could be done publicly. But doing so is probably the best way to identify and select talent.

  • We should agree to move quickly. The industry has had a bit of a grace period at least in the US. The administration change, appointment process, and hiring have given everyone about a 4 month break since the last major battle in January. This relative quiet was a happenstance … things are not going to stay quiet. Now the new administration is settled in. If this committee were funded today, it would also have to spend weeks hiring an initial staff member, reviewing proposals, analyzing strategy, etc. so that these funds are allocated the most effective way by Fall 2021. So the sooner that process could start, the more likely the industry can get ahead of some issues.

  • All committee members are strongly aligned with the interests of the Defi industry. Regardless of strategic preferences and tactics, we are all on the same team and striving for a fairer, more accessible, safer future of finance. While the committee does not claim to represent the industry as a whole, the committee does include three head lawyers from some of the world’s leading Defi projects who think about and work to advance these issues every day with considerable real responsibility.

So to summarize:

  • If you had worried that 1M UNI is too much to allocate effectively in the policy education process … that’s unfortunately just not the case. If this were a sports match, our side would not even be fielding enough players. To support a winning team on this field, this budget is a great start.
  • If you had worried that the committee needs to prove they know how to allocate money with a small amount before being trusted with a multi-year grant and mission … you have better evidence than that. This group has demonstrated the necessary experience and expertise over many years. Plus, you simply can’t recruit busy people of this high caliber to join a committee with an ineffective, tiny amount of money. They would spend their time doing something else more effective than that committee.
  • If you simply oppose having a specific group of people allocate funds, and think that there is a better way to allocate these funds to the policy process, you may be right but I doubt it. I’ve been part of many dozens of different policy efforts, all with different organizational structures. Here, a dedicated group with expertise could move most competently, most cost-effectively, and just as transparently on cost without harming the process by leaking too much of the strategy. This is a plan that would work well. Maybe another plan would work marginally more effectively, but I have not seen people put forward or coalesce around a concrete plan for a novel political grant-making structure that solves every problem without creating others–nor a structure that has any precedent for success. No plan is perfect, and you can try to poke holes in any of them, but this plan has a good chance of working. To the extent ideas emerge for new forms of political organizing, activism, or coordination, this committee should fund at least some experimental policy tactics for anyone from the community who wants to apply.

All that said, I agree with many of the suggestions.

  • “Defi Defense Fund” does sound too defensive. I have been talking with the other committee members and we like the many suggestions to focus on education. We think that something like Defi Education Fund is much better. Open to better branding too.
  • We agree that frequent community updates on progress, grant allocation, tactics, etc. are essential. These updates would not only ensure trust, but will also keep the community informed on when and how they can lend their voice to the process. Ensuring that policy-makers are well informed goes beyond an “inside” game and requires the participation of many more people. It is important not to waste people’s time so that they get involved in ways that have the maximum impact, at the right time, reaching out to the right policy makers. We will provide updates and, where feasible, require grantees to do the same directly.
  • The committee should put out a detailed budget within 90 days of the proposal passing. Of course, budgets, projections, and 5-year plans often must be revised and amended. As Mike Tyson famously said, “Everyone has a plan until they get punched in the mouth.” When there are surprise punches, as there so often have been in the policy space, we should let you know why and how funds will be reallocated to address them.
  • I agree that this Fund should protect the Uniswap protocol and educate policy-makers on its benefits. It can not be a slush fund at all, let alone for any other causes. But the Uniswap protocol stands on the shoulders of giants in a complicated web of composable code. Threats or misunderstandings about unhosted wallets, cryptocurrency, Ethereum, and decentralized finance protocols will impact the potential for the Uniswap protocol, so they must be considered. As a matter of strategy, much of the funding may go to supporting and educating policy makers about these lego pieces to protect the Uniswap protocol.
  • As noted above, I totally agree on a full-time hire.

I hope people find my views as useful as I have others’ and I look forward to continued discussion.

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We appreciate the hard work of @hlsbfi in bringing this proposal forward. We think it’s a good start, and wanted to offer some feedback that we think might enhance the idea further.

1. Crypto Native Approach. We agree with the policy objectives of the proposal. However we would encourage the community to consider other, more novel ways of achieving them. Rather than recreating the existing policy infrastructure (or indirectly funding it using the UNI treasury), we think this initiative has the potential to create something unique. In particular, something that is lacking from the current landscape and is uniquely enabled by the underlying technology. In other words, a more crypto native approach.

What would that look like? For starters, it would formally be instantiated as an onchain DAO, which at a minimum would provide better transparency, tooling, and interoperability with the rest of the DeFi ecosystem. But more important than its technical form, the project would also take on the more collaborative and community-focused ethos that characterizes DAOs and DeFi governance today. It would seek participation from community representatives of every major DeFi protocol. And it would build consensus from these representatives on key matters. We think this type of architecture would lend greater legitimacy to the organization’s decision making and allow it to more credibly speak on behalf of the broader DeFi community.

This “Policy DAO” could still elect leadership and engage in all of the same functions described in the proposal (just in a more transparent way). But it could also do things that existing industry groups (who lack this sort of community-level buy-in) frankly cannot do. For example, you could imagine it doing something like creating and publishing a set of best practices for new projects to follow. This could include things like security practices, code audits, financial reporting, disclosures, user safeguards, and so on. Many of these things are already done by the leading decentralized communities today (see the quarterly reports published by the Yearn and Maker communities as a great example). This would just be a way to formalize those practices a bit further and publish them for everyone to benefit from.

But critically, rather than being dictated by a small few, these practices would be sourced from the participant developer communities, deliberated up through the governance process, and published on an open-source forum like Github for everyone to read. An initiative like this would go a long way towards demonstrating to policymakers a good-faith effort at industry self-governance. It could also meaningfully level-up the development and governance practices of new projects and communities entering the space.

Point being, this is merely an example of something enabled by this type of cryptonative model - there are undoubtedly others. We think the proposal should lean into these aspects, rather than shy away from them. Doing so will allow it to add something both valuable and new to the policy landscape.We’re happy to help the community brainstorm ideas and build an architecture that embodies these principles.

2. Take an Inclusive Approach. Building on the prior point, the strongest form of this initiative would be one that has buy-in from all of the protocol communities that it purports to represent. This doesn’t mean the full list needs to be defined up front, but there could be ways to condition/stagger the disbursal of funds on obtaining some minimum degree of buy-in across the industry. We suspect there would be broad interest from other communities throughout DeFi. Assuming that’s right, this should be brought forward as a coordinated effort across a number of communities to start, and not a unilateral one. We’re happy to help drive those efforts.

3. Brighten the Message. Finally, the initiative should take on a much more positive message! The current proposal feels negative and defensive. For example, referring to it as the “DeFi Defense Fund” or a “political defense organization” is likely to engender hostility with policymakers and undermine those engagement efforts. We would also recommend striking all the references to “political lobbying” and things of that nature. The focus from the get go should be on the positive aspects of DeFi and the ways it’s an improvement over the legacy financial system. This is ultimately a messaging point, but it will go a long way towards determining how the group is perceived. We can also help brainstorm ideas here as well.

We look forward to working with the community on these points.

Jeff Amico
a16z

For further important information, please see [https://a16z.com/disclosures/].

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Hi all,

I’m loving the thoughtful discussion on this topic. Overall, it seems like there’s fairly strong consensus that Uniswap should fund outreach and advocacy. Protocol participants face an uncertain and potentially hostile legal environment, and educating policymakers could help avoid damaging conflicts down the road.

But it seems there’s less consensus over the amount of funds requested, and the oversight structure. The 1 million UNI requested would represent the largest DAO expense to date, and after approval Uniswap governance would have no direct control over the use of funds. Uniswap governance could approve incremental funding in smaller amounts, but there’s some concern that a minimally scoped initiative would be less effective or risk running out of money before fulfilling its mandate.

One potential solution is to add an oversight mechanism to the distributed UNI, allowing governance or an appointed admin to revoke funding if necessary. At Tally, we’ve been working on a project funded through Uniswap grants to enable this sort of direct on-chain oversight: Safeguard.

How it works:

  1. Funds are placed into a Safeguard timelock contract, controlled by an executive multisig.
  2. The multisig signers (eg potentially the committee members listed above) would submit a transaction to transfer a portion of funds out of the timelock - these funds could be sent to the organization’s legal entity account at an exchange to be converted to fiat. At the same time, they will communicate details and justification for the transaction to the community.
  3. If the transaction is suspicious, goes against community sentiment, or has insufficient information, a guardian mechanism can cancel the transaction while it is queued in the timelock. The guardian can also revoke funding and authority from the multisig entirely if needed.
  4. Assuming it is not cancelled during the timelock period, the transaction is executed and funds are sent to the intended parties.

This mechanism is highly configurable, and can support a variety of approval flows to suit the needs of governance. I think Safeguard could offer the best of both worlds for committee funding:

  • Optimistic governance - additional funding tranches are approved/released by default unless an objection is raised
  • Concrete oversight - governance can block transactions or retrieved remaining funds if the committee loses community support

I’m happy to answer any questions, and look forward to further discussion on this important topic! :slight_smile:

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@jamico these are great comments; proposal should not be approved in current form

the urgency is false as every single one of these people already commands millions of dollars through their respective organizations and is already engaged in DeFi lobbying and advocacy…they need to go back and propose a decentralized, non-trust-maximized alternative…

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Actually the project being built by Uniswap Grants right now by Tally, the Tally FailSafe (See above) does exactly what you’re talking about- decentralizes the trust. It works as optimistic execution, but ultimately, it is the token holders who have authority over the spending. That solves the concerns in my opinion.

These are great ideas. Taking a more inclusive and crypto native approach will almost surely help to advance the cause and improve the optics here and with any regulator the group engaged with.

However, most of the concerns raised before have not been addressed.

  1. Why is so much money needed?

As Matt Corva wrote (see below), each major bank disclosed about $3m per year on policy spend. This is a lot of money!

However, each major bank operates a far larger, far more complex business than Uniswap – and faces far more legal and policy issues. They really aren’t comparable businesses. Yet they only spent $3m per year.

Why do we think Uniswap needs to spend so much more to handle a much narrower range of issues?
"
To put it in perspective, upon a quick search, it looks like each major bank discloses approximately ~3MM in policy spend per year, and that’s what is reported. That’s not to say that the number proposed is correct or incorrect, but just to put real life costs to what otherwise might seem like a big number.
"

Likewise, as Marvin said, trade association heads are paid more than $2m per year. One example is Robert Cook, the head of FINRA. Another is the current head of SIFMA. Is this the sort of organization we are trying to from?

If so, we probably need a much clearer plan and a large upgrade in talent. The folks who typically take these jobs are former head regulators (Cook was a repeat division head at the SEC) - not young crypto lawyers.

  1. What accountability is there?

As currently written, the proposal simply exits 1m Uni with no strings attached. This is wildly out of line with how budgets work at the bigger banks and how regulatory campaigns are usually undertaken.

For example, when the large US investment banks lobbied to influence the regulations promulgated under Dodd Frank, they typically needed to get approval of quarterly budgets and KPIs. Project managers and often outside consultants were employed to drive the process. If the results didn’t occur, budget would be cut or changed and people would be fired.

Here, what do we have besides a grant of 1m Uni to a small board - without even a clear statement of what success looks like.

How is this OK when it is 10x more money than a typical large bank spends a year on lobbying? Put differently, how do you think Goldman Sachs or Morgan Stanley would evaluate this proposal?

  1. How is this conflict of interest acceptable?

At the same time as I am sympathetic to any lawyer or policy wonk who is fighting for DeFi, this proposal pretty clearly creates significant conflicts of interest for each lawyer involved, as well as HLSBFI. Why are we comfortable with this?

To see this very clearly, suppose that Hayden and 3 of his friends proposed taking 1m Uni from the Treasury to start a DeFi VC fund. They then continued to pitch the project to all of you, and piled on to support it on Twitter.

Then they pushed the issue to a vote and used their influence to exit 1m Uni to a separate fund that they controlled.

Afterwards, they continued to be involved in Uniswap AND to hand out checks from the new VC fund - with no accountability to Uniswap.

Why is this OK?

  1. Do the behaviors of the lawyers who would be on this board actually support their being on this board?

As you probably guessed, my answer is no because of the conflicts of interest. But I actually think it is worse.

None of the responses from the potential board members have addresses the basic issues of accountability, budget size or conflicts. In fact, none provide any evidence why 1m Uni are needed for this effort or how 1m Uni will be spent. Likewise, none lay out any details on organizational structure, oversight, or staffing (beyond that the group will hire one full time employee).

Moreover, may of the responses just seem disingenuous or irrelevant. For example:

If you had to beat, say, the LA Lakers at home … you can’t do it on a $2 million dollar budget. There is no point fielding a team of amateurs that will definitely lose, so you have to go big or go home. The top trade association bosses make over $2M each year (it is pretty sickening but there is often much more at stake, and democracy is better than the alternatives). Many of the most persuasive lawyers who lead teams that win these fights earn more than the average professional athlete. The proposed fund here is actually much too small to hire many of those people, but it could support the hiring of more good, hungry junior talent and a few targeted big hires–

To put it very bluntly, how is this relevant?

And who, then, are the Goldman Sach’s and Morgan Stanley’s of the world hiring for $3m per year? And, who are these partners?

Aren’t they the right comps …, and the Lakers payroll just a side show?

2 Likes

I’m Jake Chervinsky, General Counsel of Compound Labs and one of the proposed committee members for this organization. I strongly support the proposal and I’d like to explain why in as much detail as possible here, as well as address some of the community’s concerns. I’ll start with a summary of my main points and then expand on each; if you have any questions or want me to dig deeper on anything, please ask.

Summary

  1. The success of DeFi in general, and Uniswap in particular, depends on how effectively we engage with regulators and policymakers over the next 6 to 18 months. If we fail to act quickly and forcefully, the consequences could be severe.

  2. The proposed committee is well-qualified to manage this program, both in terms of skill and experience with DeFi policy and government affairs, and in terms of commitment to the principles of decentralized governance.

  3. Funding for engagement with regulators and policymakers should come from DeFi protocol treasuries at the discretion of decentralized governance. Uniswap can take lead, but other protocols should join as well.

  4. The proposed funding amount is appropriate given the scope and urgency of the task, especially considering how much money TradFi spends on government affairs, and the fact that centralized crypto companies have no incentive to lobby for DeFi.

  5. Programs like this should always operate at the pleasure of decentralized governance, and those involved should always be accountable to the community. This means we, the committee members, must (and will) prioritize transparency.

About Me

I’m a lawyer based in Washington, D.C. with a background in regulatory compliance and government enforcement defense. I started my career with a multinational firm handling anti-money laundering and anti-corruption matters for Fortune 500 clients. After a federal judicial clerkship, I joined a boutique firm specializing in cross-border dispute resolution and white collar criminal defense. I fell down the crypto rabbit hole in 2017 and represented a number of clients in crypto-related matters involving the SEC, CFTC, and DOJ before joining the industry full-time.

I joined Compound as General Counsel in May 2019 after realizing how DeFi can reshape the global financial system for the better. Since then, I’ve focused all my energy on the legal, regulatory, and policy issues surrounding DeFi. I serve as Chair of the Blockchain Association’s DeFi Working Group and as a Strategic Advisor to Variant Fund. I’m a member of the Uniswap community and I’m personally, deeply committed to the success of DeFi as a whole. Achieving the mission of this program is exactly why I’m here in the first place.

DeFi Regulatory and Political Landscape

In my view, regulatory risk is the single greatest threat to DeFi today. Before this year, DeFi received fairly little attention from the government due to its small size; the industry’s perception was that DeFi was “flying under the radar.” But with success comes scrutiny. After the rise of yield farming, the DeFi bull market, and Uniswap’s appearance in mainstream media, those quiet days are over. Regulators and policymakers worldwide are now watching closely. Although some of them understand the benefits that DeFi offers, many others are skeptical about a decentralized financial system that lacks the intermediaries they regulate.

Initial reactions from some regulators have been discouraging. In the AML/CFT arena, policy changes are now being considered that could significantly harm DeFi. For example, the FATF’s March 2021 draft guidance suggested that governance token holders could qualify as regulated VASPs, or that crypto exchanges could be prohibited from allowing withdrawals to non-custodial wallets. Policymakers are also concerned about the risks posed by stablecoins — a critical piece of the DeFi ecosystem — to monetary sovereignty and financial stability. As time goes on, we can expect to hear more questions and concerns about numerous other subjects as well, including the US federal securities, commodities, and tax laws, to name a few.

It’s crucial that we take the concerns of regulators and policymakers seriously. Like it or not, they have an unparalleled ability to hamstring the growth of DeFi, and if we fail to engage, the most likely outcome is a draconian “regulate first, ask questions later” approach which could set DeFi back by years, if not permanently. Luckily, we still have time. Most regulators and policymakers haven’t made up their minds yet, and in the US, some high-ranking positions are still waiting to be filled. But we can’t wait; now is our best chance to have a meaningful impact on DeFi policy before these decisions are made for us without our input. Time is of the essence.

Proposed Committee and Program Strategy

My fellow proposed committee members are among the smartest, most experienced, and most effective advocates for good DeFi policy in the world. I’ve had the pleasure of working personally with nearly all of them and I have no doubt that they’re the right people to lead this effort. From the feedback I’ve seen, the community seems to agree, so I’ll leave this here.

But what exactly will we do with the funds? Although the decision won’t be up to me alone, and my fellow committee members may have other (better) ideas, here’s generally how I think about our strategy and use of funds:

  • Education. The vast majority of regulators and policymakers don’t yet understand the technical and practical details that distinguish DeFi from TradFi. Without that knowledge, their initial reaction may be to impose the same regulatory obligations on DeFi protocols as they do on centralized financial institutions. In other words, they may mistakenly assume that Uniswap is an “exchange” like any other, implicating all the same risks and requiring all the same regulatory safeguards as Coinbase, et al. That’s wrong. To avoid such an outcome, we need to educate regulators and policymakers on how DeFi works and why its unique properties negate the need for many traditional regulations.

  • Advocacy. We can’t just educate government officials about the greatness of DeFi and then hope they leave us alone. Instead, we need to advocate strongly in favor of policies that support adoption of DeFi protocols and against policies that restrict access to DeFi or create a regulatory moat around entrenched incumbents. Good advocacy is both reactive and proactive; we need to address regulatory developments as they arise and advance our own policy proposals. Good advocacy is also both government-facing and public-facing; we need to engage with regulators and policymakers while also building consensus within the industry and grassroots support from the community.

  • Defense. We need to be prepared to take swift action in case of hostile guidance, rulemaking, legislation, executive orders, enforcement actions, or otherwise. It’s hard to predict in advance what form our defensive efforts might take, and hopefully the need won’t materialize at all. Yet, there’s plenty we can and should do now to prepare for the worst. For example, we could commission legal research on defense theories or constitutional protections that may apply to DeFi. Equally important, it’s a huge benefit to have resources set aside and available to allocate quickly in an emergency.

I anticipate the bulk of this work will involve retaining specialists such as researchers, lawyers, lobbyists, organizers, designers, and consultants, as well as making contributions to other aligned organizations and hiring full-time staff for the 501(c)(4). I understand that hiring lawyers and lobbyists may seem distasteful — in a sense, it goes against the ethos of DeFi, which emphasizes opting out of the legacy power structures that brought us to this point in the first place — but as @Marvin put it, this is “what it takes to win.” I prefer to win.

Funding from Uniswap and Other Protocols

Given the importance of engaging on DeFi policy, I believe this program is a valuable use of Uniswap’s resources and a paramount example of how DeFi communities can achieve off-chain goals without sacrificing the decentralization at their core. Uniswap is especially well-positioned to lead this initiative. The issues and strategy that I outlined above are particularly important for Uniswap as a decentralized exchange protocol that allows users to trade an enormous range of Ethereum-based assets, an activity that’s heavily regulated in the traditional centralized context. Uniswap also has the capacity to fund the program thanks to its substantial treasury.

That said, I appreciate the feedback from some community members that Uniswap shouldn’t be asked to fund the entire program on its own, or all in one shot (more on that below). There’s no question that, to be effective, we will need to engage with regulators and policymakers on behalf of the entire DeFi sector, not just Uniswap. For that reason, although I do believe Uniswap is the right “founding protocol” for this program, my hope is that other DeFi communities will see fit to join the effort and allocate additional funds from their treasuries to the 501(c)(4).

Initial and Total Funding Amounts

As far as I can tell, the point of greatest contention within the community is how much funding the program should receive. In my opinion, the size of the request in this Consensus Check is ultimately appropriate given the magnitude of the task at hand. As @sukernik explained, we aren’t proposing to form a startup that can wait to launch a minimum viable product before seeking additional funding. We’re proposing to form a nonprofit that can meaningfully impact policy on the global stage within the next 6 months.

This mission is an expensive one. There are thousands (literally, thousands) of regulators and policymakers worth engaging around the world today. There’s virtually no amount of money that we couldn’t put to good use immediately. Other industries that have above-average success with government affairs — including TradFi itself — spend hundreds of millions of dollars each year to influence policy in the United States alone. Make no mistake, we are the underdogs. In my view, if protocol treasuries can help us level the playing field, we’re obligated to use them.

It’s particularly important for protocol treasuries to fund DeFi-specific policy efforts because nobody else will. As of now, centralized crypto companies have a tense relationship with DeFi. While they appreciate the role that DeFi tokens played in catalyzing the bull market, they also see DeFi protocols as competitors. These companies aren’t incentivized to, and indeed do not, dedicate resources toward DeFi policy. Coin Center and the Blockchain Association are both fantastic organizations, but neither focuses exclusively on DeFi as the 501(c)(4) would. If this is to be the only DeFi-specific policy organization in the world, we should fund it properly.

However, I also appreciate that 1M UNI is a significant sum, even if only a small fraction of the total treasury, and that some community members aren’t convinced that the full amount should be allocated in a single vote. With that in mind, I wouldn’t object to a smaller initial grant to get the program up and running, with the expectation that we will request additional funds from Uniswap and other protocols when appropriate. Although it may be difficult to measure our progress objectively over short time periods, I trust that the community can understand and evaluate our work in light of that caveat.

Transparency and Accountability

Transparency and accountability are essential to the success of this program and others like it. For many reasons, decentralized governance simply doesn’t work if the governors don’t have equal access to information about the protocol, including how its funds are being used. My goal as a proposed committee member is to provide as much public transparency as possible, to hold myself accountable to the community in the performance of my role, and to hold my fellow committee members to the same high standards.

@Marvin has already outlined the steps we’ll take regarding community updates, budgeting, and more. Personally, I’ll endeavor to make myself available to answer questions and attend community calls as much as possible.

Conclusion

We’re at a challenging time in DeFi’s history. Since last summer, we’ve proved the concept that financial activities more complex than transferring and storing value can be decentralized. As a reward, we’re now a subject of attention for regulators and policymakers worldwide. I strongly support this proposal because I believe it will help us advance good DeFi policy, a goal that is essential to Uniswap’s long-term success and well worth the cost.

9 Likes

Rationale is ok. The amount $40mm is too much. Please give some examples of why we need to have $40mm to be spent on this.

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In full support of this proposition. I also second @jonsnow in that $40M may be too much, however I would fully support an initial allocation that would be sufficient to bootstrap the initiative. As progress is made, Uniswap governance can determine how much more should be allocated from the treasury to fund the agenda. Thank you for taking action!

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My name is Grant Gulovsen, an attorney who represents clients in the crypto industry including a few DeFi protocols. I am also a UNI holder. I’m not opposed to the proposal per se but I am concerned that the interests of the committee members (as well as their respective clients) may not align with the interests of “DeFi” as a whole. I therefore would recommend that at least a few more non-lawyers be added to the committee to ensure that broader interests are taken into account.

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This seems entirely US centric. Uniswap is decentralized and not subject to a single nation state jurisdiction.

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I absolutely agree with providing a smaller initial grant to see how things pan out. This way it wouldnt be too polarizing for the community as a whole because I have a strong feeling a lot of people will NOT want to hold onto their UNI if they know the prices can get absolutely obliterated by passing sell pressure proposals all the time. It will just not be worth the hassle to hold UNI token if you are to fund everything as a holder with massive amounts…

Like one thing that grinds my gears is that people are not discussing the real value of the token and what it might entail for this proposal. 1M UNI is worth 40M now, but what if in 6 months its worth 200M? What if its worth 10M? What will happen in those cases. Will the OP come for another 30M if the token is worth next to nothing in 6 months?? I mean, its ridicilous how nobody is talking about this. This is why we have to provide a smaller amount first, then see if we require more funding.

Blockchain@Columbia supports the overall direction of the proposal though there are numerous changes and specifications that we would like to see in the final proposal for the on chain vote.

  1. We completely agree with @jamico’s points about the rebranding of this to be more educational and non-antagonistic to regulators and lawmakers.
  2. The bylaws of the 501(c) (4) proposal must be included in the on-chain vote that includes provisions such as: the ability of UNI holders to remove/nominate people to the board based off of on-chain votes; consistent schedule of reporting to UNI holders re initiatives, progress, and use of proceeds; and minimum time commitments of board members.
  3. A full-time hire to lead this initiative must be on-board before this vote occurs.
  4. Measurable set of goals and metrics with approximate use of funds and time-line for each.
  5. Specification of amount of funds that will be contingent on other defi “blue-chips” contributing funding to this initiative.

We will be voting for this consensus check as we are looking forward to seeing this alterations to this proposal. If such changes don’t occur then we will be voting against this proposal during the on-chain vote.

The space has become large enough that serious regulatory scrutiny is already occurring and is likely to intensify. Uniswap should take the lead as the preeminent project in the space though not without buy-in from other major projects. Building a positive relationship with informed regulators and legislators is essential to the longevity and success of Uniswap, defi, and crypto in general.

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@jchervinsky I think you’ve done great work for DeFi and should be paid accordingly. But let me ask you a serious question -

Why is it OK for the General Counsel of Uniswap and lawyers who worked for Uniswap as their outside counsel OK to be seeking to remove funds from the Treasury to place them in an entity that they control and has no accountability to Uniswap?

How is this not a conflict of interest far beyond what’s permissible in normal corporate law?

@jamico Why don’t you just set up a subsidiary or another entity that is 100% owner by Uniswap token / equity holders, reports to @haydenadams and the board and is funded quarterly by Uniswap?

I am not as silver tongued as many of the lawyers here, but I really can’t figure out why anyone things it makes sense to exit corporate funds to a new entity that has no relationship to Uniswap.

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Same question for you @blockchaincolumbia Why do you support exiting funds from the treasury into a new entity that is not accountable to Uniswap’s board, token holders, etc?

Why not set up a subsidiary or another entity that has a direct reporting line - and is funded periodically - by Uniswap?

Same question for you @lex-node Why would someone support exiting funds from the treasury into a new entity that is not accountable to Uniswap’s board, token holders, etc?

Why not set up a subsidiary or another entity that has a direct reporting line - and is funded periodically - by Uniswap?

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Huge supporter of this initiative (with many solid perspectives - on both sides).

A quick comment on the amount > in the grand scheme the $40M price tag is inconsequential to the overall treasury. There should be checks and balances to that; a smaller grant may indeed provide a bit more comfort. But in the end, the focus on the amount vs. the justification of the activity is probably an inconsequential debate. Big swings will need to be taken for future evolution; this is one of them.

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