Its time to get serious…
I want to talk about the unfairness of the governance and the sustainability of the UNI Treasury value if the fee switch does not get turned on.
- If we look at the submitted proposals, all of them besides one represented an attempt to dillute the value of UNI token holders and redistribute them to somebody else. Now, we have an attempt to siphon the funds for a DeFi lobby fund which represents yet another sell pressure proposal for the token.
Now, I dont know about you, but when I bought UNI token, I was buying it with the intent of deploying my capital effectively to propel the growth of Uniswap. I did not buy the token with the intent to become a piggybank for somebody else to siphon off all my value to 0. Proposing sell pressure proposals all the time is not sustainable for the growth of Uniswap´s treasury and presents a strong threat to the UNI token project as a whole. Afterall, who wants to hold a token which basically redistributes its value to other people?? Like the point of the token was it to be a governance token, but this is slowly becoming a charity type of a token where the only vote is to decide to whom we should give out money and how much…
- During the community call on the 2nd of June, there were people arguing against the proposal to turn on the fee switch who are not even UNI holders. People were arguing that paying the UNI token holders does not provide value to the Uniswap project as a whole, but this is completely wrong.
Let me explain:
UNI has a treasury which holds a specific amount of UNI tokens. The value of this treasury is determined by the price of the UNI token. This means that if there are willing UNI token buyers, the value of the treasury grows. On the other hand, if there are willing sellers of the UNI token, the value of the treasury falls. Now, if we propose sell pressure proposals all the time with no buy pressure proposals, what is the incentive for anybody to be a willing UNI token buyer? Proposing dilution is clearly not a sustainable path for the token to be taking as it will diminish the buying power of the UNI treasury; therefore, there will be a limit on what it can fund.
-
Now, I think it would be much more beneficial for the protocol if we TURN ON the fee switch and PAY the token holders. This way we create a buy pressure proposal for the token which actively creates value in the form of a higher UNI price = more valuable UNI in the treasury = more things which we can fund in order to foster growth for Uniswap.
-
The main argument against the fee switch up until now was the fact the competitors would have an advantage by providing better LP fees and the fact Uniswap LPs would suffer. Now, I strongly think the situation has developed in such a way that these arguments do not hold true anymore. Uniswap V3 assured the dominance among DEXes with the timelocked code which cannot be copied over. This means that the competitors will not be able to simply adjust incentives to siphon off the liquidity of off Uniswap.
The second argument is also not valid because the LPs which suffer the loss of the income can simply offset it by buying UNI tokens and collect the fees to cover for the loss arising from the fee switch. Actually, this would be incredibly good for Uniswap as there would be a flood of willing buyers which would transfer their wealth into the treasury meaning Uniswap´s influence to propose sell proposals would increase tremendously in a sustainable fashion. Therefore, I see this as a net positive for the protocol
All in all, I do think the time to turn on the fee switch has come. With arbitrum & optimism deployment around the corner, Uniswap is in the best position to further its position as the market leader among the DEXes & enhance the value of its treasury by a good margin.