After attending an office hours, we got a lot of our questions answered; some general thoughts and current opinions.
A lot of our concerns have been voiced above and will be nice to see the revisions in the upcoming days. From our standpoint, the highest level question we’re most interested in is with Unichain, how will the UF and DAO relationship going forward work? Maybe more specifically, with this proposal, the UF takes on the role of a normal Chain’s foundation team and to us this makes sense. There needs to be someone for this role and it makes most sense for the UF to take on this role. With this assumption, how will the DAO function day to day? Will there be grant requests to the DAO/alternative programs set up, upgrade requests communicated to the DAO, etc.
It will definitely be interesting to see where this progresses over the next few months as the DAO maintains the role of treasury allocator and preserver.
In light of Devin’s and karpatkey’s replies, let me clarify one point on sustainability, otherwise there’s a risk that we’re talking past each other.
The problem I see is ultimately of balancing the books. If the DAO doesn’t have sufficient income from operations, and spends more than the income from yield, the treasury will go to zero.
The the argument can be spelled out as this:
The tresaury report divides Operating Income and Non-Operating Income of the DAO. It suggests that relatively small amount of fees can be captured by the DAO and that “the Uniswap DAO will therefore not be sustainable in the long-run by relying on income from operations”.
While the report doesn’t say this explicitly, the same argument can be made for Unichain’s revenue share.
The report also suggests that “it must utilize its current treasury to collect income via alternative methods—likely through yield-bearing strategies and investments”.
Collecting revenue from Unichain and Uniswap v2/v3/v4/X are forms of Operating Income.
Spending funds to incentivize Unichain or Uniswap v2/v3/v4/X therefore have the potential to increase the DAO’s Operating Income, but not the Non-Operating Income.
Spending any funds from the treasury reduces its size, therefore reduces the future opportunities for Non-Operating Income.
It follows that:
Spending additional incentives to grow the potential future revenues of the protocol reduces the sustainability of the DAO as its currently designed, rather than decreases it.
It’s not clear if you disagree with some of the premises, or the conclusion? For one, I’m not saying that the TWG’s report is the ultimate source of truth. And ecosystem development could increase the UNI token price even if there’s no clear plan for the DAO to balance it’s budget. Does the protocol need the DAO more than the DAO needs the protocol…?
There have been a lot of great comments made by fellow delegates. We appreciate everyone who has taken the time to review the proposal and provide feedback. Ultimately, this process will lead to the best outcome for the DAO.
Many of the points we intended to bring up have already been discussed, so rather than reiterating those points, we would like to offer a new view.
We believe it’s time to improve the governance of the Uniswap Foundation with their new funding request. The foundation has raised about $60M in funding from the DAO to date, and once the two new funding requests are approved, they will eclipse $200M.
As it currently stands, the Uniswap Foundation has an advisory board established in the first funding proposal, and the legal board of the Uniswap Foundation has two seats (according to publicly available filings), one filled by Devin and the other filled by Ken.
As the foundation scales its footprint and the DAO scales its investment in the foundation, it would be fitting for the DAO to have a more direct role overseeing the UNI invested in the foundation.
We propose the DAO elect five individuals to the board: a DeFi legal expert, a growth/marketing expert, someone with a track record for building high-impact organizations, and two Uniswap delegates. The board would have a total of five seats.
If delegates are receptive to this idea, we are happy to create a new forum thread to discuss the process of nominating board members and holding elections in parallel with the foundation’s proposal.
Lastly, GFX Labs feels strongly that this maturing is necessary to approve the funding request. As such, we will withhold our support of the dual requests until it has been indicated that the foundation and delegates support improving the foundation’s governance.
EDIT: We have had a few folks message us to voice why updating the advisory board would not be sufficient. We agree. We are proposing changes to the Uniswap Foundation’s legal board.
To enable delegates to clearly signal their preferences for the Foundation’s strategic focus, I propose adopting an approach similar to the incentives proposal by splitting the vote into four distinct options:
Approve the entire proposal as presented.
Approve only the Uniswap V4 strategy.
Approve only the Unichain strategy.
Reject the proposal in full.
Again, this would allow stakeholders to vote directly on each part, avoiding an all-or-nothing approach. It ensures a clearer, fairer reflection of preferences and reduces potential friction.
The filings are pretty interesting to dig through and the topic of an advisory board makes sense. Would be nice to hear from the Foundation what the purpose of the board is or does currently; we thought it included independent parties already?
Overall, given the relationship, it makes sense to have some level of DAO or independent involvement and relation for accountability and oversight. Quite a few delegates have asked the Accountability Committee to get involved, but given the current scope of that, it doesn’t make sense in our opinion for that entity itself right now to do so. However, an independent board mixed with outside professionals makes a lot of sense. There probably needs to have a good level of recruiting for outside professionals but given the scope and budget, it should be pretty reasonable.
Overall optimistic about the opportunities that lie ahead for Uniswap, and we recognise the important and valuable work that the Foundation has done and continues to do for Uniswap. Most of our questions have already been answered during office hours and in private convos with the UF, but wanted to share our thoughts here nonetheless. We also appreciate the important questions and feedback raised by some of our fellow delegates so far, which we in large agree with.
Imo, the key strategic priorities — scaling network supply (liquidity) and demand (developers), onboarding core contributors, evolving governance, and activating revenue streams — are logically connected and make sense for building network effects. Together with hooks and Unichain, one can imagine where these come together to create real synergies and drive a competitive edge for Uniswap. This is all very exciting stuff.
Our main concerns involve the heavy reliance on financial incentives to achieve these goals, coupled with significant execution complexity.
Incentive dependency: While these types of incentives can be effective short-term catalysts, as others have noted, it is questionable whether they can form a sustainable strategy for long-term success. The proposal acknowledges the need for “organic demand” but could elaborate further on how this will be achieved through the various builder/hook/partnership initiatives in terms of synergies/network effects.
Execution: The UF proposes to undertake a large number of initiatives simultaneously: managing multiple large grant programs, launching and scaling Unichain, overhauling governance, engaging with regulators, and more. Successfully recruiting 12+ highly qualified individuals in the competitive crypto space is a significant undertaking in itself; delays in hiring, struggle to find the specific expertise required for each initiative, and effectively onboarding these new team members would all directly impact execution.
Would be interested to hear more about how the UF is thinking about mitigating some of these risks, and what if some of these issues get in the way of meeting the year-1 KPIs?
Similarly, we’d be interested to hear how the UF envisions the management of all the specific grant programs for developers, governance, core contributor teams, infra, research etc? Appreciate the recently added milestones/deliverables etc!
Governance: The proposed changes to governance are on a high level ambitious and necessary, but the role of the DAO appears to remain somewhat unclear amongst the community. While this was discussed at Devcon Uniday, we’d encourage the UF to explicitly outline this in plain English and how they see this developing.
As far as understood, the UF’s goal for governance in the next year is to facilitate more effective UNI spending, primarily involving core contributors. While the UF will initially manage the core contributors, we understand the goal is to transition management of these relationships to the DAO once it has a legal entity, as well as develop tools to enable the DAO to directly manage said relationships and ultimately eliminate the UF’s intermediary role.
We also think the board setup suggested by @GFXlabs could help bridge the perceived gap between Uniswap stakeholders and something we’d be interested to hear more about and explore further, and look forward to seeing what the UF thinks of this idea.
Regarding the budget, the operating expenses are — as expected — significant, but therefore we think also warrants further breakdowns.
@GFXlabs@sogipec There is $3.5 million worth of unused UNI in the “Uniswap Revitalization and Growth Proposal”. Data is showing that this program has failed in its objective of attracting retentive liquidity in its target chains. If UNI holders are going to fund Unichain liquidity incentives; then use this full $3.5million to solely target Unichain. Remove Unichain incentives from this proposal, and redirect the “Uniswap Revitalization and Growth Proposal” to Unichain.
Ethereum address where the “Revitalization and Growth” UNI is held:
As of early December, the UAC had a surplus of nearly $3M.
The $3.5M in Uniswap Accountability Committee’s multi-sig is for a multitude of programs, not just UNI for the Uniswap Revitalization and Growth proposal. For example, proposal 74, the prop supporting Tally, was directed to the UAC. Further, proposals are often denominated in dollars but are funded to the UAC in UNI. Between the UAC receiving UNI and distributing it for the approved proposal, the price of UNI can fluctuate, leading to a surplus or deficit.
Proposal 59 stated, “The goal of this proposal is to take Uniswap on the offensive by actively supporting and incentivizing new deployments of Uniswap v3. If successful, we will be able to grow Uniswap’s market share and increase the amount of volume growing through protocol-owned deployments rather than leaving the opportunity for more Uni V3 forks to grab market share.”
That said, we are not opposed to directing sizable incentives to Unichain. The sums requested by the Uniswap Foundation are not beyond what we would support. Our primary concern with the proposal is the foundation’s lack of governance.
In the short term, if the DAO would like, we would be happy to propose allocating sizable incentives to Unichain.
please clarify/expand … without details its hard to determine whether it is
a) structural
b) procedural
c) accountable (lines of reporting)
If it is a sensitive matter, we (as in LexDAO) can set up an anonymous process to protect whistle-blowers by giving authorNyms. However, without substantive evidence, it can easily degenerate into slander
Discussions (ongoing) to improve governance (not exhaustive)
structural = thoughts to onboard more developer-oriented delegates … this tries to overcome fact that all IP is controlled by Uniswap Labs so fostering adjacent/vertical IP broadens participation;
procedural = suggestion to use a open tender process for simple procurements - this separates the how from who-what on non-discriminatory basis;
accountable = various dashboards as UF grantees (which also benefit forks) - I’ve made various suggestions on whistle-blowing and independent investigations
As this proposal currently stands, I hold in two views: Uniswap Foundation needs to be funded, and there needs to be effective oversight and accountability over the utilization of the requested capital.
There doesn’t seem to be a net positive scenario that’ll result from cutting the UF’s funding or reducing it by a significant margin. The landscape of “Uniswap” as a whole has materially transformed just over the past month. V3 and previous iterations, although incredibly impactful and significant, have been baseline protocols—but v4 is a platform, and Unichain is an entire L2. So, a formalized steward is needed to help grow these additions.
The landscape is changing from other angles as well. Regulatory developments should lead to the adoption of the DUNA, which will help turn on fees for token holders and allow the DAO to partake in more active treasury management initiatives. The DAO, and the protocol as a whole, has been held back for some time, but these developments should allow for more impactful and creative initiatives to develop. Plus, token holders can finally benefit from trading and sequencer fees. It’s frustrating to see an entity like Labs be the sole benefactor from Uniswap’s growth, while remaining restricted as a token holder. That’s about to change.
So here’s the main question in my mind—given all of these changes, can UF properly execute their mandates?
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I sympathize with the argument that the DAO itself may not attain direct and explicit benefit from Unichain. Sure, we could stake UNI from the treasury to attain some yield, but that would only reduce the yield towards staking token holders. And if the UF stakes, that would also cut into other token holders’ yield. Sounds like a net negative…even though we could run simulations to find an optimal staking ratio between the DAO/UF and token holders. Regardless, Unichain won’t financially benefit the DAO overtly, and its control—from what I can tell—won’t directly be in delegates’ hands either due to the layer of separation between Uniswap governance and Optimism governance. And if the UF is playing a part in the Optimism security council, how will the UF interface with the DAO in decision making?
Regardless of rights over the UVN fee split, the DAO does not operate on a strictly profit-maximizing basis, so cutting funding for Unichain from this proposal doesn’t make sense. The DAO’s actions haven’t always been in the direct financial interest of itself but for DeFi as a whole. The largest expense for the DAO, apart from UF funding, has been public goods support like the DEF. These are beneficial to both Uniswap and crypto as a whole. This isn’t to say that public goods funding should be our main purpose—I’m actually opposed to most public goods initiatives and think the DAO should start functioning more or less like a business. What we should be focused on is long-term value provision to token holders, and increasing adoption for Unichain by funding the UF helps accomplish that goal. After all, that 65% UVN fee is useless if Unichain activity remains low. So, not funding Unichain partnerships, incentives, etc seems to be a net negative to token holders—even though not funding Unichain would be positive for the DAO’s treasury:
Based on the above, along with the UTWG’s research, expenses for the DAO would eclipse initial projections if this proposal were to pass—and that’s largely based on an underestimation of expenses required to bootstrap v4 (which has had a comparatively slower rate of growth than both v3 and v2) and the introduction of Unichain. From previous conversations, it’s clear that Labs doesn’t want to deal with the DAO. But the success of Unichain, and other Labs-related revenue sources, hinge on DAO-based funding. Labs hasn’t announced that it’ll be recycling a large portion of its revenue to support the growth of its newly developed products. Surely they should commit some of the $100M+ they earned over the past year to bootstrapping the v4/Unichain ecosystems? This was in part the hope when creating the initial expense projections. We request that one of the additional mandates of the Foundation is to more closely work with Labs to attain clarity on economic architecture, like UVN fees, and communicate that to the DAO prior to their institution, thereby more closely advocating token holders’ best interest.
And so, value provision to token holders can either be direct or indirect—the same goes for the DAO. Even if the DAO does not financially benefit from the UVN, even though it could, token holders definitely benefit. To what extent? Well, that largely hinges on how much the DAO supports Unichain—and is fettered by the economic architecture put in place by Labs (maybe the UVN split could’ve been negotiated from 65% to 75%?).
To the previous point of public goods, they often provide indirect value, but these “righteous” endeavors can easily veer into unjustified expenditures. The DAO can fall into this trap—this is bad for token holders. The UF can also fall into this trap, which can be harmful for the DAO and token holders.
So where does the onus lie regarding the UF?
According to the proposal, the goals for 2025-2026 are divided into “Scaling network demand/supply” and “equipping governance and community.” So there is a verbal commitment to Uniswap as a whole, along with the goodwill that the UF has created over the past couple of years.
But here’s a key detail—the Uniswap Foundation is legally a 501c4. What does this mean? Simply put, the UF’s fiduciary responsibility is not “Uniswap” or “the DAO” but DeFi as a whole. A 501c4 is not allowed to prioritize an explicit entity, only a cause like DeFi. Hence, one could argue that some of the initiatives funded by the UF could fall more into public good territory, where the clear benefit does not fall to token holders or the DAO. For example, the requested $4.5M for CFMs is an experimental endeavor that Uniswap stands to benefit from—but it’s also an experiment that other entities can indirectly learn from without having to allocate direct resources towards. In other words, Uniswap is taking on the financial risk of seeing this experiment through for the sake of Uniswap, yes, but partly also for the sake of DeFi as a whole. This isn’t to say that this experiment isn’t worthwhile—just that the $4.5M allotment may be too large.
Why keep a 501c4? From my understanding, this enables the UF to engage more heavily in political activity: [quote=“devinwalsh, post:1, topic:25251”] In 2024, the UF engaged informally with staffers of Congress members, the administration, and regulatory agencies, and crypto lobbying groups to advocate for DeFi to push for regulatory clarity, governance certainty, and builder protections. Recognizing the pivot from enforcement to dialogue, UF has engaged with the SEC Crypto Task Force, CFTC, and key Congressional committees to help shape DeFi policy. The UF is well-positioned to expand these efforts and excited to explore opportunities here in the next year. [/quote]
So how does the DAO ensure that capital is expended in the best interest of the DAO and token holders? Legal frameworks are often the best answer. A potential answer is creating a contract with the DAO and the UF, where upon the execution of the funding request, the UF is legally obligated to uphold certain standards and meet particular KPIs. The currently presented KPIs are rather optimistic. And in an ever-increasing competitive landscape, where Uniswap continues to lose overall market share, the DAO must make sure that expectations are realistically set. The presence of a legal contract between the DAO and UF would ensure that attainable KPIs and objectives are set, which would thereby lead to more prudent spending. The issue is that the DAO cannot enter into legal agreements. Perhaps this is feasible once the DUNA is in place. Therefore, a revamped board would make sense:
Instead of two Uniswap delegates on the board, perhaps it would be better for a large liquid token holder to be present.
An alternative to the board—or in supplement—is dividing the funding request into two yearly tranches, much like the initial funding request which was divided between 2022 and 2023.
The downside to approving just a single year of funding is:
But it also lends itself to more scrupulous capital management. Less cash on hand would mean that the UF is forced to more prudently give out grants and fund other partners. This would also limit the size of the team. Some of the roles listed could perhaps be rolled up into a single job. I would hope that the Foundation continues functioning like a startup as opposed to a larger bureaucratic organization.
A further alternative would be granting the DAO the ability to clawback a portion of the funds after a given review period. The incentives proposal allows the timelock to have ownership over the funds—a similar setup could be warranted for grants and UF OPEX.
——————
A very exciting vision proposed in the proposal is the inclusion of core contributors. A big change that should be ushered in over the coming year or two is the incorporation of “in-house” developers and researchers. The UF has agreed with delegates on this vision. That’s why $15M is bucketed for bringing on 3 new core contributors over the next 2 years. This is something that’s been lacking for some time, with Labs acting as the primary R&D entity for Uniswap as a whole. But in order to realize this vision, a stronger pipeline must be created for grantees and future core contributors to become true businesses.
A missing KPI imo is the number of successful, i.e. self-sufficient, businesses that the UF has funded. A salient one is of course Oku, which was funded by a $1.6M grant and has enabled Uni v3 to be safely deployed across dozens of chains. They generate revenue based on these partnerships and are even expanding their FE integration expertise to protocols like Morpho. In other words, Oku started as merely a grantee and is now a growing, revenue-generating business, funded often by the DAO for integrations but primarily directly by target chains. We need more of these success stories. Grantees and incubator participants should eventually graduate from their “seed” phase with the Foundation, at which point, they may come to the DAO for further funding, or raise from more traditional sources like VCs. Incentive-aligned structures can be set up to fund these businesses as well, like being paid in vested UNI. If enough of these businesses graduate from the UF grants launchpad, in a couple of years, Uniswap could supplement—or displace—Labs in a meaningful way.
This brings me back to a previous point: the UF should interface with Labs more to ensure that the DAO’s and token holders’ interests are represented. In a scenario where communications with Labs are entirely severed, a more adversarial environment could brew. If the DAO launches new products via core contributors, would Labs feel threatened? Would this turn into a pvp grudge match between the DAO and Labs? It wouldn’t be a surprise since alternative core contributors would increase Labs’ competition and therefore suppress their margins. If entities aren’t on the same page, then funding core contributors and more grantees may ultimately be fruitless due to Labs’ significant stronghold.
I am supportive of the work the foundation has done so far. I also believe the objectives of the proposal are worthwhile and set a new tone moving forward.
With the launch of v4 and Unichain, this feels like a pivotal moment. One of the main points of contention I see within the crypto “X” community is that Uniswap DAO is perceived as a “piggy bank” for incentives and public goods. Meanwhile, Uniswap Labs benefits from front-end (FE) revenues while holding a separate equity stake in the company. I hold Uniswap Labs in high regard, so I tend to disregard this line of thinking in favor of the bigger picture. However, the narrative linger’s.
It would be great to see Uniswap Labs take a more active role in initiatives that drive users to Unichain. I believe that “crypto the game” could be one such effort, although it is more targeted and limited in audience. Additionally, it would be nice to explore other ways to reward Uniswap users for their loyalty to the brand, particularly those whose activity enables Uniswap Labs to generate revenue. If the Uniswap DAO had a clearer understanding of Uniswap Labs’ vision for these releases, the incentives could better align with strategic goals that benefit Uniswap DAO and Labs.
Overall, I believe this proposal should pass in some form. However, from my initial read, it feels complex and a bundle of funding incentives to digest.
As it currently stands, the Uniswap Foundation has an advisory board established in the first funding proposal, and the legal board of the Uniswap Foundation has two seats (according to publicly available filings), one filled by Devin and the other filled by Ken.
With this operating structure, the Uniswap DAO’s only ability to govern the UF is when it requests additional funding. Outside of that, it is a free-standing organization.
Implementing an elected (legal) board with a diverse skill set has the potential to do much more than hold the UF accountable. Most importantly, the board could help guide the foundation toward working on the highest-impact items and formalizing the foundation’s operations. In many cases, a great board can be a force multiplier for the organization.
Hi all, for those of you who do not know me, I am Brian Nistler, the General Counsel of the Uniswap Foundation. While I do not typically post in the forum, I felt it important to make an exception to address the comments regarding the UF’s Board of Directors. I want to note and remind everyone that as the GC of the Foundation, none of the below should be taken as legal advice to any particular delegate or to Uniswap Governance as a whole but is an overview of my concerns regarding the Board comments.
Having Uniswap Governance elect the Board of Directors (referred to as the legal board in some comments) is, from a corporate governance, legal, and regulatory lens, a potentially huge risk for Uniswap Governance, Uniswap delegates, and the Uniswap Foundation that should not be taken lightly.
As you all know, the Uniswap Foundation is distinct and separate from Uniswap Governance. Uniswap Foundation is ultimately accountable to the DAO via our fund request process. Further, as the above proposal outlines we are ensuring that the Uniswap Foundation continues to maintain alignment with the success of the protocol via our committed holdings and employee vesting denominated in UNI. That said, it is imperative that the Uniswap Foundation maintain legal and operational independence, as is typical for similar foundations to maintain from their donors.
If Uniswap Governance were to control the election of the Board of the Uniswap Foundation, this independence and separation would be jeopardized. Plaintiffs’ firms could attempt to exploit some perceived non-independence and hold the DAO liable for the acts of the Uniswap Foundation or vice versa. In several recent private plaintiff litigations in our space, we have seen firms lump all ecosystem participants together to argue a common enterprise (e.g., ongoing class actions regarding Lido and Compound) and use novel and untested theories of liability, securities law, and other state claims to hold DAOs and their respective treasuries liable for certain actions. Implementing the proposal to have Governance elect the Board may make it easier for those firms to make these arguments and place the Uniswap Foundation, delegates, token holders, and other community participants at increased risk.
A federal or state entity could make a similar argument and group Uniswap Foundation and Uniswap Governance together in a regulatory investigation or action. While we have seen a dramatic shift from parts of the new federal administration, we should still tread carefully and continue to be thoughtful in how these proposals will affect the potential expansion of an attack surface for those who wish to take advantage of Governance or the Uniswap Treasury. Several states are still hostile to our industry.
I wanted this post to come directly from me, given the negative legal impact that Governance electing a Board may have. I know that Devin will follow up with her thoughts on how we can ensure the Uniswap Foundation continues to maintain a high level of transparency and input from Uniswap Governance. The Uniswap Foundation clearly understands Governance’s desire for increased involvement and is working through ideas to make that happen.
Hi Brian, thanks for the post. If you could clarify a question, that would be helpful.
Would you say that a plaintiff’s firm could not attempt to exploit a perceived non-independence and hold the DAO liable for the acts of the Uniswap Foundation due to the foundation’s full funding originating from the DAO?
We realize this proposal, and proposals generally, can increase the risk surface area. This DAO is governed by a collection of individuals and entities regularly tasked with weighing the potential rewards of their actions or non-actions against the risks they are taking, whether those actions be in the role of a Uniswap delegate, Uniswap LP, DeFi participant, or otherwise. The proposals contemplated here are north of a hundred million in funding. That presents a significant risk. We strongly believe that by adopting a new board, the DAO will significantly reduce that risk and may even be able to increase the reward from the current expectations.
Slightly off-topic to the scope of this proposal, but I wanted to follow up on UVN being leveraged to gain a direct benefit.
Staking treasury or UF funds doesn’t necessarily imply a net negative for the ecosystem. These funds could be delegated to selected third-party validators from the community. This would enable to benefit from the revenue share of UVN, while encouraging community validators and supporting the network. A similar strategy is being implemented by the dYdX community.
As laid out in the Foundation’s governing documents, the ArbitrumDAO has significant authority over the directors as it may remove or elect The Arbitrum Foundation’s directors, or expand or reduce the number of directors at any time pursuant to a Non-Constitutional AIP.
Hi all, we appreciate all of your additional comments, and feedback shared in, over the last few days.
Transparency + Accountability
Reporting
We have received some questions about how to check in on the status of grants. The best place to go is our 2024 Community Impact Report - it dives into progress and KPIs achieved by every grant we have made in the last year+. To learn more about grantees, you can watch a few of our past Community Calls on our Youtube channel, or sign up for future Community Calls here.
In the coming year, we commit to continuing the cadence of our existing transparency measures: biannual Community Impact Reports, monthly Community Calls, quarterly financial transparency reports, and grant initiative announcement and update blog posts.
UF<>Delegate Feedback Mechanism
We’ve heard constructive feedback on ways to tighten the feedback loop between the UF and Uniswap delegates – one of those ideas was a forum in which delegates can meet with UF leadership to review and give feedback on the UF’s strategy and execution.
For this endeavor to be effective, it must be designed in tandem between the UF and delegates. Erin just posted to kick off discussion on some key parameters for this forum – we are excited to hear your ideas, and to work together to get this set up.
Governance
Core Contributor Lifecycle
The long-term goal of our core contributor work is to support Uniswap Governance and community sustainability. This is ultimately a program to arm Governance with the tools and infrastructure required to create value for itself over a long term time period.
Some of the inputs into success here include:
Evolving Uniswap Governance’s operational capacity. A key initiative here is our continued diligence into the DUNA, which we believe will result in a governance proposal in the coming months.
Finding projects and teams to fund, and sizing allocation to these projects/teams appropriately. Our work with CFMs, if successful, may support this at large scale, potentially in tandem with other approaches, in the future. While CFMs are built out, the UF will also learn from onboarding a first set of core contributors for initial work.
Aligning incentives of contributors with the Uniswap community. Governance controls a large treasury of UNI tokens, which may be used to align incentives with these teams.
In the future, we envision a culture which attracts top tier DeFi development teams to the Uniswap DAO to raise funds as an alternative to other forms of funding, like VC funding. We envision a process by which these teams may mutually agree to a defined vision or scope with the DAO, and by which the DAO can properly size an allocation of vested UNI to the team over time. We envision multiple teams building complementary protocols, infrastructure, and more, each of which accrues value to the Uniswap community.
Over the coming months, these are the things the UF plans to do to kick us off on this journey.
Iterate upon CFM design, starting shortly with our first implementation (here).
Finalize diligence and kick off governance proposal to create a legal entity for the DAO.
Hire a Core Contributor Coordinator whose job will be to work with the DAO to begin to form supportive structures for communication and feedback loops between delegates and the UF, delegates and Core Contributors, and to begin to develop DAO-centric structures along with delegates to support Core Contributors in the future.
Kick off discussions with initial possible Core Contributors, scope out initial milestones, and disburse initial grants.
Growth and Sustainability
Several delegates raised concerns about the size of this budget request through the lens of the UTWG’s report, which included projected expenses. We cited our thoughts on this report in our first comment above.
To expand our thinking: long-term sustainability is of course important, however the Uniswap Protocol, and certainly its developer ecosystem, are in startup mode. Startups require an upfront allocation of resources in order to grow. Without initial support, a startup will flounder – stagnation early in a startups’ life does not lead to long-term sustainability. We believe the programs outlined in these proposals will drive long-term ecosystem value, ultimately ensuring sustainability once growth stabilizes.
Having worked closely with UF in running some of these programs, we’ve seen first-hand their professionalism and commitment to protecting and expanding Uniswap’s market-leading position. With significant growth opportunities ahead, particularly with Unichain and Hooks, it feels like now is the time to double down on this type of initiative. We feel added confidence with this request given the transparency and level of detail outlined in UF’s Community Impact Report; this emphasis on reporting back to the community aligns with our priorities at Areta.
For us, a key focus is on increasing visibility for builder activity in Hooks, which we see as the focal point of Uniswap v4. It is critical to build a support funnel for hooks development from inception to growth to make sure the level of demand for liquidity consistently increases. The UF has already taken the right steps in this regard; Atrium Academy’s Hooks Incubator is a great initiative to drive hooks development and adoption forward, while we see the UFSF as a core support pillar for all hooks builders. Further filling out this support funnel through Routing Subsidies, the Public Good and Chain-Optimised Hook Allocations, etc., will only help hooks mature faster and ensure that the demand side of the equation is fulfilled.
Regarding Unichain, we see its growth as crucial to consolidating Uniswap’s market-leading position. We agree with @AbdullahUmar - the DAO isn’t meant to operate strictly to generate profit for itself, but rather is meant to support and steward the Uniswap ecosystem while providing value to tokenholders. One of the core ways for the DAO to support tokenholders at this time is by supporting Unichain growth and activity and increasing the UVN fees it accrues. As such, we think the initiatives outlined to generate core demand on Unichain are strong. We also agree with Abdullah’s points that there is some work that needs to be done to ensure equitable investment and fee splits between Labs and the DAO. We’re glad that efforts to ensure greater collaboration and communication between the UF, delegates, and core contributors have already begun.
All in all, we’re supportive of this proposal and see it as a strong signal for the future of Uniswap.
The Cooley and Placeholdr legal exercise you mentioned was funded through a UAGP grant, so we’re happy to provide an update here. Broadly, the remit of the grant is to analyse the potential regulatory, civil, and tax liabilities of participants in the Uniswap ecosystem.
Ultimately, the grant will culminate in a blueprint, suggesting various practical and structuring recommendations that should minimise/mitigate participants’ potential liability. The outcomes of this legal exercise are still being finalised and will be shared with the DAO once prepared. Further, these findings will be complementary to the existing legal efforts outlined in this discussion thread.
I hope this helps clarify your questions and obviously we can provide more details when the exercise wraps up!
I will vote against the proposals as they stand now. In my view, a request for such an extraordinary funding amount requires extraordinarily strong evidence. I don’t believe that level of proof has been reached yet.
Specifically, I haven’t seen sufficient evidence that spending the funds in the proposed manner is a better alternative for UNI tokenholders than simply allocating them to a Stability Fund for yield. For example, the total gross revenue of a top-5 L2 (Linea) has ranged between $5,000 and $20,000 per day over the past week. If this is the revenue Unichain aims to reach by spending >$30M on Unichain-related incentives and grants (not even including the related budget for ops), it will take a long time to recapture the investment—especially if only 65% of the net revenue goes to tokenholders. We can hope that Unichain’s revenue will be much higher, but’s it’s just that, hop. To be clear Unichain here is just an example, this also applied to other categories.
Another major issue is the lack of alignment and coordination among the key actors (UF, Labs, DAO). Unichain, in particular, is problematic in this regard.
Changes I’d like to see in the proposal
Postpone all funding related to Unichain’s operations and related operational budget.
Provide clarity on how the grants used to fund v4, including v4 hooks, will benefit UNI tokenholders.
Present a concrete roadmap toward the fee switch or alternative revenue generation methods.
Improve transparency and accountability within the UF, either through a closer feedback loop with the DAO or via an external supervisory organization.
Consider making some funding conditional. For example, once Labs delivers the promised innovations for Unichain, the DAO could release X% of the incentive funding. Once the fee switch is live, X% of grant funding could be released, and so on.
Below are detailed explanations of these proposed changes.
Unichain
While I and most other delegates support incentives for Unichain’s growth, it’s unclear whether including votes for such incentives within the same proposal as the rest of the UF’s budget is necessary. There are multiple reasons to separate and/or postpone this funding:
Unichain represents a significant shift in the DAO’s scope and responsibilities, and more time is needed to understand the role the DAO can and wants to take.
The promised technical innovations for Unichain are mostly not live yet; currently, it is a generic chain within the Optimism Superchain ecosystem. Therefore, incentives may be better timed for later.
At present, the DAO lacks a legal structure to capture fees from Unichain.
The DAO does not control the “fee switch” of the chain.
Attempting to handle both the v3 → v4 migration and Unichain incentives simultaneously could pose operational challenges for the UF and its partners.
It’s not clear how Labs see Unichain in their strategy and whether/how they will influence the chain’s governance in the future. The DAO should not spend UNI tokens to indirectly fund the Labs.
We believe the following conditions should be met before the DAO provides incentives to Unichain:
The technical innovations promised in Unichain’s whitepaper are either live or ready for launch, specifically:
Unichain’s Validator Network
Sub-second block times
Trustless revert protection
An incorporated entity (such as a DUNA) exists to receive revenue from Unichain on the DAO’s behalf.
Other concerns—such as the DAO’s lack of control over the chain and its fee distribution—are thoroughly discussed and addressed where possible.
Grants, Including v4 Incentives
Hook Grants & Incentives
Since v4 hook developers can choose to bypass the protocol fee using hooks with BEFORE_SWAP_RETURNS_DELTA_FLAG or otherwise interfere with the protocol fee, we request that, at a minimum, a legally binding agreement be made with each hook developer receiving a grant. If the developer collects revenue from the hook in any form, the DAO must be entitled to its fair share through protocol fees.
Additionally, we believe other mechanisms should be explored to capture revenue from protocols building on top of Uniswap. For example, grant agreements could stipulate a share in future equity or tokens.
Other Incentives
The proposal should clarify which incentives are public goods for the DeFi space and which are aimed at sustainability of the DAO & UF and UNI token appreciation.
Fee Switch
The funding of v4 incentives and the operational budget should be conditional on establishing a clear pathway for capturing revenue from the protocol—whether through the protocol fee switch or alternative mechanisms such as frontend fees. The burden of proof lies with the Foundation, not the delegates, as it is unlikely that any bottom-up proposal from the DAO will gain traction while the general understanding remains that the Foundation is still working on its design.
Improved Oversight
One option to enhance oversight is extending the UF’s Legal Board to include DAO members, as suggested by GFX Labs. However, if this is not possible due to regulatory reasons, other alternatives should be explored. Some options were recommended in response to the previous funding request in 2023, and I’m happy to see that some of them have already been implemented!
The goal should be to reduce potential misalignments (real or perceived) between key stakeholders within the ecosystem and improve transparency.
The snapshot vote is already live. I’ve always appreciated your feedback on proposals, and the points you’ve raised are very valid. Unfortunately, they will not be addressed. When these types of proposals come to the forum, they are almost guaranteed to pass without change (e.g., the DEFI fund proposal). The direction of these proposals is influenced by the interests of specific groups (VCs, Uniswap Labs, etc.), and the incentives are misaligned. We’ll revisit this proposal in a few months or years and see how it all plays out.
