[Governance Proposal] Uniswap Unleashed

[Doo_StableLab]

As it’s a proposal that got additional discussions, here’s StableLab’s voting and rationale on Uniswap Unleashed.

Voted: Abstain

Regarding this proposal, we had several discussions and we thank everyone including Uniswap Foundation members and other delegates for their opinions. We focused on questions regarding assessment criteria and three aspects for our voting decision.

Whether the proposal should been seen under the different assessment criteria

-The Uniswap Foundation is a steward for Uniswap DAO, which was voted in by DAO vote, and it holds interest and information distinct from other working groups or service providers to Uniswap DAO. For example, legal challenge to Uniswap DAO impacts its participants but the Uniswap Foundation is likely to face bigger challenges compared to others. Several members of the Uniswap Foundation have been contributing to the Uniswap ecosystem before the Foundation’s creation, and their concerns for the ecosystem, driven by both reputation and personal interests (financial and otherwise) are reasonably greater than other Uniswap DAO participants. However, as StableLab recognizes, this is subjective and sets a precedent that could be misguided, so we decided to evaluate the proposal under the usual assessment criteria. Three aspects were evaluated: scope, budget, and impacts.

Scope

-The scope of the proposal is extensive, covering operational cost, marketing, and large grants budgets for research and governance. The Uniswap Foundation has the mandate to request these, as it also has the ability to request funding grants and also distribute it to grantees it decides. We understand the concerns from other DAO participants that new scopes have been created and initiated by the Foundation including Unichain. But for this, as the mandate given to the Uniswap Foundation also covers the ever changing nature of DeFi, we believe that the scope is still valid.

Budget & Impacts

-There are two main compositions of the budget: operational and grants. Regarding the operational budget, while it might be controversial to note, we don’t think it’s necessarily unreasonable. For larger DeFi DAOs like the Sky ecosystem, costs have been around $150 million USD over the past 12 months. Granted, Sky makes sustainable and strong revenue. However, considering Uniswap is a protocol with over $4 billion USD in TVL and market cap above $4.8 billion USD, presence of the Uniswap Foundation was able to generate or defend more than $20 million USD per year in TVL and marketcap is reasonable. This is especially valid in potential extreme situations such as hacks or governance attacks, where the presence of the Foundation helps to coordinate defense, mitigating coordination issues. Therefore, the operations budget is valid.

-The grants budget, which is more than double the budget for Operations, is contentious due to the budget size and question regarding its impacts. While we appreciate the report, such as this, aside from grants spent on audits, which are understandably important, it’s difficult to see actual impacts. For example, the report noted over 400+ new hook developers, which is great, but how much TVL and revenue will they generate? A big portion of the grants are ongoing, we don’t necessarily believe that it would be beneficial to create more burdens for the Foundation team with larger grants to manage. This is also considering there are already large grants specifically for Unichain and V4 migration (which we suggest just incentivizing v4 onboarding to Unichain.)

Suggestion

We strongly recommend the Uniswap Foundation to reconsider how it wants to move forward with grants. One approach could be for the Foundation to present a monthly or quarterly list of grants for DAO approval, with comments explaining the recommendations. Alternatively, a more narrow list and budget for grants might be considered.

Conclusion

Traditionally, Uniswap Governance utilizes Snapshot (offchain voting) for sentiment, allowing onchain proposals to incorporate more details or edits as needed. We voted to abstain at this time, anticipating that the outlined concerns will be addressed in future iterations.

[drllau_LexDAO]

@devinwalsh

As we note above, we plan to maintain approximately 50% of our Treasury in UNI over the short to medium term, and to continue to maintain a portion of our Treasury in UNI over the long term. We are also exploring the ability to stake a portion of our UNI holdings once staking becomes available.

@kfx

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.

This is the $2B question on treasury sustainability. For every $1 given to UF, I conjecture up to $10 needs to be liquidated for the stability fund (hypothetical 16% yield less 20% capgain or 8.5% profits tax).

The bigger the ask, the more downward pressure on UNI-fiat conversion. Are there enough opportunities that yield 16% (which is itself highly optimistic) Looking at the UNI price chart (since 2021), will the overhang persist for years?

Whilst I haven’t seen the treasury investment statement, I’d note there are alternative diversification strategies:

1. offer existing UNI holders to swap for side-car fund of the 16% stability fund
2. co-fund - ask other entities such as Arbitrum Venture Initiative (AVI) to join in say hooks incubator
3. use of loans or low-interest finance to supplement outright (initial) grants
4. time-locked UNI vesting schedule tied to medium-term growth targets
5. the Uniswap clones (shushi, pancake, etc) also benefit (some would say free-ride) on any benefits UF delivers, can they also “donate” (via the fee-switch?) for pool-goods?

By more adroit risk-management strategies, can improve capital productivity (without excessive liquidation of UNI) whilst still achieving the benefits UF identified.

[cp0x]

Hi, thanks for the proposal

1. Grants. I like your proposal regarding grants - everything is described in detail. The amount is also acceptable for a large grant program.
   However, it is unclear what budget DAO currently has. How much money is currently available, where is it located, and how much profit Uniswap has generated over 2 years. Will it not turn out that we will be in the red by the end of the year?
2. Operational Budget. Regarding operating expenses - simply huge amounts.
   Even if we calculate the minimum without vesting UNI for employees, it turns out that each employee receives an average of $300,000 per year.
   I consider this amount to be overstated, both by the market and by their contribution. Instead of reducing Foundation, as it should ideally be, we have a desire to increase expenses.
3. Expense discrepancy. Even if all expenses were acceptable, the amounts indicated in your proposal do not correspond to your expense tables:
   • you asked for $95.4 million for grants, and in the table it is $99.39 million
   • you asked for $25.1 million for operating expenses, and in the table it is $38.6 million.
     Why do these amounts not correlate with each other?

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Conclusion

It seems to me that in order not to slow down the development of the system and the grant program, it is worth dividing this proposal into two parts: grants and operational activities, because there are very big questions about the expenses in the second part.

[Tane]

We vote for this proposal. We would like to add some comments on each topic as below:

Investment in Uniswap v4

Uniswap v4 represents a fundamental innovation in the DeFi space, and to realize a future where Uniswap plays an even larger role, significant investment in hook development and user onboarding is necessary.

Investment in Unichain

We believe that using UNI token stakes as a method for the DAO to recover investment is a feasible approach, so it is not a major issue. The challenges around Unichain are more related to how we exert influence within the governance of Optimism Collective, and on this point, we are eager to contribute actively as a delegate for both of the DAOs.

Regarding the sustainabilty of the DAO treasury

Of course, the sustainability of the treasury is critical not only for the DAO’s own longevity but also for the interests of UNI token holders. This is an important issue to consider from the perspective of not just cash flow, but also the appreciation of UNI token itself. Modeling this is not easy, which makes strict discussions difficult.

At least for now, even if there is some increase in expenditures, it is a reasonable decision to bet on the expected value increase of UNI tokens in the long term, given the significance of the innovation. While the expenditure is indeed large, based on the current market position of Uniswap as a protocol, its trading volume, and the size of the treasury, this is not an unmanageable investment.

UF accountability

That being said, we share concerns about the transparency and accountability of UF activities, as well as the appropriateness of future grant allocations. However, with communication channels already in place, we believe these can be improved moving forward. This is not a reason to cast a dissenting vote at this point.

In conclusion, there are certainly challenges such as transparency, accountability, and the approach to Unichain governance. However, these are problems that should be solved while moving forward. This proposal is crucial for strengthening Uniswap’s competitive position and, in the long run, we can expect the value of UNI tokens to appreciate.

[404DAO]

We voted FOR the Uniswap Unleashed proposal to fund the four identified Uniswap Foundation priorities over the next two years: scaling network supply, scaling network demand, equipping governance and the community by activating revenue, and onboarding protocol core contributors. We believe this proposal represents a significant step toward strengthening Uniswap’s ecosystem, and we trust the Foundation’s ability to execute on its vision effectively.

However, we recognize that certain areas remain unclear and require further refinement. Specifically, there is ongoing uncertainty around the establishment of a legal entity, the timeline and feasibility of activating the fee switch, and broader transparency and accountability measures for the Uniswap Foundation (UF). Additionally, it remains unclear how core contributors’ work will align with the DAO’s long-term strategic goals and how value will ultimately flow back to the DAO.

To address these concerns, the Uniswap Accountability Committee (UAC) has already begun tightening feedback loops between the UF and delegates, ensuring that these critical areas receive the necessary attention and oversight. We look forward to continued engagement to refine these structures and enhance transparency and accountability as Uniswap evolves.