Buy and burn. Efficient, not only code but on taxes as well.
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Thereâs a lot more discussion to be had! I think Iâll wait, we donât have control over the fee switch as of yet anyway. 
Keep the discussion rolling guys!
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A wise choice in my opinion would have said wait aswell myself as you appear to be on a similar page as me that this is a very undecided topic
I disagree under the basis that we the community and Governance token holders should be able to come to a consensus that we either want to Burn the tokens or Distribute the tokens, choosing an indecisive idea is not beneficial and to me just make it look like someone wanted something unthought and poorly thought out to go out quickly to take advantage and earn before a good idea can be thought out.
Proposals shouldnât be a quick thing, in my opinion proposals in my should be carefully thought out, considered and tested ideas.
Also a consensus has to be reached on what proposals we want to actually put through. Better for the community to take the time and only propose a few serious ideas than have many spam and not well thought out/rushed ideas IMO
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Regarding the legal argument.
No, burning doesnât work with SEC.
There were coins that relyed on the burning mechanism.
And those coins are not traded anywhere now.
If burning would be an option, a lot of security ICOs would adopt this model.
Instead, they are frozen in the limbo for years.
But the good news is, there is no need to worry about SEC. They donât come after decentralized organizations, because thereâs no one to come after.
One of the primary benefits of introducing governance tokens is that you can have security tokens and you donât need SECâs approval for it.
The staking mechanism is another way to avoid flirting with SEC, when you say: âbut people do work to earn these tokens, these are not dividendsâ.
There is no reason to introduce UNI staking, because no work is being done with them. UNI is not a Proof-of-Stake blockchain.
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Wouldnt you agree that its best to take this poll to the snapshot page at least? If we canât agree on the poll option, at least lets somehow proceed forward.
Weâll know where actual âmoneyâ stands, and we will have a better picture how we could proceed things.
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I think one of the things lacking with current Uni governance, is lack of action - essentially nothing is done, not a lot of people are discussing, etc. We need to take action, so its better if we put this on snapshot, create some buzz around the community, so that we get a better representation of voters, rather than this niche forum (I think large share of token holders donât even visit this site).
Hey everyone, I wanted to share some thoughts in regards to those arguing for a UNI burn with the fee switch rather than a daily dividend of revenues. First off, looking at all of these defi governance tokens that have come to market this year. They have all all come to market with the promise of future revenues being distributed to token holders through some sort of governance vote. I am of the opinion that the governance aspect of these tokens is relatively valueless and it is those future cashflows to token holders is where something like a COMP, BAL, or UNI comes from. However, the majority of these defi coins canât add in revenue âpass throughsâ to token holders yet because they donât make enough money to warrant their valuations. (see revenues and PE ratios here: https://www.tokenterminal.com/) Any additional fees for token holders in these platforms could theoretically be forked away, and would lead to investors have to value these current low cashflows/revenues rather hope of future cashflows rerating prices lower. I outline this because UNI doesnât have this problem, Uniswap makes so much money that if the fee switch is turned on today, valuing those cashflows has UNI at a higher price than it currently is.
Hopefully this shows that the fee switch should be turned on, now turning to Burns. Burns are most common in CEFI tokens so I will look their. Looking at BNB, BNBâs token has seen its highest valuations when the token MAKES people money, not saves people money. What I mean is this: BNB did very well when you had to use BNB to buy IEOâs when they were pushing every IEO up to 2-5x in a month. It is also doing well now that you can stake BNB for their âyield farmingâ product Binance launchpool. In both cases, BNB is used to make more money for token holders. When IEOâs slowed down at the end of last year, BNB was only used to save people money on trading fees and their burn and the market priced their token lower. Now looking at UNI, a burn does not make users money, it instead hopes that the burn will make UNI deflationary. We know this wonât be the case because of the UNI supply schedule and vesting periods. By distributing a daily dividend with the fee switch holding UNI makes people money. This is a subtle difference but one worth highlighting here when discussing whether revenues should go to a dividend vs Burn. I am strongly in camp daily dividend. This is a jumble of thoughts so feel free to ask questions and I will do more to explain my thoughts.
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Burning tokens and distributing them to all holdes has the same effect. Those with more tokens will receive more reward in the same proportion to their bags. Or do you mean the reward should go to all holders in the same amount (e.g. holding 1 token gives the same reward as holding 1000?). In that case, holders would just split up their tokens in several accountsâŚ
My conclusion: burning UNI-tokens is the most fair and effective reward model.
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Exactly if a whale wants to split their bag theyâll probably be able to split it pretty easily there is no way to offset a whale without unbalancimg the system and unfairly rewarding smaller accounts which would just be biased.
Better to have an unbiased system IMO and focus on the important stuff like Governing and making the platform better than arguing over how to stop whales from manipulating this one individual token which would be very difficult to stop and in my opinion is a waste of energy.
Whale will eventually sell off once the price is right for them every project and token experiences whales getting in early and having a large cut of the supply nothing you can do as these people are lucky enough to have a large fortune to be able to buy the tokens in the first place
Strongly disagree with âbuy and burnâ. Iâm sure many would argue that burning tokens does not provide the same value to holders as if they were paid an income directly.
Instead, I would suggest that distribution is established on layer 2. Whether it is possible to âharvestâ fees into the treasury on L2 for UNI holder claims I am not sure. But this should be something investigated when the other two options are sub-optimal (buy and burn or individual gas-consuming claims).
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My two cents is for option 2; Redirect a portion of LP fees to a UNI buy and distribute to holders.
Why?
I want to be rewarded directly, i want to see something in my wallet for holding UNI.
A token burn may or may not add value, a % of fees will add value to me and my holdings.
Personally on a side note. This airdrop of UNI has been disastrous for the price. I have lost 50% in value. We should not do anymore UNI airdrops
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strongly vote for distributing fees either by eth or tokens.
MKR and BNB have demonstrated that Burn mechanisms have extremely unreliable effects in terms of distributing fees.
In addition, i dont think network fees and logistics should be a deciding factor this AT ALL.
Buy and burn vs Distiributing fees is an extremely significant, token economic-level issue which should be decided on its own merits.
Network fees and distribution logistics are a solvable problem. Synthetix, BAL, and MStable are all dealing with - there are tried and true case studies of how to do this.
Network fees should absolutely not be a reason to be deciding buy and burn vs fee distribution.
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Many have highlighted the problems with the âbuy and burnâ approach and I agree completely, burning tokens are a cheap way to artificially boost the short term value of a token without creating new value.
That leaves two valid options IMO:
- UNI dividends: Converting fees to UNI and distribute it to stakers
- Non-UNI dividends: Converting fees to a non-UNI crypto (either ETH or an agreed-upon stablecoin) and distribute it to stakers
The two main things we should consider when weighing these options are:
- What will be the effect on the price of UNI (i.e.: the short-term, holder value growth dimension)
- What will be the effect on governance, and by extension, the protocolâs future (i.e.: the long-term, protocol value proposition dimension)
UNI dividends:
- Effect on price: This should in theory increase the value of UNI since UNI has to be bought on the open market to be distributed to stakers (I assume no reward would be coming from the community treasury). However, as @Mr_Po noted, if this is done in a predictable/periodic way, it could be gamed and increase volatility.
- Effect on governance: Distributing UNI dividends to UNI stakers would concentrate power on the largest holders, which I believe would hurt long term governance of the protocol. We must remember that the main goal of having a governance token is to give all stakeholders a voice in the projectâs direction. The more distributed the token, the healthier the protocol.
Non-UNI dividends:
- Effect on price: This dividend approach would tie the price of UNI to the amount of dividends payed out, in effect providing a floor to the value of UNI. Moreover, since its much harder for someone to manipulate the price of ETH or stablecoins, the buying and distribute scheme could not easily be gamed and would not create additional volatility.
- Effect on governance: Although distributing non-UNI dividends will not increase decentralization per say, it will definitely not increase centralization. Some might use their dividends to buy more UNI, which itself is fine, but I suspect the majority might use their dividends for other purposes.
In the case where dividends are payed out in a non-UNI token, I have a small preference for payment in stablecoin, as this would make the value of distributions much more stable and predictable (ETH remains somewhat volatile) which is something valuable when considering that the dividends would be passive income. However, I recognize the problem of choosing which stablecoin to use (most of them are centralized and some might even be ponzis), so an ETH dividend might be the best practical choice.
I leave out concerns about taxation (if you want to pay less in taxes, then vote for a government that will lower taxes, donât try to come up with a sketchy distribution scheme that may or may not create taxable events) and network fees as these are superficial concerns that are unrelated to the core discussion about the future of the protocol.
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Iâve read through this thread a number of times now and the more I think about this, the more it becomes clear that there is no good solution to distributing protocol fees on Layer 1.
While the protocol switch should be considered (although I think we need to consult Liquidity Providers first), the mechanism for distributing funds should not be rushed.
It may be that there are far more efficient and value-creating distribution methods possible with the OVM on Layer 2.
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Sushi is distributing fees fine one layer 1, the vast majority of holders donât pay anything, only the whales do when they âserveâ aka convert the fees to sushi. Fees are distributed to sushi holders just like they would for a LP in a pool, you get them when you withdraw.
Itâs really not optimal. Sushi is a small project. Uniswapâs âfootprintâ on ethereum will be enormous with the volume of claims required across a huge number of pools.
The long tail of Uniswap is orders of magnitude greater than SushiSwap. Has anyone calculated the annualised gas used for what youâre describing?
As someone constantly afflicted by L1 gas we need to look at how we can do better.
I havenât thought this to its full extent, but what if token holders receive benefits in the use of Uniswap. Maybe with lower fees per transaction or some options of scalable discounts depending on your holdings.
That way it can promote the use of holding UNI and also of using more the protocol instead of just holding passively and collecting gains just parking your money in UNI.
Maybe it can be some sort of levels, depending of time staked or number of votes per month or something that encourages participation with your holdings (Iâm new to governance)
What do you guys think?
If we fix a small amount, say the 400 UNI that were airdropped. That will encourage a lot of users to acquire or hold their UNI instead of dumping, so they can have that edge, as a user of the protocol. And that will also evenly distribute holdings so it can have more voters for governance purposes
We are talking about maybe 50-200 txs per day for sushi, vs perhaps 1000-2000 per day on uni to gather fees in a pool, doesnt need to be daily, could be weekly etc.
I have thought about this and I was initially in the ETH distribution camp, but then I realized that buy and burn is the most fair option for everybody newcomers and early adopters alike.
I have to admit this thread has kickstarted a great discussion concerning the cornerstone of the Uniswap platform as a whole and the comparatively related value of its native UNI token.
First, I´d like to segment my 2 cents into parts so everybody can easily navigate my answer.
Initially, I would like to add my two cents regarding the value of the token and boom and bust cycles. UNI´s value has to be by definition inherently tied to the fee structure Uniswap is currently generating otherwise the coin has no value. You could argue that the governance aspect adds enough value to the token, but think about this: Why would you hold a governance token unless you plan to vote? The expected outcome is facing extreme inflation alongside falling demand which would end in a disaster for any of the early adopters of the token. This is, of course, not the best course of action. Regarding the boom and bust cycles mentioned above â when you are dealing with an innovation of the magnitude we are seeing right now, a boom and bust cycle is an inevitable consequence of human behavior. Our task is to minimize its destructive impact on the project as a whole. If you take a look at any of the innovative companies in the stock market, all of them had a boom and bust cycle; however, only those companies which had a solid foundation survived. Even though the cycle cannot be broken, it can be mitigated. The key to any human action is an incentive. You need to reward early adopters while treating late comers with respect as well.
ETH redistribution is not a practical solution due to the fact that the value of the UNI token would suffer as the demand for it would not outweigh the continuous inflation. The UNI holders would have to buy more and more in order to retain their share which could only get us so far because of gas fees. However, if gas fees are fixed, then this could be also another way to distribute alpha.
In the current state of affairs, buy and burn token would put a floor under the UNI price and change people´s incentives. Why would you sell something which you know will go up in value? Therefore, you hold and you do not dump and you eliminate gas fees.
The argument that burn would be outpaced by inflation is flawed in multiple aspects. Initially, the burn would outpace the inflation and then there are two scenarios which could happen. If Uniswap continues to grow, the fees would grow; therefore, the burn would be more poweful and would outpace the inflation. However, this applies vice versa as well, if the volumes drop, fees drop, burn is less powerful, inflation stays the same. There is a silver lining to the last outcome though as the price of UNI token would reach a point where the fees collected would be able to buy so much UNI that it would outpace the inflation.
That is why burn places a floor under the prices and retains value for everybody unless gas fees are fixed. Cheers.
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