RFC - Onboarding Ekubo, Inc. as a core developer of Uniswap Protocol

[Herees]

After reading the responses here I am now uncomfortable with this proposal. The analysis I provided is I agree very insufficient due to the limited data available. It also uses a P/E metric for fees as earnings rather than being more equated to P/S which would make it untenable. It would be great to have some valuation analysis from VC’s, as this proposal has not provided a proper breakdown of its own valuation for its ask.

My switch from mostly positive about the direction of this proposal to negative is contingent on transparency:

1. After reading that Ekubo Inc. is closed source, how do we know that Ekubo was not directly 1 to 1 rewritten in Cairo from the same codebase used for Uniswap v4? Why does this matter? It is basically giving the v4 license for something that was already paid for while the employee worked for Uniswap Labs. It gives unfair value extraction to an insider, who already gained from that same work.

2. If this is a core developer proposal, what is the breakdown of the core developer component value, vs the speculatory investment in Ekubo?

3. The proposal needs proper Due Diligence. It is out of depth for the UNI dao to vote for this as there may be inherent unknown conflicts of interest due to the proposal being a former member of Uniswap Labs. For example, was Moody’s exit from Labs amicable?

4. There is a lot of value for enshrining a DEX on another chain, and also a lot of risk by giving that vote of trust and brand reputation to a closed source base. Paying $12 million to enshrine a Starknet DEX attestation is a backwards precedent to set.

5. UNI Dao is not a VC, the 20% received will be more like a liability than an asset; if the Ekubo tokens are ever sold it will create a negative opinion on UNI dao for selling on Ekubo token holders/users. While on the opposite side of this, Ekubo will be selling UNI without any oversight or consideration for UNI retail, who have already been heavily extracted from.

6. Overall I feel the questions are not being thoroughly answered in a way that reveals the specific objectives of the proposal title of being a core developer of Uniswap Protocol and how it differentiates from being a developer on labs.

[moody]

Yes, this proposal requires trust in Ekubo’s team. I also would not support it if it came from someone who did not have a long history of contributions to Uniswap protocol.

I made this proposal because I like Uniswap and I want to see it succeed. It’s far easier to raise money for Ekubo via a traditional fundraise, and I was privately advised not to spend the energy and incur the risk to try to make this work. I talked about my motivation to do this on this Twitter space.

@Herees

After reading that Ekubo Inc. is closed source, how do we know that Ekubo was not directly 1 to 1 rewritten in Cairo from the same codebase used for Uniswap v4? Why does this matter? It is basically giving the v4 license for something that was already paid for while the employee worked for Uniswap Labs. It gives unfair value extraction to an insider, who already gained from that same work.

In the past I’ve made efforts to defend Uniswap from baseless accusations of plagiarism, and give credit where it’s due [1][2][3].

Immediately after I left Uniswap, I revoked my access to the private GitHub repositories and deleted the V4 code from my computer. Ekubo is not a “clean room” implementation of the V4 AMM design: because I wrote a lot of the V3 and V4 code, I have more knowledge of Uniswap’s code than just about anyone. Regardless, I reimplemented the V4 design in Cairo without the ability to reference V4 code, which is the reason we can make many improvements to V4.

Copyright law protects the specific expression of ideas, which in the context of software, means the actual code. It does not extend to the underlying ideas, design patterns, or mathematical algorithms that the code may implement. I certainly think there are other AMMs on Starknet that are 1:1 rewrites in Cairo and do violate the license, but Ekubo is not one of them, and for that reason it is in my estimation 3-5x more efficient than a fork.

@Herees

If this is a core developer proposal, what is the breakdown of the core developer component value, vs the speculatory investment in Ekubo?

The contributions to Uniswap protocol are secondary to the investment. I would emphasize what @eek637 says:

@eek637

I suggest that delegates consider this proposal on the merits of the transaction itself, rather than the labels that might be applied to Ekubo Inc.

@Herees

The proposal needs proper Due Diligence. It is out of depth for the UNI dao to vote for this as there may be inherent unknown conflicts of interest due to the proposal being a former member of Uniswap Labs. For example, was Moody’s exit from Labs amicable?

I don’t think it’s helpful to prescribe what DAOs, a nascent form of cooperation, can and cannot do without attempting to do it. And I don’t think there will ever be a better opportunity for the DAO to experiment with this kind of proposal. The proposal process is sufficient due diligence to distribute $50+ million in grants, so I don’t know how anyone can say it wouldn’t be enough to make a much smaller investment with a potential in-kind ROI.

@Herees

There is a lot of value for enshrining a DEX on another chain, and also a lot of risk by giving that vote of trust and brand reputation to a closed source base.

This is not an endorsement. The Uniswap ecosystem is free to bring its own trademarked AMM to Starknet even if the proposal succeeds. Ekubo, Inc. is designed by a different team and makes different choices in its design, e.g. the withdrawal fee.

@Herees

• UNI Dao is not a VC, the 20% received will be more like a liability than an asset; if the Ekubo tokens are ever sold it will create a negative opinion on UNI dao for selling on Ekubo token holders/users. While on the opposite side of this, Ekubo will be selling UNI without any oversight or consideration for UNI retail, who have already been heavily extracted from.

This is a really convoluted point. VCs also risk reputation when they sell large amounts of tokens. As I said before, the DAO is free to sell or distribute the Ekubo tokens.

@Herees

Overall I feel the questions are not being thoroughly answered in a way that reveals the specific objectives of the proposal title of being a core developer of Uniswap Protocol and how it differentiates from being a developer on labs.

I will point to @eek637’s reply:

@eek637

Ekubo Inc. would promise to raise issues, participate in discussions, and make pull requests on the core and periphery repositories of the Uniswap V4 code prior to its freeze in the coming months. Such collaboration would be valuable given Moody’s experience in both architecting V4 and putting Ekubo into production on Starknet.

We’ll move this proposal to temperature check on Monday so we can measure the support.

From our perspective, it’s unclear whether this proposal passing is actually the best thing long term to Ekubo, Inc. if it will enshroud the company in DAO politics and lead to bikeshedding, so we would appreciate faithful readings of the our proposal and comments.

[Doo_StableLab]

@moody

From our perspective, it’s unclear whether this proposal passing is actually the best thing long term to Ekubo, Inc. if it will enshroud the company in DAO politics and lead to bikeshedding,

Even in traditional investment side, an investor with 20% share will likely at least bring their opinions to it, so if you literally just want funding but don’t want DAO to be involved in it, the team should just raise from other ways, which you have noted as very easy.

@moody

It’s far easier to raise money for Ekubo via a traditional fundraise, and I was privately advised not to spend the energy and incur the risk to try to make this work

@eek637 respectfully, is there anyway to enforce the following promise if it’s passed? Previously we have seen many that said they will keep the promise because of their reputation and so far only few of them have kept from our understanding. Like if one of the objectives of Uniswap Foundation is to protect against legal issues, shouldn’t it be also willing to step in to protect the Uniswap community?

@eek637

Ekubo Inc. would promise to transfer 20% of Ekubo’s native token to the Timelock’s proxy address on Starknet at some date in the near future

[0xJommi]

Definitely an interesting discussion. Taking into account the upcoming existence of Karakot does make this a harder debate than it might be otherwise.

[AbdullahUmar]

Although the DAO seems to have significant reservations around VC-type investments, I am of the opinion that an effective treasury distribution is only proper if capital is allotted across various strategies with differing risk profiles. But the issue here is primarily a lack of structure and roadmap in regards to how the DAO should utilize the treasury. If we were to create a more comprehensive outline regarding the goals of how the “unissued” $UNI ought to be used, then analyzing this proposal would be a lot easier. Ideally, we should have a committee in place that conducts due diligence on behalf of the DAO, in concert with the musings that already occur on the forums. Just because we are a DAO does not mean that the level of DD we conduct should be less thorough than that of a typical VC.

@moody

It’s far easier to raise money for Ekubo via a traditional fundraise, and I was privately advised not to spend the energy and incur the risk to try to make this work

Although I respect your intention to stay connected to the Uniswap protocol and take a more unorthodox route towards funding, the roadblocks in receiving that funding are still too impeding. Hopefully, within the next year or so, a system will be in place that will allow for funding like this to take place more effectively.

Most Important Reason for Rejecting the Proposal
Beyond the DAO’s organizational issues, another issue here is that the post-money valuation is simply too high relative to other DEXs, as highlighted by numerous delegates. That, coupled with the current market environment, makes it even tougher to get this proposal across the finish line.

The high valuation is the primary reason for why we will be voting against this proposal. If this were to be brought lower, we would reconsider–and I think many of the other delegates would too. Since the FDV seems to be the largest sticking point noted by the conversation so far, moving forward with a temp check at a $60M FDV, while most all delegates are advising against this, is not the best move.

Quick interjection for delegates: this proposal should be a point of reflection on the previous VC-type proposal created by the Retro/Zero team. They were not asking for any funding directly from the DAO; all they wanted was an endorsement, something that’s costless as setting up a new subdomain for endorsed friendly-forks. Given that their protocol was also being actively supported by the Polygon team, I believe that we missed out on a financially FREE VC investment. If the protocol we endorsed failed, so what? It’s a part of the VC process–and the risk to reward ratio was by and large favorable.

Now, if the DAO hesitated to endorse a proposal that was offering 10% of its tokens for free, I find it hard to see this proposal, asking for $12M, passing (and no, I am in no way equating or putting Retro/Zero and Ekubo on the same plane…I’m merely highlighting the DAO’s conservative approach even when the risk to reward is clearly positive).

[Doo_StableLab]

Agree with the other points but just wanted to mention that Zero team set up planned public sale right start right after the Uniswap voting for them ended. And they had to drop many requirements later and extend public fundraising twice already (end was supposed to Oct 4th, which they extended to Oct 12th, and now again extended till indefinite time till Chainlink oracle issue is fixed).

So while I hope the best of for Zero or any partners that approach Uniswap governance, it’s important to think about partners we work with even if it’s 10% of its tokens for “free”.

@AbdullahUmar

this proposal should be a point of reflection on the previous VC-type proposal created by the Retro/Zero team. They were not asking for any funding directly from the DAO; all they wanted was an endorsement, something that’s costless as setting up a new subdomain for endorsed friendly-forks.

[WintermuteGovernance]

We are generally supportive of such experiments and appreciate having this opportunity presented to the DAO. However, in its current state, we cannot support this proposal based on the requested funding amount of $12M and the implied valuation of $60M.

@eek637

With that in mind, I suggest that delegates consider this proposal on the merits of the transaction itself, rather than the labels that might be applied to Ekubo Inc.

Taking into account the above:

• There is little to no information about the Ekubo token, its intended use outside of a governance token, plans for the remaining 80% of the token supply, etc.
• The Uniswap DAO has not established a framework for both treasury diversification and investment decisions. Which is unfortunate given this opportunity.
• The above is further amplified by the size of the investment which ranks Ekubo above the likes of Paraswap, IDEX, and QuickSwap by FDV. Which are protocols that exist on highly active chains and have done significant volume numbers. (We don’t agree that directly comparing Ekubo to these protocols is the correct approach, but it helps with determining a rough heuristic of market pricing).
• Starknet’s TVL sits at $152.8M ~ 2.5x the implied FDV of Ekubo.

Ekubo looks like an amazing DEX which has already proven to capture the majority of the DEX trading volume market share on Starknet. However, this decision requires the DAO to take a bet on both Ekubo and Starknet which at the implied FDV and lack of information is rather optimistic and forward-looking.

[moody]

After reviewing the feedback, we decided not to advance this proposal to an on-chain vote. Implementing the proposal with the requested changes would create a significant burden on Ekubo, Inc., and would distract us from the development of Ekubo protocol.

We greatly appreciate the support from Jesse, Leighton, and others. Thank you for your comments and thoughtful discussion.