First off, thank you to everyone who has engaged with this proposal thus far. We have read through your comments and questions, and are sharing our thoughts and responses below.
First though I want to reiterate that this proposal is about shoring up the Uniswap ecosystem’s long term competitive advantage.
It is not a request for charity, or public goods for public goods’ sake.
This is a strategic investment to sustain Uniswap’s leadership in DeFi for decades to come.
Specifically, we are proposing:
- A commitment to growth. While the catalysts at hand – with a new US administration, the launch of Uniswap v4, and Unichain – present an opportunity to generate massive growth, that opportunity is not guaranteed. The Uniswap Foundation is poised to help drive this work at the scale needed to drive results. We cannot assume v4 or Unichain will win based on technical innovation alone -- we must support their respective flywheels.
- A commitment to long-term sustainability. We have heard your concerns about sustainability. To us, sustainability means two things: the ability to create value, and capture that value, over time. Our proposal encompasses both. Specifically, we are focused on the ability of Governance to create value over time (Governance influence over Protocol development through Core Contributors, Conditional Funding Markets, and legal entity formation) and to capture it (activation of fees).
Below, we double-click on some specific topics that have come up over the last week:
KPIs & Accountability
We appreciate your comments requesting clearer metrics by which to hold the UF accountable, and by which to track certain grants programs. We have since plugged in 1-year target impact metrics that we aim to achieve in our “Uniswap Foundation 2025 Priorities” and “Top 10 Largest Grants Allocations” tables.
As we support the four strategic pillars we’ve laid out above, we expect to see growth in market share, TVL, volume (and hook volume), and across our developer community.
Uniswap Treasury
We appreciate the work that the Treasury Working Group has done to lay the groundwork for Governance Sustainability – it is a useful precedent involving all delegates. We note that our proposal and the UTWG’s Report share North Star objectives– growth and sustainability. Specifically:
- Growth: the DAO should allocate its treasury resources to propel the continual adoption of Uniswap and deliver value to relevant stakeholders in the process; and
- Sustainability: the DAO should be a self-sustaining entity, able to cover its future costs in perpetuity.
Karpatkey, one of the authors of the UTWG proposal, reiterates these goals in their comment above, and stated “In our view, mobilising the treasury is an effective way to achieve sustainability, which includes supporting UF funding in the long term.”
Unichain’s Role & Governance
As for the governance of Unichain – Unichain is subject to the Optimism governance process for its technical upgrades, just like every other member of the Superchain. The UF has already laid the groundwork for Uniswap community participation by securing a seat on the OP Security Council. Further, we are excited to lean on the expertise of the Uniswap delegates who are active at Optimism to build a framework for ourselves and our delegates to advocate for our community’s interests in that process.
Unichain stands to create value for our community in a few ways. We believe it is the L2 best suited for all DeFi Protocols, including Uniswap v4. We are excited to see hook developers, swappers, and LPs alike benefit from their usage of Unichain. We also look forward to the deployment of the UVN, upon which the community may choose to run a validator, or stake, in order to earn revenue to support additional initiatives.
Hooks Commitment
v4 has the potential to subsume entire categories of DeFi into the Uniswap Protocol via hooks. They are a unique technical differentiator which, if fostered properly, can cement our competitive advantage. To maximize the opportunity presented by hooks, it is integral to support every stage of the development lifecycle:
- Ideation: 100s of hook developers learn how to build hooks through the Uniswap Hook Incubator (UHI) and sponsored hackathons – with many going on to build long-term on v4, Unichain, or both
- Building: our Public Good and Chain-Optimized Hook Allocations provide a strong foundation to iterate upon high potential use cases, while our tooling and infrastructure make it easy to put together a finished product
- Testing: the UF Security Fund subsidizes audits, mitigating the risk of hooks being hacked
- Growth: once a developer has deployed, we support them in growing distribution with grants into routing infrastructure, routing subsidies, and more
In addition to our efforts across the developer lifecycle, we also work hand-in-hand with blue chip protocol teams and DAOs across the space to support them in integrating hooks.
Treasury & Liquidation Strategy
Our goals for our liquidation and UF treasury management strategy are threefold:
- Fund operations and grant-making
- Minimize impact on UNI token
- Demonstrate alignment with the community
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.
To support us in treasury operations, we have onboarded with three established trading and advisory firms. We are confident we can implement strategies that fund our operational and grants needs while minimizing market impact on an ongoing basis.
Why a Two-Year Budget Term?
Some of you have asked why we request a two-year budget, rather than a one-year budget.
From an operational perspective, we would not be able to attract and maintain a talented team with less than 1 years’ runway. Startups generally aim to operate with at least 1 years’ runway at any given time.
From a grant-making and ecosystem-building perspective, there are multiple reasons why a two-year term is superior to one year.
- Stronger long-term commitments from partners – We are best equipped to attract the best teams as grantees and contributors if we are able to commit to longer term support (financial, technical, marketing, and otherwise), and to quickly extend successful grants without going through additional governance processes. If we can’t commit to an extension of a successful program due to the governance process, someone else will. For grantees whose initiatives do not produce the intended impact, on the other hand, we have before and will continue to end grants early in order to reallocate funds to more productive uses.
- More cost effective – Many infrastructure providers offer better deals for multi-year commitments. If we renegotiate annually, we will receive worse terms.
- Continued full accountability – We will continue to publish quarterly financials and biannual impact reports, and to showcase grantees on a regular basis. We also look forward to setting up regular sessions with smaller groups of delegates to review our direction and execution.
- Support UF sustainability – with more initial funding, the UF may have the option to begin to stake its UNI once that opportunity becomes available. We are excited to pursue this, and hope it may fund a portion of our ongoing funding requirements, so that we may require less funding from the Treasury in the future.
Final Thoughts
This proposal is about positioning the Uniswap ecosystem for long-term leadership. Investing in growth today will allow us to maximize the opportunity this moment presents, and to capture and rechannel value for years to come. We appreciate the engagement and look forward to continued discussion.