We’re very excited to see this proposal and discussion; it represents a significant step forward in enhancing the governance mechanisms of the Uniswap protocol.
We have already seen several community and socially-driven initiatives to spur governance activity, but this proposal furthers those initiatives at a structural level. We agree that tying staking rewards to delegation will revitalize the delegate pool and encourage more communities to experiment with positive and negative financial incentive mechanisms to bolster their governance health.
Although we have settled on support for this proposal, we want to share some of our initial questions below:
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1) Immutability of the Contracts
We had some trepidation about making staking mechanisms immutable, as removing the ability to make changes could be detrimental in the face of unforeseen challenges. After discussion, we respect the commitment to trust and safety as a core tenet and understand that more experimentation can be undertaken on future implementations such as V4. We are glad this is still possible because it is crucially necessary. An ideal end state for strong feedback loops in governance would ensure that a delegatee sets the delegation AND those delegates actively participate in governance to receive rewards. In future experiments, this could be accomplished with periodic resets or negative reinforcement (slashing) of staking rewards for those who have staked to inactive delegates. -
2) Effect on Existing Delegate Programs
The delegation initiatives over the past year have promoted a strong body of active delegates. Through conversations with the @eek637 and the Uniswap Foundation, we understand that this proposal does not negate the importance of socially enforceable mechanisms to increase delegate activity, such as incentive programs or delegation races. -
3) Impact of Fees on Liquidity
The eventual introduction of fees could negatively impact liquidity as users migrate to alternatives with less overhead cost. We have confidence in the modelling done by @gauntlet that will ensure the protocol fees will be introduced in a measured and intentional way that does not detrimentally affect the existing liquidity.
We are grateful that the Uniswap Foundation and partners in this initiative have candidly and collaboratively discussed these topics (and more) at their recent GovSwap during ETHDenver. This level of engagement was optional and has helped alleviate our concerns while making the governance process more inclusive.
We look forward to this proposal moving forward as a significant step to ensure that Uniswap remains the liquidity layer.