[Temperature Check] Create the Uniswap Foundation

Speaking for Other Internet, we are very enthusiastic about this proposal.

Since last year, we’ve put released 3 comprehensive deep dives into the governance challenges facing the Uniswap community, and are about to release a 4th. In all of our work we’ve consistently identified one issue common to all of Uniswap governance’s various problems. That issue is the lack of a clear center of authority and source of legitimacy.

The outcomes such a party’s absence include:

  • high levels of politicking needed to get anything done
  • voter apathy and delegate fatigue
  • slow operational decentralization
  • lack of accountability in partnerships (more on this in our forthcoming paper)
  • difficulty in improving the governance process

We are supportive of the proposed foundation because we believe it will address these problems, not only through various initiatives, but also by simply being an actor with the mandate to be a channel for various stakeholders to connect and get things done. That there are dev relations, delegate relations, and partnership leads roles listed (with job postings already!) is a hugely positive sign for the type of operational capacity and speed that the foundation should unlock for Uniswap governance.

As a side note, I hope this proposal makes clear what I’ve been advocating for in the fee switch conversation. There are a lot of things that need to happen for Uniswap protocol to continue to grow; with or without protocol revenue, the Foundation is the best bet to make those things happen.

TL;DR - Uniswap Foundation is an entity that can represent the interests of the protocol and its various stakeholders. It can scope projects, be a legal counterparty, liaise with delegates and get things done. We simply haven’t had haven’t had this before, and it’s the biggest step we can take toward more efficiency here. Devin and Ken are excellent and have a proven track record, and we are looking forward to working with them on new governance initiatives.

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This is a good question. In order for Uniswap Protocol to become the value exchange layer of the Internet (which we believe it should be), we believe there should be many diverse and talented teams building on it. There are many teams outside of Labs building on the Protocol today (many are listed in the UGP retrospective) however we believe there is a massive opportunity for grants to fund additional ambitious and impactful projects. The governance of the protocol is another key to long term Protocol sustainability that in our opinion requires some reinvigoration - we are excited to work with the community to ensure the governance process is efficient and effective. The UF will build a lean team and have a grants budget focused on exactly these things: Protocol growth, decentralization, and sustainability.

Uniswap Labs is one of many organizations in the Uniswap ecosystem. It built, deployed, and, alongside many other teams, will continue to contribute to and build on the Protocol in the future.

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I don’t disagree. I’m not asking for people to work out of the kindness of their hearts. I am going to question why if that’s the sole goal (which requires a legal analysis) do we need to fork over 14M in operating dollars to build a team of 12. That’s pork and spending for other things. Size it all down and work provisionally. You can come back in 6mo to ask for more.

14M for 3 years for 12-15 people? I dont think its unreasonable. If it were 140M, then yea, but I do not see how this is unfair compensation. The UGP has already done what you mentioned here with the smaller spending. You can check their retrospective out in the post itself.

We aren’t impressed. UGP has been a porky failure. I can’t post links but please see @adamscochran’s Twitter thread on the issue posted a few hours ago.

This is a fair point. Ken and I have went back and forth a lot on the best way to set OKRs. The first set of OKRs we wrote for the UF focused on increased volume, number of new users and developers in the space, number of “high impact, high engagement” governance proposals, etc. These are the results which all of our work would aim to have.

However, we got stuck is defining the “right” numbers to tie to those results- how much volume might increase, when (it might take a talented dev team time to build a high impact new interface), by a % or total cumulative volume, and so on and so forth. Volume is going to be highly influenced by market conditions - how do we know what to attribute to the UF vs the market? New developers and interfaces - does it make sense to measure the number of new interfaces? One interface that stems from a larger grant might have a more positive impact than 5 interfaces stemming from smaller grants. We ultimately decided to set OKRs based on grant allocation % and team focus, and the metrics we will measure grantee success by, because those are the clear inputs to the results above which are within our control.

We also think we might learn more about what numbers tied to those results (volume, # interfaces, etc.) make sense once the UF is up and running for some time (if the proposal passes!). If we do, then it could make sense to adjust OKRs in the future.

That was our thinking in setting the OKRs this way. But, if community members have suggestions on how we might be able to better measure ourselves, we do want to hear them.

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Hi all - Michael from xToken here.

I think this proposal is aligned with the best interests of the Uniswap community, and I also think that this sort of initiative is (directionally) an appropriate use of the protocol’s treasury.

That said, having been through the UGP process, it would be beneficial to hear more about the process and methodology for the grants program under the new umbrella. I found the members of the committee to be kind and well-intentioned, but overall the process was vague and lacking in transparency. I’ve spoken with other applicants who have had similar experiences.

A few notes:

  • I had to backchannel through an investor to get time on the calendar to present our proposal in front of the committee
  • We didn’t receive feedback or any communication on the proposal until about 2 months later
  • The feedback provided for why the committee was passing was plainly inconsistent with the decision to fund other grants in that wave

Because the committee declined to fund our proposal, it’s difficult to write this post without sounding like sour grapes. However, the grant request was really quite small, so I hope I can present this perspective neutrally.

Looking at the list of funded grants over the history of the UGP, the committee has done great work supporting projects around tooling, analytics and ETH public goods. The media and hackathon sponsorships make legitimate sense for the protocol, even if some people object to the price tags. However, it’s hard not to look at the grants list and notice a subset of very generously funded projects with ambiguous goals. In many cases, these projects are led by folks with strong ties to the committee and team. In some cases, these are projects led by committee members (to be absolutely fair, the committee members are not always the beneficiaries of these grants). And, in some cases, these projects have not been shipped or maintained.

I really don’t think there is any ill intent here, and I don’t want to empower any of the trolls on this forum. I also think it’s completely justifiable to run a grants and development program driven by the committee’s network and priorities. However, this approach would seem to be in conflict with the stated ethos of the project and community. And the optics are apparent to everyone except a few insiders.

We’ll still be building on top of Uniswap V3 everyday, and we will definitely apply to the grants program again in the future. But I think the community and protocol – and the foundation -– would benefit deeply from a clear statement of process, methodology and standards.

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Adam´s thread completely disregards facts such as the OP situation or the Polygon liquidity mining campaign which are vital reasons why the Uniswap Foundation should exist to handle such events specifically for the tokenholders.

Representing it as a “porky failure” is a misrepresentation. Is it perfect? No. Did it do more good than harm? Yes. Even Adam said there were worthwhile projects being funded by the UGP. I think the measuring stick is too harsh here as the Uniswap Foundation aspires to be more than what UGP was/is.

The UGP was run part-time by only a handful of people who were working upwards of 40 hours per week+.

When a DAO promises the Uniswap DAO a reward, whose responsibility is it to collect it? Is it you or me? Is it the Uniswap Labs? Whose job is it to handle such things on behalf of the tokenholders? Nobody knows and everybody assumes, “Well, somebody is assigned to do it.” No. There are very few people who are watching these things and its to the cost of the tokenholders. We are not talking paltry sums either.

These situations are going to pop up more frequently in the future and are going to be more costly each time they happen. Major major sticking point in my honest opinion.

Another good reason why the UF should exist is whiteglow support for users when it comes to user generated governance proposals. People are not really familiar with the process of how to implement their ideas into a concrete governance on-chain proposal.

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I do not support this proposal.

Reading through the article, I don’t see a proposal describing how to empower uni tokens and increase the value of uni tokens. As a uni holder, I can’t support this proposal to set up a centralized company purely by selling coins. We call for the commission switch to be turned on.

I remember donating 1 million uni tokens to a defi education group, and honestly, I didn’t see any educational results from the group, but rather like a transfer of benefits. The proposal to set up a foundation this time seems to me to be the same.

Even if a foundation is set up, asking for $70 million is too much now, and the uni token market can’t afford such a dump in the short term.

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Can we get @kenneth to comment on such projects that UGP is failing to budget? I’m genuinely curious to hear what projects are out there to help justify this temperature check! Is the plan to sunset the UGP program eventually?

This is extremely exciting and in my opinion represents a really ambitious step in the direction of further decentralization of the whole Uniswap ecosystem. Kudos to Ken & Devin for creating this proposal.

Some comments:

I think this funding amount is totally within reason. Attracting top talent is key, this work is hard, and the operational budget looks acceptable to me.

I saw some comments below about UGP application times, communication holes, etc and I would just like to remind everyone here that the UGP has been a resource constrained and very grassroots effort up until (hopefully) now. I have worked with Ken on UGP and he is exceedingly competent, and I have every confidence that most of the issues described will resolve with more resources and the ability to hire help.

I am especially excited about the plans to invest in governance stewardship. Creating proposals and passing them is too difficult and I think a dedicated team to provide assistance to would-be proposers will lead to a huge increase in viable governance activity. (ps. Please overhaul the current governance process! I wrote it but now I’m embarrassed by it lol)

Some questions:

  1. The biggest thing that stood out to me was 35% for research on incentive mechanisms.
  • Can you guys go into more detail on what you hope to achieve there and maybe give some more detailed examples of the types of things you want to explore using this funding?

  • Will UF be using funding to provide actual incentives (i.e. some types of liquidity mining programs)?

  • If the answer to the above is yes, what kinds of modeling will you be doing to before funding a given incentive mechanism MVP and will you plan to share the results of modeling with the community?

  • Given that this is the largest part of grants budget, would it be fair to say that the UF thinks incentive scheme development is the largest factor in the future growth of the Uniswap protocol?

  1. What types of candidates are you seeking for 3rd board member?

  2. Is the advisory team permanent or will it roll over periodically as in the current UGP?

  3. Now that Uniswap labs has entered the NFT space via acquisition, will NFT focused tech be eligible for UF grants?

A suggestion:

I think the marketing and events budget looks low. I would like to see the Uniswap protocol begin to market itself in a big way. FTX is out here naming stadiums, but Uniswap logo, branding, mission and ethos is cooler in every way and I think has the potential to resonate with retail. Superbowl commercials. Official sponsor of Paris Fashion week. Headline sponsor of US womens soccer. The olympics. More e-sports partnerships. I would add another $10M to the first year’s budget to test out large scale sponsorships and see if they work for us.

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UniScott - may not be able to come to an agreement here, but I do want to acknowledge and respond to a few of your concerns.

On UGP v0.1, Ken just wrote a response to Adam’s comments here - we’re proud of the success of UGP v0.1, and believe some awesome grant projects came out of it, (some covered here). The UGP team has definitely learned a ton to apply to the next round, if the proposal passes. And, we’re excited about what we’d be able to achieve with a full-time team (v0.1 only had funds to pay a small team part-time salaries, tho many of them still worked 40+ hour weeks).

We think it’s in Uniswap’s best interest to have a full-time team and resources devoted towards 1) funding teams to support Protocol growth, 2) reinvigorating governance, and 3) being an advocate for the Protocol.

A larger grants program and full-time team is more capable of building strong relationships with the most talented development teams, and scoping out the most impactful, ambitious projects which take more time and funds to build. A budget limited by a 6 month timeframe would be limited in its ability to support those kinds of projects, which we see as being integral to Uniswap’s long term success. The UF would also have a team focused on developer relations, community building, delegate relations, improving governance, and more.

Also happy to hop on a call to discuss further - feel free to DM me https://twitter.com/devinawalsh

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This should happen way before. I really agree with this. Let do this fam

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Loved the initiative to further decentralize Uniswap

Also, imo the budget is pretty modest for the experienced crypto-native team.

Highly excited for the Uniswap’s journey to achieve peak decentralization

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The team structure being proposed is a step forward. Having a dedicated grants lead is definitely a step forward.

The proposal misses an answer to - What were the problems and learnings from the UGP? How is the Uniswap Foundation addressing them?

Re: UGP. Thank you for the comments here! (For others: Ken and I are also writing up some additional history and information about UGP to add as a comment in the forum later today and to the addendum in the next version of the proposal!)

Re: governance. Agree! And a proposed governance process revamp is definitely in scope for our first 3 months (inspired by this post, with additional community feedback)

I’ll publish answers to the rest of your questions in line:

  1. The biggest thing that stood out to me was 35% for research on incentive mechanisms.
  • Can you guys go into more detail on what you hope to achieve there and maybe give some more detailed examples of the types of things you want to explore using this funding?
    • Yes! The goal here is to fund MVPs of incentive mechanisms which work to achieve one or all of the goals of growth, sustainability, and decentralization of the Uniswap Protocol - primarily by increasing engagement and retention across a variety of stakeholder groups. Many protocols have experimented with liquidity mining and that could be in scope here, but there are also opportunities to explore other kinds of incentive programs. One example is a developer mining program, which would incentivize third-party integrations with the protocol to strengthen its network effects.
  • Will UF be using funding to provide actual incentives (i.e. some types of liquidity mining programs)?
    • Yes. That’s one of the reasons this is the largest bucket. The $21M (35% * $60M) would fund MVPs. If the MVPs are successful, grantees could take their learnings and propose a larger scale initiative to the community to be funded by the Treasury.
  • If the answer to the above is yes, what kinds of modeling will you be doing to before funding a given incentive mechanism MVP and will you plan to share the results of modeling with the community?
    • We have a 5% Incentive Program R&D grantee budget that would fund this kind of research and modeling. While we will work with grantees to determine the best modeling for a specific program, one example might include an estimation of marginal swapper, or marginal $1M of volume, benefit to Protocol network effects. In other words, how much additional TVL does one additional swapper prompt, what is that TVL’s impact on reduced slippage, how many additional swappers does that attract? This research, like all other research funded by grants, would be open sourced to the community.
  • Given that this is the largest part of grants budget, would it be fair to say that the UF thinks incentive scheme development is the largest factor in the future growth of the Uniswap protocol?
    • The most important input to the future growth and sustainability of the protocol is stakeholder growth, usage, and engagement — essentially, making it easier for the community to get involved. Incentive programs which reward Protocol contributors with UNI might not only bring new integrations, but also turn contributors into governors of the Protocol (a lockup could be a component of these programs). Because the success of one or multiple programs like this would potentially provide long term sustainability and growth for the Protocol outside of any one or set of external actors or interfaces, we believe it is an integral component of our budget and key to Protocol success.
  1. What types of candidates are you seeking for 3rd board member?
    1. Based on our experiences over the past few weeks, we’re seeking out an individual with a few characteristics. Most importantly, they should have 1) significant experience in crypto, and 2) a Founder mindset. Based on what we have seen thus far, we also would look for someone with 3) a law degree and experience working as a lawyer, to provide guidance to the Foundation on the evolving legal and regulatory landscape, and 4) previous Board experience particularly for an organization focused on open source software, technological infrastructure, and/or financial services. However, we believe we will learn a lot if and when the UF gets fully up and running and we begin to conduct Board interviews, and these criteria may change as a result.
  2. Is the advisory team permanent or will it roll over periodically as in the current UGP?
    1. Intend to keep working with the advisory team for as long as their contributions are valuable to the UF - which we forsee as being a long time! In the event of unexpected circumstances or advisors no longer being able to make a time commitment, we would seek to replace them with someone of equally high caliber. Also worth mentioning that we are not necessarily capping advisors at 4 and may add more over time as is helpful.
  3. Now that Uniswap labs has entered the NFT space via acquisition, will NFT focused tech be eligible for UF grants?
    1. UGP is open to any grantee project which benefits the Uniswap Protocol or ecosystem. If an NFT focused grant falls into that category, then definitely! Caravan is one cool example that came out of the Unicode Hackathon, it allows users to rent Uniswap v3 liquidity (NFTs) from one another.
    2. Also worth noting that the Uniswap Labs acquisition of Genie has no impact on the Uniswap Protocol, governance, or UNI token (covered in their blog post).

A suggestion:

I think the marketing and events budget looks low. I would like to see the Uniswap protocol begin to market itself in a big way. FTX is out here naming stadiums, but Uniswap logo, branding, mission and ethos is cooler in every way and I think has the potential to resonate with retail. Superbowl commercials. Official sponsor of Paris Fashion week. Headline sponsor of US womens soccer. The olympics. More e-sports partnerships. I would add another $10M to the first year’s budget to test out large scale sponsorships and see if they work for us.

  • I like this! We do have a 10% grants allocation for community growth ($6M with current budget) which will include sponsorships. Community - what do you think?

The UF team is conducting extensive research to determine the type of legal entity which best matches our ambitions, including our mission to make a positive social impact, and other operational needs (covered in the proposal above). Given these requirements, we are contemplating a US-based entity that would seek tax-exempt status.

If we go down this path, the entity would be a non-stock corporation, with no owners or equity. There has been no stock issuance, and we have no plans to do a stock issuance in the future.

That being said we should note there is no guarantee that tax-exempt status will be secured, and we may make modifications to UF’s structure and operations in the future. We will share more about our path forward with the community as soon as we are able to.

Thank you! Re: the team - we agree with that sentiment. We’re already very excited about the awesome applications which have been coming through Lever - and we’re very excited to empower, support, and work with Uniswap community members all over the world.

All UF decisions will be made with the best long-term interests of the Uniswap ecosystem — of the Protocol and all stakeholders — in mind. The individual interests of a single stakeholder in the ecosystem, such as Uniswap Labs (or any other entity or individual), will not sway these decisions.

We do want to highlight the fact that we plan to work with stakeholders in the ecosystem to publish a biannual State of the Ecosystem report, which will highlight developer tooling, libraries, and interfaces that exist for the Uniswap Protocol, as well as the high-level roadmaps of what teams contributing to the report are planning to build in the future. Our intention with this report is to make it easier for developers to navigate the ecosystem and to also discern what new tools they can build (without doing redundant work). We would welcome contributions to this report from all builders in the ecosystem.

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To respond to a few questions in the forum (@metaverbal) and on Twitter, we wanted to provide more information on the Uniswap Grants Program (UGP). We are also adding this information to the Addendum of the Proposal at the Consensus Check.

What is UGP, and how do I find out more about it?

The Uniswap Grants Program started after going through a governance vote in December 2020 for an allocation of $1.5M in UNI intended to last 6 months. While the initial set of priorities for UGP was narrowly scoped as an MVP to seed the ecosystem of developers, it has since grown to encompass more, including governance research, community building and education, and core protocol work. Due to the crypto market bull run we were able to give $7M in grants over 18 months.

Grants researcher @sovereignsignal also recently put together a fantastic (independent) write-up on the history of the UGP here.

For more information on UGP’s past work and grantees check out the following links:

What does a successful UGP grant look like? What are some UGP success stories?

Grantees have done some incredible work over the past 1.5 years - for more information, check out our recent retrospective on UGP v0.1.

However, most UGP grantees are less than a year old. Just like with any product, it may take some time and several iterations for grant projects to develop traction and see adoption. The first version of Uniswap only worked for a single LP and ETH/ERC20 pair, and looked much different than the Uniswap we know and love today (still live here!). Hardat, too, took time to become what it is today - Nomic Labs received its first grant in 2018.

With that being said, not every grant will have the same outcome as a Uniswap or Hardhat. Not every grant will have runaway adoption, just like with any startup. Even when a project does not have the expected or intended impact, it can still have a positive impact on the ecosystem, bringing in new developers, users, and ideas.

Grantee success can be a range of impactful outcomes and, although we can’t pick favorites, some notable highlights are:

  • Serv.eth Discord support - a globally distributed team of 10 supporting the Uniswap Discord server all hours of every day. They have resolved over 15,000 community support tickets (and counting!), from helping users set up their first wallet and making their first trades, to identifying scammers and helping others retrieve funds.
  • GFX labs cross-chain governance research - The GFX team have been active Uniswap contributors since the beginning — they were one of the first LPs on v3! Their UGP-funded research led to the the Protocol’s first cross-chain governance proposal, the deployment of the 1bps fee tier on Polygon.
  • Chaos Labs TWAP hardhat plugin - One of Uniswap’s most under-appreciated innovations is the TWAP oracle, a core but admittedly complex DeFi primitive. Chaos Labs recognized the need for more robust tooling and documentation to make integrating TWAPs more accessible. They created a Hardhat plugin so anyone can leverage its robust security and accurate price reporting.
  • Scopelift Seatbelt & Flexible Voting- Scopelift productionised Seatbelt for governance testing. This test suite not only protects against unverified contracts, but also simulates proposals locally to ensure they deploy results properly. Additionally, their initial work on Flexible Voting would enable governance tokens locked in other protocols (for example, cUNI) to be leveraged for cross-protocol governance voting.
  • OmniAnalytics uniswappeR - The first R package created to interact with, quickly query, and trade on Uniswap, opening the door for more advanced data analyses. The Omni team went above and beyond their grant scope to deliver video tutorials, extensive documentation, and an easy dashboard generator for in-depth exploration of trade history, LP and price simulations under infinitely customizable conditions including slippage and liquidity depth.
  • TechEducators Solidity Bootcamp - As an established web2 bootcamp, the team behind ETHAnglia have built an open source Solidity Bootcamp to better usher web2 developers into web3 with a focus on building secure Ethereum dApps. Their target demographic reaches to underserved populations in the UK, offering scholarships and free mentorships. Through this work, they have received recognition and further support from the UK government through the Department for Works and Pensions.

How will UGP be improved within the UF?

Even with the success cases listed above, there are a number of ways that we’re excited to improve UGP for the benefit of the ecosystem.

  • Provide grants to universities and research institutions: Today, UGP is a multisig without a legal entity so we are unable sign contracts with or award grants to universities and academic research institutions, among others. As a legal entity, the UF would allow us to work with these organizations.
  • Diversify assets: No legal entity also means UGP could not diversify its assets out of UNI due to a lack of clarity around tax liability. This has made it impossible to scope out and provide larger and longer-term grants due to UNI price risk. The ability to diversify our assets will allow us to award these kinds of grants, for more ambitious and impactful projects.
  • Full-time well-compensated team: UGP v0.1 was able to pay its small group of contributors part-time (≤30 hours per week). With an entity and full budget, the UF will be able to hire a full-time and well-compensated team. We also want to recognize the fact that a few UGP team members would still work 40+ hour weeks and weekends, uncompensated, due to a love for this work!
  • Upscale all of UGP: With a formal entity, larger budget, and a full-time team, we would be able to improve our internal processes, from the applicant pipeline through feedback cycles, decisions, disbursements, and ongoing grantee management. We can do more in proactive outreach to fill our pipeline with fresh ideas and new teams. We could shine more of a spotlight on the impact grantees have had on the community. We will also be able to scale up our legal and accounting capabilities required for a more comprehensive grants program.
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Hey Dan - Ken just added a lot more info about UGP and how we want to improve it as a comment below, and I’m about to add that to the Addendum of the Proposal as well for the Consensus Check. UGP won’t be sunset, it will operate under the UF and scale up its resources and team.

As for the kinds of ambitious projects we would now be excited to fund? Listing many below, but we’re just as excited to be blown away by new ideas the community dreams up.

  1. Novel incentive programs, like a developer mining program to incentivize third-party integrations with the protocol to strengthen its network effects (spoke about this a bit in my reply to Ashleigh)
  2. The extensive R&D and engineering work required to design, build, test, and deploy future versions of Uniswap. And of course, associated developer documentation, tooling, and support.
  3. New smart contract primitives improving Uniswap stakeholder experience. A recent example of this would be The Franchiser, whose audit was coordinated by UGP. The Franchiser for the first time allows for partial delegation and re-delegation of Compound-style voting tokens like UNI.
  4. New independent grant-making organizations, for instance, managed by University blockchain clubs, and focused on regions around the world like South America, Southeast Asia, Africa, and more.
  5. Grants to write versions of Uniswap in new languages to deploy on other chains (I.e. in Cairo for Starknet, in Rust for Solana, etc.)
  6. More middleware, including an open source streaming data platform for Uniswap pricing, trading, pool, and other data.
  7. More advanced tooling (ie 1-click position changes and fee collection), improved UI/UX, and more education for liquidity providers. Ditto for liquidity mining.
  8. An pro trader interface that offers a familiar UI/UX to the most popular centralized exchanges, like FTX and Binance
  9. On-site hackathon support at events around the world to work hand in hand with hacker teams
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