Temperature Check - Funding a Political Defense of DeFi

Governments around the world are considering how they will regulate decentralized finance, and we need to defend the ecosystem and decentralized ideals. We should create and fund with 1-1.5M UNI a community-overseen organization that would finance existing and new political groups engaged in crypto policy/lobbying with the goals of 1) educating policymakers to preempt regulatory, legal, political, and tax threats to decentralized finance; 2) achieving regulatory clarity for decentralized finance and related activity; 3) advancing laws that support decentralized finance and decentralized governance; and 4) spurring other DeFi protocols’ governance communities to contribute to the effort (through this organization or their own).

In short, we propose to create a political grants committee (loosely modeled on the Uniswap Grants Program) with board members who are legal and policy experts, including lawyers from various leading DeFi projects. We propose a large amount of funding (between 2-3x the existing Uniswap Grants Program) because effective lawyers, lobbyists, and organizers are very expensive. They are also often specialized in different specific legal areas and specific jurisdictions or branches of government, so hiring a team of specialists is necessary. Further, an infusion of capital—while less than 0.25% of the Uniswap treasury–will enable the DeFi space to counter the massive spending from traditional finance players.

The need for such an organization is urgent as governments around the world are awakening to decentralized finance and are rushing to regulate the projects without being properly educated on their benefits. Currently DeFi is not at the table—but on the menu.

New developments include reactionary tax, securities, and illicit finance proposals. These proposals are actively being considered in multiple countries and venues at the same time. This organization would help fund the education of policy makers to achieve more balanced legal frameworks around the world. It would be similar to a group of funders who founded the Media Democracy Fund in the early days of the Internet; it relied on experts to allocate funds across organizations advocating for a more decentralized and democratic internet.

The Snap Poll will be live for 2 days, from May 27th until May 29th at 7:00 PM EST. If the poll passes with a minimum of 25,000 UNI in support, this proposal will move forward to the consensus check phase.

A link to our snapshot proposal: Snapshot

23 Likes

Does it just need to be Uniswap that funds this? What about creating a Gitcoin project for this?

8 Likes

This is an interesting proposal, and I do agree that it is an under-served area in the current environment. A few points come to mind:

  1. I think the scope of such an endeavor should be better defined. Will it advocate generally for DeFi? Will it focus on DEX related issues likely to be of greatest importance for Uniswap? Will it focus on the US primarily? Even the articulated budget is likely not big enough to address all global concerns, so there needs to be some prioritization. No doubt the committee would define this in more depth, but having some more clarity up front on these points would be helpful.

  2. If the goal is more general, advocating as a public good on behalf of DeFi, then I feel strongly that this would be better as a consortium effort with other top DeFi apps, including the likes of Aave, Maker, and others.

In general, I’m definitely intrigued by the idea, but am also hesitant to dedicate treasury funds to advance a diffuse public good without a direct tie back to how it benefits Uniswap, or thoughts on how we might cooperate with others on said public goods.

6 Likes

It’s a cool idea n the it gives a voice to crypto community in tradfi n policies.

1 Like

I work in crypto policy in the US and this post is 100 on point. The question is what future for defi we want: do we want to have active governance over protocols that can be changed, upgraded, and secured over time or for Defi to be effectively prohibited (whatever that means in practice, it wouldn’t be good)? Regulatory proposals like the Financial Action Task Force’s draft updated guidance (intended to be finalized next month) for crypto essentially claims that there is always an intermediary where a financial service is offered. The scrutiny of DeFi is intense in jurisdictions all over the world, and it’s only going to get more serious as defi gains adoption. The traditional financial services industry has always leveraged political engagement to secure advantages, and they will use that leverage against defi when it becomes a threat. Re the above comments, policy is always a “tragedy of the commons” situation. If UNI doesn’t make the first leap, then which project will? If anything, UNI moving first will pressure other communities to act with us, and we don’t have time to wait for them rn given the regulatory action we’re facing.

12 Likes

Generally agree with these sentiments. I would like to see:

  • firm commitments from legal and policy experts including a strong executive
  • an initial project roadmap rather than just a promise to allocate funds across other organizations
  • a rationale for pursuing this unilaterally instead of together with a consortium of DeFi protocols, or a proposal for how to avoid the free rider problem.
8 Likes

I think 1M-1,5M UNI is an exorbitant price for the type of your proposal. Knock a zero off and it would sound more reasonable. Maybe do a USD amount just like the Uniswap Grant Proposal did and it will be more swallowable. Good idea, but Im NOT going to vote for this with the format proposed

8 Likes

A great starting point. Sooner than later, Defi is going to be in the mainstream in a major way. As indicated, Defi poses more threat to the current global financial system than anything else in crypto. And the global financial system literally intertwines with the global political system.

While it is difficult to attack Defi from a technological perspective, it can easily be done through a political angle. This proposal provides a framework to develop strategies to counter this. It affords the Defi movement to be proactive instead of reactive.

Am pretty sure we would have had bitcoin/crypto ETFs in the US and other parts of the world easily if these kinds of initiatives were taken earlier on.

This is a step forward in the right direction. I look forward to seeing how this develops.

5 Likes

People should remove their UNI vote delegation from this random Harvard organization. This proposal with this huge price tag is a sign that they are not trying to make an improvement but enrich themselves with a BS Harvard law brand. They should not be trusted with your UNI vote delegation.

7 Likes

Uniswap needs this for two reasons:

  1. Regulators/Policymakers pose an existential threat to Uniswap. They will turn their attention to DEXs soon, and when they do, we need to make sure they’re educated as to the benefits, so they approach regulation with an open mind. Lobbying government on novel and complex subjects like DEXs and DAOs, particularly subjects tied to all the baggage of crypto, will be very difficult and time consuming. I’m happy to see the community is taking this seriously and I expect other DAOs will follow Uniswap’s lead.

  2. The lack of legal and operational clarity significantly slows Uniswap’s development and we need to address it as soon as possible. DAOs and DEXs are cutting-edge organizational structures and there is very limited precedent to help the community understand how to operate, particularly when it comes to legal compliance. Lawyers don’t have enough direction from policymakers/regulators to provide crypto companies with guidance on how to be absolutely compliant. We need folks working closely with governments around the world to push for clarity that allows Uniswap and its community to continue building without all the legal friction we currently encounter.

The price of not doing anything will be much higher. Think of what happened last week and how much any negative signal from the US or Chinese government can impact progress in crypto.

2 Likes

5% of what they asked should be fine. They need to prove this initiative can add value to the community not just a way for them to hustle money.

5 Likes

I would say 5% of what they proposed to show a proof of concept. Too much money at the beginning is never good.

2 Likes

I support this proposal. Taxes with uniswap and DEX ecosystem is very confusing and intimidating. We need an group to help regulators create clarity on liquidity pooling, yield farming, cypto to crypto transactions and its associated tax implications. Tax reform for the entire blockchain system will benefit both parties: government, and individual.

I hope in the future this technology will allow a more automated and stress free way of paying taxes for all.

2 Likes

Im only voting for this if the goal is no regulation at all. Defi wont need to be regulated for 10 years. If you regulate it now, even a little, youll kill a lot of innovation. In fact, governments stand to lose a lot of tax money by regulating early. Just like the early internet was the wild west, so Defi should be. This proposition looks too broad to me, scope is too wide. Encourage others to vote it down until more details are defined.

5 Likes

So HarvardLawBFI starts a proposal to fund a pro-DeFi lobbyist group? Hmmm, sound suspicious to me. Who would this money go to? I call conflict of interest on this one, and am AGAINST this move.

6 Likes

This proposal is dead in the water.

It might have gotten 10.48M UNI voting yes while only 4.77M has voted no (as of writing), but 10.45M of those votes are from @HarvardLawBFI themselves!

There is clearly no real community support in favor of this proposal, and while there’s 2 days left for the vote, I doubt the composition of people voting yes will turn around significantly.

While it might fulfill the requirements to progress to a consensus check, it won’t make it. @HarvardLawBFI is better off going back to the drawing board with the feedback already given.

8 Likes

I’m a huge fan of the direction of protocols using their resources to benefit their real world defensibility, in addition to their on-chain product competetiveness & growth. This is a direction that I hope Uniswap (and many more DeFi protocols) grow into over time.

However, this proposal lacks crucial details that are necessary to prevent the Uniswap treasury from becomming a slush fund; who, what, where, why, how are all questions that need to be drilled into before committing tens of millions of dollars of resources.

If real-world operating experience is required to answer those questions, a pilot program (50k UNI?) might be more reasonable.

While I plan to signal against this temperature check on Snapshot, I believe the philosophy of this proposal is strong, and hope to see it mature.

28 Likes

This is honestly a dangerous proposal tapping into the insecurity of DeFi users in some countries about potential regulations –which are often necessary, and sometimes good, sometimes bad.

Ignoring for a second the arbitrary (and very high) amount of $ proposed in the poll, the fact that the funds of lobbying organisation would be traced back directly to our protocol is alarming to say the least. We are basically shouting as loud as we can to get regulators attention that way, and at the same time attracting political researchers and civil society groups that tend to raise flags about money used to nudge the democratic process. A nudging often driven by financial interests and a disregard for fundamental rights or issues affecting a small number of users.

Let’s also not forget that lobbying efforts are often seen under a bad light by the general public. Google is the biggest lobbying fund in DC with ~$22m in 2018. Followed by other big tech. Same in the European Union. And as someone who lives in the EU I can tell you how much these companies are hated by people for trying to influence Brussels.

But let me constructive. What I would fund instead:

  1. Educational content on regulations around the globe. Map out countries’ regulatory landscape for users to be able to get summarised knowledge about their own jurisdictions’ laws on crypto/DeFi, or lack thereof

  2. Content on tax obligations.

  3. Content on the implications of the decentralisation measures in place for Uniswap. E.g resistance to different levels of state or corporate censorship, if the happen.

  4. ^^ All that is helpful political education for DeFi users.

And I believe it is much more needed than trying to shove narratives down the throat of regulators.

Wanna raise money? Go to Gictoin, show what you’ve done and what you’ve built already for crypto. Here you need stuff about Uniswap. It can be non-technical; political and educational.

7 Likes

Agree with all that much more detail needs to be spelled out before resources are committed. There needs to be accountability over any funds allocated. I hear you @Momonosukke re lobbying… it doesn’t have the best rep but it’s how industries’ concerns and positions are conveyed to government. I don’t think we risk bringing any additional scrutiny on the protocol that doesn’t already exist. Regulators and policymakers definitely know about uniswap; we’re not “flying under the radar” anymore. The “final boss” is gearing up to fight us, and sitting back (while tradfi likely lobbies against defi) isn’t going to be effective. I think we want to avoid thinking about “resistance to different levels of state or corporate censorship” in the first place. To your point on google’s spending (and @Buckerino @jonsnow), this is precisely why we need to go big… tradfi contributed $1.9 billion to us politicians last cycle (https://www.opensecrets.org/industries/) and $542 million on lobbyists last year alone (https://www.opensecrets.org/federal-lobbying/ranked-sectors?cycle=2020).

3 Likes

Agreed with everything that’s already been said above - this is philosophically the right direction for where protocols like UNI should be heading. We should be leveraging these resources to help ensure the activate participation in DeFi DAOs and dgov members are protected irl, so I’m happy to signal support on snapshot.

However, this proposal in it’s current state lacks any sort of implementation details and it’s unclear who & how these funds will be used. Until this happens, I will not support the proposal moving forward.

Relatedly, but not a priority, while the treasury is significant, DeFi protection would probably be better served as a coalition of treasuries supporting a superstar legal roster rather than just UNI footing the bill to still amorphous org.

My hope is that once the snapshot passes, we will get more information but in the future, I hope this sets the precedent that more implementation details are provided upfront so we can have functional discourse before heading into a snapshot, then work out the more granular details later heading into a formal proposal.

9 Likes