Temperature Check - Ultrasound UNI [Fee switch organization funding]

Temperature Check
21

The UNI fee switch is a good endeavour and will easily gather support.

I find several issues with how this is proposed. The word “we” is used, but I have no clarity on who is proposing, who is on the team and if they have the capability to follow through to the outline.

I also find it problematic that the cost is very high (10 million USD) and the deliverables are unclear. You also are defaulting to Uniswap Labs building out UI/UX around the fee switch. If legal issues are a concern then this would not be possible. I would find more confidence if you had a team capable of executing considering the money being asked.

My hope is the community can find a more direct and actionable route to the fee switch.

For example a proposal that analyzes a pair that would be suitable for a V3 fee switch and does an individual proposal for that pair, which sets a framework for future fee switches. Similar to how the .01% basis fee pair was initialized.

This proposal is too bureaucratic in nature and unclear to it’s research expertise. Value for UNI is a must, but let’s do it in a more streamlined way.

22

Didn’t you receive a UGP grant? I find it troublesome you are viewing it as a “soft rug”.

Do you think a proposal should be created to stop funding UGP and have the DeFi Fund return its funds?

23

$10mm is too expensive for this endeavor. 500k is probably more acceptable.

1 Like
24

Does receiving a grant mean that I will have to shut up and not disclose my honest opinion? For all its worth, having received a grant should imply a better informed opinion.

I am simply calling these programes what they are - a soft rug. They are inherently taking money out of the holder´s pocket and redistributing them elsewhere. This does not mean they have to be wound up, but Im not going to sit here and scream that they provide extreme value for the token holder when its simply not the case. UNI token is a wealth redistribution mechanism a.k.a a soft rug. It has no inherent value without the fee switch.

The Harvard students havent logged in over 6 months. In one of their posts, they stated they would not dump the UNI day one “because it would be problematic”. Bam, day one. Half is gone. If you do not want to call that a soft rug, then I do not know what else you want to call it.

Another example is the UGP sponsorship of Team Secret, what value do the token holders get by giving an esports team 250 000 USD in UNI?? How does it improve the value proposition of the Uniswap ecosystem or the value of the token besides B level marketing? Are we really saying that using 250k to pay for an AD is a good use of funds? Wouldnt it be better to allocate the 250k to other projects that are actually BUILDING stuff?

I see it as imperative the UNI token holders have their own association sponsored by the UNI treasury to finally accrue value for the UNI holders. Its high time. If this is not done, the UNI token will remain a laughing stock.

Im not one of those people that will bullshit you and tell you everything is all right and dandy if thats what you are looking for.

2 Likes
25

Nice said. Fully agreed. Those so called UNI delegations do not care about Uniswap at all! UNI swap treasury is just a big honey pot for them to dilute and soft rug the remaining UNI holders.

26

I feel like the proposal that passed adding the .01% fee tier proves meaningful proposals can be passed without incentives, no?

27

Thanks for bringing this up because this is yet another perfect example.

What did the UNI token holders get for making the Uniswap Protocol become the market leader in stablecoin swaps? Nothing.

What did Getty and Alex get for their time, concentrated effort, and execution for making Uniswap compete with Curve? Nothing. Absolutely nothing. In fact, they lost because they had to pay for all the gas fees associated with it. Both of them are in net minus.

This is what they got for making Uniswap matter in the billion stablecoin swap business. Absolutely mad. The only real winner here is the Uniswap Labs who gained by making their product look more attractive.

Both Getty and Alex absolutely SHOULD get compensated for their contribution and thats why we need a community run organization that will compensate them for their work funded either through the treasury or partially through the fee switch.

1 Like
28

I know Getty and GFX lab has been pretty involved in some DAOs and proved to be efficient and constructive. If we going to start with some budgets to improve the governance, including turn on the fee switch and revamp the tokenomics of UNI, we should get Getty involved as well.

1 Like
29

What are the main benefits of turning the fee switch. Do you think we can do it in a way that makes TVL and trading volume increase?

30

Hi jonsnow,

Getty and his cohort at GFX Labs is one of the main prospective groups we would like to work with on progressing the fee switch. His notable work in leading the 1-basis point fee tier and helping Mihalio for the polygon on-chain vote is indispensable to this proposal. If the temperature check passes, we aim to reach out to several delegates (i.e., Ken Ng., Jesse Walden., John Palmer, Robert Leshner, Monet Supply, etc.) and university governance committees in support of future action to be detailed in the consensus check phase.

32

Hey all,

I voted against in the temp check, here’s my reasoning:

  • initial proposal isn’t fully fleshed out
  • amount of funds needed isn’t clearly justified, would like to see at least some estimates for cost breakdown
  • scope seems larger than necessary, imo would be better to start just focusing on research to see how much market share impact we’d have by turning on fee switch

I’d support a smaller initiative to research fee switch and have a better idea on how large of protocol fees the market can bear - personally I’m assuming DEX trade execution will become a very efficient market which will be difficult to monetize directly, but this is just my intuition and I’d love to have some data to confirm/refute my hypothesis.

One other comment, just because Uniswap isn’t actively paying out revenue to token holders doesn’t mean that token holders aren’t accruing value. UNI dex market share has been rising steadily, and many more users consider Uniswap to be synonymous with Ethereum DEX trading (brand value). We’re also winning the war of attrition with other dex projects like Sushi, who are forced to pay out unsustainable incentives to maintain TVL just to remain competitive. Among all major dex protocols, Uniswap has by far the best profitability (including both revenues and cost of token incentives).

5 Likes
33

Hi monet-supply,

Perhaps the proposal is too ambitious? I’d love to see how we can work together on funding a smaller research initiative on the topic of the fee switch. Please check your DMs! I am also drafting another temperature check to address your points noted.

Though I do have a little trouble with your definition of token holders accruing “value”. It seems to me this is somewhat an inaccurate statement since the price of $UNI has fallen from one of the top 10 cryptocurrencies in market capitalization at its peak (excluding stablecoins), and is now down to the bottom 30. It’s almost as if the bullish on-chain analytics of the Uniswap protocol appears to be inversely proportional with the collapsing price of $UNI.

The fund aims to solve simple altruistic questions:

  • How much longer will this trend continue?
  • Is there any rationale for investors or any large external VC funds, investors, or hedge funds to purchase $UNI based on this strong correlation?
  • Can the community rapidly call for a singular entity to officiate innovative methods to help reverse this trend?

The fund also aims to maintain the value of $UNI and the level of participation in Uniswap governance:

  • If the price of $UNI continues to collapse, what risks are created to Uniswap’s governance, Uniswap’s protocol attractiveness, the reputation of Uniswap’s brand value, and reputation to large token holders participation (i.e., VC funds alike a16z, Uniswap Labs, etc.)?
34

Agree on the size of the funding is not justified. This type research is shouldn’t be this expensive. If we pay a phd student 100k a year, 10mm can hire 100phds to research on this. It is not rocket science and it should be less than 500k.

35

I truly hope your post is a satire because yeah, you are right. The best way to participate in the success of the Uniswap Protocol is by NOT holding any UNI whatsoever and laugh at those who do by saying, “Look, I know you are -75 % off the ATH, ppl laugh at you on Twitter on the regular, but the BRAND VALUE you are acquiring is THROUGH THE ROOF THOUGH!”

I think we can all agree that the best way forward is to work together and bring value to the ecosystem which does not have to be necessarily of monetary value, but should result at least in the token holders not losing out on value in long term. This is my goal as a community member = not to leave anybody behind.

I didnt think highly of you before, but you just hit a new low in my eyes. Not even an ounce of self-reflection or empathy, but brazen enough to say to people, “You are in so much profit.”

Truly sickening to read and to some extent really good trolling.

1 Like
36

I think we know who is holding lots of uni…

37

Good stuff that I sold it a while back. Im pissed for all those who still are though. (Otherwise, I would have voted, “Yes” for the snapshot.)

38

Hi @monet-supply, thanks for the thoughtful comment. I’m actually planning to do some research on this question. If you have any suggestions how to go about it, feel free to reach out to me.

39

My name is Derek and I’m an intern at Variant, a crypto-native token fund investing in the ownership economy. The fund is one of Uniswap’s earliest investors.

Variant Fund believes that flipping the Uniswap fee switch should be further researched, but in the short run, scale and user acquisition should be prioritized over protocol revenue. We support researching the Uniswap fee switch for the following reasons:

  1. Even with the switch turned on, our hypothesis is that Uniswap could still offer the most competitive unincentived yields among leading DEXs.
  2. The additional protocol fees could be invested in ecosystem growth, treasury diversification, and other initiatives without placing selling pressure on the UNI token.

As the DEX space becomes increasingly competitive, protocol revenue could help Uniswap defend its leading position. Nevertheless, we believe there should be a more detailed use of funds before a grant of up to 1m UNI (~$10m) as stated in the Snapshot proposal is issued; a more suitable path might be requesting funds through the Uniswap Grants Program for this initial exploration. After a comprehensive use of funds is released, we support researching possible scenario models and timelines to switch on fees in the long run.

We feel various conditions and assumptions should be further researched in order to move forward with the fee switch. These include the following, among others:

  1. Low Impact on LPs - While Uniswap offers extremely competitive yields from trading volume alone, fee increases on other protocols could be used as benchmarks for sensitivity analysis to determine the switch’s potential impact; we believe that fees should be switched on if most liquidity is expected to remain on the platform.
  2. Market Leadership - Fees should not be switched on until Uniswap has a firm position as the leading DEX. Its network effects must create sufficient defensibility so it doesn’t lose volume to other DEXs. (The switch would have no direct effects on the demand-side of the marketplace; this condition is mostly looking into indirect effects such as the possibility of weaker liquidity, fewer token options, etc).
  3. Transparency - Although discussions around the fee switch have increased recently, we feel that the event should be made clear to LPs with forward guidance so there is not an emotional, short-term reaction that could impact liquidity.

We are supporters of a long-term approach to switching on fees for the two reasons stated above: Uniswap’s competitive yields and additional growth capital.

First, many in the community have expressed concerns that the fee switch could lead LPs to shift to other platforms. We believe that these concerns are over exaggerated and Uniswap will still offer one of the most competitive yield opportunities for LPs.

Trading Volume / TVL is a ratio that represents yield potential; it is proportional to trading fees collected per every dollar of LP capital. Uniswap’s Vol / TVL is tracking at ~3x Sushiswap’s, ~5x Bancor’s, and ~9x Balancer’s; even with some IL, Uniswap clearly offers the most competitive passive, organic yields. These metrics largely come from Uniswap controlling ~75% of the DEX market. Uniswap can maintain this position through strong network effects; it is commonly the first dApp for new crypto users, which drives volume growth and new token listings, further attracting LPs.

Importantly, even with the fee switch turned on and the parameter set to its maximum value (25% of total revenue), Uniswap will still offer the most competitive unincentivized yields:

Average APR with Max Fee Switch:
1. Uniswap = 13.1%
2. Sushiswap = 7.5%
3. Bancor = 2.4%
4. Balancer* = 2.2%
5. Curve = 1.3%

Notes: Average APR calculated by dividing annualized supply-side revenue by TVL (Source: Token Terminal)
*Balancer is currently facing a vote to increase its protocol fees

Second, new protocol fees could be used to ensure Uniswap maintains its position as a market leader. Below are example use cases for additional funds allocated to the treasury:

  1. Community development - Additional reserves could be used to hire community managers and bolster the value of Uniswap’s network through events, marketing, and Discord management.
  2. Business Development - Many parts of the crypto industry are gradually being moved on-chain; additionally, adoption of DeFi is still relatively low (~4m / 75m Ethereum wallets). Protocol revenue could be used to pursue additional partnerships and possible integrations with off-chain applications without being forced to spend UNI tokens.
  3. Treasury diversification - Uniswap has the largest treasury of any DAO; however, the protocol notably lacks any kind of treasury diversification as all reserves are held in UNI tokens. Additional revenue could be used to invest in stablecoins and blue chips without having to sell UNI and place downward pressure on the token’s price.

Importantly, these uses of funds aim to generate additional volume for the protocol and support the UNI token; in other words, LPs could see their yields actually increase from additional top-line revenue. In the long-run, revenue could be redistributed to token holders as well, but the more pressing need for funds is protocol development. These initiatives could be funded through the Uniswap treasury in the short run, but continuously funding them with UNI would place selling pressure on the token; we believe initiatives like these should be explored further.

The DEX space is becoming increasingly competitive; not only are peer AMMs launching additional features and upgrades, but alternative DEX models - notably orderbook-based - are also emerging quickly as alternatives to Uniswap. Protocol revenue should thus be considered a necessity to ensure Uniswap’s long-term success, and we firmly believe more research is required.

6 Likes
40

I agree with you that uniswap has two most important tasks at present:

  1. Rapidly expand the market share and monopolize the market as much as possible in the DEX field

  2. Multi chain expansion and reduce transaction costs as much as possible. At present, the high cost of gas in the chain will limit the development of DEX and will not bring any benefits to uni.

In addition, I have some suggestions:

  1. For the standardization of governance process, it is hoped that a special team will be responsible for promoting the governance progress. As long as any person’s opinion reaches a certain amount of support, it can be handed over to a professional team to promote the governance progress;

  2. Increase the approval rate from the current 50% approval rate to more than 66% support rate. The 50-66% support rate should be regarded as a controversial proposal and need to be revised.

  3. Support the development of uni ecological track and give some support in promotion, such as the current project focusing on uni V3 LP: visor, universe

41

Hey thanks for the feedback, I really appreciate it! I totally agree on the points re reviewing Uniswap’s governance procedures.