Uniswap survives a narrow escape, first governance proposal rejected, only 400,000 UNI away from passing

On the morning of October 20th, Beijing time, the first Uniswap governance proposal failed due to the lack of the required quorum (votes) for passing. The final vote was 39,596,759 in favor and 696,857 against. It was only about 400,000 away from the quorum (40 million) required for the proposal to pass.

The proposal’s failure is the community’s success

The voting proposal submitted by Dharma proposed to "reduce the minimum number of UNI required to submit Uniswap governance proposals from 10 million to 3 million, and the minimum quorum from 40 million to 30 million." Due to the lack of quorum, this proposal has been rejected today.

The proposal was a controversial move by Dharma’s founders, who claimed that lower proposal and quorum thresholds would increase participation in Uniswap governance.

However, if the vote exceeds the quorum, Dharma, Gauntlet, and Univalent will have full control over the governance of the platform. As the largest holders of UNI, they will be able to propose and vote on any proposals they want based on their preferences.

This dashboard shows who voted and whether they were yes or no.

This Dune Analytics dashboard shows more details about UNI delegators.

“We recommend setting the threshold for submitting proposals at 3 million UNI, with a quorum of 30 million UNI. — Dharma”

The quorum of 30 million is no coincidence — Dharma has 30 million votes themselves, meaning that the proposal would enable them to pass anything they choose.

Although unlikely, since the identities of major UNI holders are public, lowering the quorum by too much could lead to a situation like The DAO attack where malicious proposals cost investors millions of dollars.

Many expressed concern about the negative impact this vote could have on the platform’s decentralization and the success of DeFi as a whole.

Currently, about $800 million of ETH is locked in UNI liquidity mining. If the liquidity mining ends as planned on November 17, this $800 million will be withdrawn from Uniswap, and some people worry that this will increase the possibility of bad actors causing Ethereum prices to crash.

Creating governance proposals is a fine art, and all details should be considered by the reader and proposer. If multiple changes are needed, multiple proposals need to be made. Dharma’s proposed Vote 1 proposed two changes to the platform in one proposal, which is not a good practice.

Changing the quorum should be a proposal, and changing the threshold for submitting proposals should be a separate proposal.

While the imbalance of power resulting from the centralized distribution of UNI tokens is obviously concerning, Aave CEO Stani has a good point about token delegation.

That didn’t stop many from viewing the vote as a failed attempt by one of its main competitors to take over the Uniswap platform.

Dharma CEO has issued a response on this topic.

There is skepticism about Dharma’s motivations for wanting to pass this vote, as it is known that Dharma was unhappy with the distribution of UNI tokens.

Dharma issued a clear opinion on the UNI distribution, stating that its users were unfairly excluded from the UNI airdrop and that the UNI airdrop should be extended retroactively to all wallets that use interfaces that interact with Uniswap, such as Dharma, Matcha, Paraswap, etc.

Not only will this additional distribution benefit their users, but Dharma will also benefit greatly from this move.

If Uniswap Vote 1 passes, Dharma can not only propose a proposal for further allocation of UNI, but also vote to pass it.

This is a clear example of the potential influence over governance and the power that holding a large amount of governance tokens represents.

Groups such as Penguin aim to preserve Uniswap’s decentralization and sovereignty by implementing autonomous proposals similar to those used in Compound.

Access to self-governance proposals will go some way toward preventing total control of power in the future, as community members will be able to pool their voting power and easily create formal proposals.

Currently, even prominent groups or individuals may have difficulty raising enough UNI to create a proposal, so autonomous proposals are critical to the continued decentralization of the platform.

Another controversial point about this first-ever Uniswap governance proposal is that many users were unable to participate in the voting due to the following limitations.

Only UNI that has been delegated by itself or to other addresses before block 11042288 is eligible to participate in the voting.

The rule requires anyone who wishes to vote to delegate their UNI in advance before a proposal is made, but this is an unnecessary restriction that seems to only benefit the party that proposed the proposal, while penalizing anyone who disagrees or is unprepared.

Snapshotting delegates in this way was clearly an oversight; with only 48 million UNI delegated at the time of the proposal launch, and a quorum of at least 40 million UNI required to pass the vote, we can see that Uniswap’s governance still has some teething problems.

Today’s result has many breathing a sigh of relief. Although the vote did not pass, it seems like a good learning opportunity and perhaps a good warning of what can happen if bad actors manage to take control of the platform.

We may never know if Dharma really wanted to exploit this opportunity in a dishonest way, or if they just wanted to provide users with better benefits...

Governance is power, and the actions of those who are able to manipulate popular platforms affect us all.

Regardless of your opinion on Dharma or the UNI token, you can point out that all of this is the result of flawed launch and initial governance rules put in place by Uniswap.

We should all pay close attention to any new proposals and fully consider the motivations of those responsible for their creation.