Decentralized or Not? The Uniswap Protocol and Interface Are Different Beasts

Uniswap is one of the few DeFi protocols that runs fully permissionlessly, without interruptions or possible human intervention. It’s considered to be the gold standard for the space, which is why it was so jarring when management behind the decentralized exchange decided to remove 100 tokens from its interface.

Uniswap Labs is the software development studio behind the decentralized exchange protocol Uniswap. It made the decision to restrict access to the tokens through its main user interface (UI) on July 23, citing an “evolving regulatory landscape.”

Many users have been surprised by the decision and even responded with ire. 

The question DeFi users are asking is, if Uniswap Labs can make top-down decisions about the Uniswap protocol, is the protocol actually decentralized? The counterargument is, while the Uniswap interface is controlled by Uniswap Labs, the protocol itself remains permissionless. 

As governmental pressure towards the crypto sector continues to grow, this method allows Uniswap to both comply with potential regulation through their official channels (ie: the Uniswap interface), while simultaneously continuing to offer full decentralization, true to the ethos of DeFi, through the Uniswap protocol. 

Uniswap on September 1, 2020 launched its UNI token so that the community could participate in major protocol decisions, such as this one. The most “liked” user reaction on Twitter simply reads: “What’s the point of the governance token?”

No Stock Tokens

In this instance, Uniswap Labs primarily targeted tokens that mimic traditional securities, which are regulated by the U.S. Securities and Exchange Commission and commodity Futures Trading Commission on traditional exchanges. These include tokens that track and mirror stock prices (ie: mirrored Tesla or MTSLA), issued by protocols including Synthetix and Mirror. 

Centralized exchanges have also put a halt on sales of tokens that mirror stocks due to increased regulatory attention. On July 16, Binance announced that it would be winding down support for all stock tokens effective immediately.

Protocol vs Interface

In reality, Uniswap Labs’ decision to alter their UI has no bearing on whether or not the Uniswap protocol itself is decentralized. 

There is a distinction between the Uniswap protocol, which is the set of autonomous, immutable, decentralized smart contracts dictating Uniswap’s functions, and the Uniswap interface, which is the website hosted by Uniswap Labs that provides one route of access to the Uniswap protocol. 

The protocol is decentralized. The interface is not.

In practice, this means that when Uniswap delists tokens on their interface, those tokens are still available on the protocol. They simply cannot be accessed through the official Uniswap interface. Users accessing the protocol through any other interface or Uniswap fork will still have access to those tokens. And because Uniswap’s interface code is open source, this means any developer can fork and build upon the interface however they choose, making the tokens available again.