A Uniswap governance proposal riled up the DeFi community this week.
The proposal, which has since been canceled, would have used yield generated from $25M in Uniswap treasury assets to pay employees at blockchain analytics platform Flipside Crypto. The payment would have been for Flipside to oversee a bounty program for pulling more users into the Uniswap ecosystem.
But with less than 24 hours left to vote on the proposal, another analytics platform, Dune Analytics, tweeted a so-called PSA. “There is no reason for Uniswap to fund Flipside’s daily operations with eight full time employees,” Dune tweeted.
Others piled on. 0xngmi, who works on the DeFi Dashboard site DeFi Llama, tweeted, “Flipside has received $11.5M in VC funding and now they are asking Uniswap for $25M to farm yield. DeFi Llama has been completely self-funded from the beginning, am I the idiot for not asking treasuries just to hand us money for free?”
The proposal outlined a soft-launch, which would mean taking $15M in UNI tokens the first year and earning what was estimated to be a 30% yield on the funds. That would work out to $2.25M a year and $187,500 a month.
The yield would come from depositing the UNI tokens in Aave as collateral, borrowing 50% of that value in ETH, swapping 50% of that ETH back into UNI, and then depositing the two tokens into the WETH-UNI pool where the position would earn 0.3% on trades between the two assets.
The monthly sum would then be split 50/50 between programs to acquire new users and paying Flipside. According to the proposal, 50% of the money would finance new user acquisition bounties and “motivate analysts to drive substantive outcomes.” Substantive outcomes would include things like educational content and tools like the Uniswap V3 Fee Calculator.
The other 50% of yield — $93,750 per month based on projections — would have gone to Flipside to operate the bounty program.
That the funds would go to one analytics company seemed to rile up the greater DeFi ecosystem the most.
Some alluded to possible favoritism. For instance, Revert, another analytics tool, tweeted: “We applied for the three rounds of Uniswap grants. Always under $50K USD, to develop our V3 integration. Never got a reply, asked for feedback and were just ghosted.”
Stop the Vote
The proposal was cancelled shortly after the controversy on Twitter started. Although, due to a technicality — Index Coop, the index-focused DAO, delegated their UNI votes back to themselves, bringing the proposal below a threshold which allowed another user to cancel the vote.
The cancellation had Dave Balter, CEO of Flipside Crypto fuming.
“What a day. After more than two months of effort, the flipside uniswap community-enabled analytics proposal was cancelled on a technicality,” Balter tweeted.
The Role of a DAO
The proposal brought up other questions on the role of DAOs that have been circling in the crypto ecosystem at large recently.
Dune Analytics argued that grants should go to community members and not already funded service providers. Peter Pan, a founding member of MetaCartel Ventures, an investment DAO, pushed back on that, saying he believes a DAO can pay whoever it wants, as long as it’s the community who decides by a vote.
Founder of Compound Finance, Robert Leshner, took a harder line, citing a quote by the historian Alexander Fraser Tytler: “A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury.”
Leshner voted no for the Flipside proposal.
Some of the votes weren’t even legitimate. Users MonetSupply, the fifth-largest for-vote, and getty_hill, the ninth, both intended to go against the proposal, but due to a bug in the voting interface, Tally, their votes logged as being in support. Getty Hill, co-founder of crypto product shop GFX Labs, was actually the one who canceled the Uniswap proposal in the end.
To many, it was unsettling how close the proposal came to passing. “To me it’s not even about this specific proposal, it’s about the fact that something so controversial would’ve passed unnoticed if not for this last-minute tweet,” Messari senior research analyst Ryan Watkins tweeted, referring to Dune Analytics’ post.