Friday, March 1, 2024: Snapshot Link
This proposal seeks to invigorate and strengthen Uniswap’s governance system by incentivizing active, engaged, and thoughtful delegation. Specifically, we propose to upgrade the protocol so that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.
The UF team is often asked what success looks like for Uniswap governance. Quite simply, success for governance equates to the long-term sustainability and continued growth of the Protocol. Governance controls the Uniswap Treasury, and core parameters related to the Protocol’s long term sustainability (for instance, fees). In 5, 10, 20 years, Uniswap’s continued success – and whether it actually becomes the liquidity layer of the Internet – will have been the result of its delegates and the decisions they make.
Over the past year, the UF has prioritized improvements to the delegation experience. We have provided delegates with the opportunity to launch their platforms (the Delegate Race), and with information they need to make good decisions (the Bridge Report). Next week at ETHDenver we are launching GovSwap, the first of a series of in-person gatherings oriented around producing good governance outcomes by defining a common purpose. Subsequent GovSwaps will take place at ETHcc and Devcon. For delegators, we funded and launched Agora, a platform that allows delegators to find delegates that will best represent their interests.
As a result of these efforts, delegate activity has picked up, as evidenced by the increasing number of community-driven governance initiatives. For example, in the last three months:
However, there is much more that can be done. Free-riding and apathy remain existential risks to the Uniswap Protocol’s sustainability. Less than 10% of circulating UNI is used to vote on a given proposal. Further, a large portion of existing delegation is “stale”. As of February 1 2024, 14 of the top 30 delegates by voting power had not voted over the last 10 proposals, and only 7 of these delegates have ever created a proposal.
We’re excited to invigorate governance – incentivizing not only delegation but thoughtful and active delegation – by tying delegation to protocol fees. Specifically, we believe UNI token holders will be incentivized to choose delegates whose votes and engagement with the protocol will lead to the Protocol’s growth and success. If this proposal succeeds we believe we will see an influx of new delegation. And because existing delegators will be required to re-delegate to stake their tokens, we will see a shift of “stale” existing delegation to delegates who have proven their commitment to supporting the protocol. Further, this mechanism can run on its own into the future - continuing to incentivize engaged delegation, without requiring any additional facilitation.
The Uniswap Foundation has funded the research and development of the various components that are required to implement this proposal. Specifically, we have funded two new smart contracts which are designed to be deployed into and interact with the existing ecosystem of Uniswap contracts operating on-chain. If implemented by this governance proposal, they would:
Below we provide a brief overview of the two new contracts. More technical detail can be found in the Appendix.
The two new contracts are V3FactoryOwner.sol and UniStaker.sol.
If governance is supportive of this initiative, we will move forward with this vote. Specifically, a successful on-chain vote would update the owner of the mainnet UniswapV3Factory to be a deployment of V3FactoryOwner.sol, enabling the programmatic fee collection mechanism described above.
The next steps are:
setOwner function passing it the v3FactoryOwner address.These dates are subject to change based on audit results and community conversation.
Assuming a successful on-chain vote, the community will then have the option to turn on fees. To that end, Gauntlet is preparing a proposed roll-out process that they will post in the forum. Only at the completion of that separate governance process will fees begin to be collected and distributed in accordance with the contracts adopted in this proposal.
We want to thank the many grantees who have helped make this proposal possible: Scopelift, Gauntlet, Avantgarde Finance, Agora, Trail of Bits, Code4rena, and Immunefi. We also want to recognize Getty Hill for first suggesting the idea to update the owner of the V3FactoryOwner to allow for more flexible, programmatic fee collection in a May 2023 forum post.
For those who are excited by this proposal and other work the UF is taking on, we encourage you to check out our open roles. We’re currently hiring for a General Counsel and a Protocol Product Lead and would love to hear from you.
A detailed description of protocol fee mechanics as they currently exist can be found on the Uniswap Foundation blog, here.
The TL;DR is:
The proposed vote would change the owner of the UniswapV3Factory to be a deployment of V3FactoryOwner.sol.
The smart contract piece of our proposed solution consists of two custom-built contracts, designed and written by Scopelift. This appendix discusses each of them.
V3FactoryOwner.sol This contract allows for the programmatic, permissionless collection of protocol fees from the pools where they accrue while maintaining Uniswap Governance’s control over whether fees are turned on and their levels.
The mechanism that enables fee collection sets up a continuous “race” wherein external parties (we contemplate this will include MEV bots, arbitrageurs, etc.) compete to claim the fees accrued by each pool once it becomes profitable to do so. The external party that claims the fee is required to deposit (in our recommended implementation) 10 WETH to a deployment of UniStaker.sol (detailed below). In other words, once the value of accrued fees exceeds 10 WETH (plus gas), a rational actor is incentivized to convert accrued fees to 10 WETH, which is sent directly to the UniStaker.sol contract.
Additionally, V3FactoryOwner is configured to pass through the function calls from Uniswap Governance that are required to turn on and adjust protocol fees in any pool deployed from the Uniswap V3 Factory contract. Governance votes will still be required for these adjustments.
In order for this contract to work, it will need to become the owner of UniswapV3Factory. This first vote, the Upgrade vote, will update the Owner of UniswapV3Factory to the address of a deployed instance of V3FactoryOwner.sol.
V3FactoryOwner has four parameters that are configured at contract deployment.
| Parameter | Updateable by governance? | Description | UF Recommended parameter |
|---|---|---|---|
| Payout Token | No | The ERC20 used to pay out rewards to stakers. | WETH |
| Payout Amount | Yes | How much of the Payout paid in each discrete deposit. This is the amount third parties will "pay" in order to collect the fees of any given pool. Rational actors would thus not call the method until the value of accrued fees plus gas is worth this amount. | 10 WETH |
| Reward Receiver | No | The address to which third parties will send the Payout Amount of the Payout Token. | UniStaker |
| Admin | Yes | The address that can pass through function calls to the V3FactoryOwner to adjust fees. | Uniswap Timelock |
UniStaker.sol This contract manages delegation and fee distribution. Actors responding to the mechanism in V3FactoryOwner.sol deposit an ERC20 into UniStaker.sol to be distributed pro-rata to delegators.
UniStaker.sol is modeled after Synthetix’s battle-tested StakingRewards.sol. UniStaker extends StakingRewards.sol’s functionality in two key ways:
| Parameter | Updateable by governance? | Description | UF Recommended parameter |
|---|---|---|---|
| Admin | Yes | The address that can add addresses to the list of RewardsNotifiers. | Uniswap Timelock address |
| RewardsNotifiers | Yes | A list of addresses that defines where rewards can come from. | V3FactoryOwner added to the list of RewardsNotifiers |
| RewardsToken | No | The token UniStaker expects to be deposited and distributed to stakers. | WETH |
| StakeToken | No | The token users must deposit and delegate to be eligible to earn RewardsTokens. | UNI |
| Reward Duration | No | The timeframe over which rewards are distributed. This is a parameter that comes with the Synthetix staking model. Effectively, when a reward is distributed it is spread out over this time frame (unless/until the next reward comes in). Primarily, this impacts the reward rate. A longer duration will drip rewards more slowly. A shorter one will drip them more quickly. | 30 days |
Appendix C: Fee distribution logic The rate at which accrued protocol fees are distributed to UNI stakers, as well as the size of a stakers’ reward, are determined by several variables. Specifically, the inputs are:
Note that every time a deposit happens, the reward duration “clock” resets. All outstanding Reward Amounts are added to the newly deposited Reward Amount, and that amount is distributed over the subsequent Reward Duration.
To illustrate these distribution mechanics using an example, assume that we have defined the contract variables as follows:
Every time a little bit more than 10 WETH worth of fees accrue in a pool, a third party is incentivized to collect them and distribute 10 WETH into UniStaker. From there they will be allocated pro-rata to stakers over a 30 day period.
Example 1: Simple Case
Example 2: New Rewards Distribution
Example 3: New Stakers
Both V3FactoryOwner and UniStaker are fairly lightweight - the total combined lines of code is near 550. But if put into production, both are critical to the future of the Uniswap ecosystem. With that in mind we have invested considerable resources into their security.
Both contracts were developed by Scopelift. The code has meticulous in-line documentation and there is user-facing technical documentation here. The repository contains a robust test suite including unit, integration, and invariant tests. Scopelift has also written scripts for the governance proposals that will be required to transfer the ownership of the V3Factory contract and subsequently to interact with the V3FactoryOwner.
The smart contracts have been highly scrutinized by multiple teams including Trail of Bits, whose final audit report is forthcoming. The audit flagged one issue that is documented here. The full report from that audit will be added to the contract repo when their technical writing team has completed their work.
Additionally, the Uniswap Foundation is sponsoring a 10-day Code4rena contest which will further harden the contracts. That contest will begin shortly after this post is published.
Finally, in the event of a successful transfer of UniswapV3Factory ownership, the contracts will be the subject of a $1m bug bounty hosted by Immunefi.
The UF has funded two separate front ends to provide access to the UniStaker contract.
Avantgarde Finance has built a React app that enables the functionalities necessary for users to stake, delegate, and collect their fees. It is open source and its UI is purposefully unopinionated. It can be freely forked and the components copied at will for other front end teams to incorporate in their apps. This app will be deployed and hosted following a successful governance proposal; it can also be downloaded and run locally.
Avantgarde has also built a hosted subgraph that indexes the events fired by the V3FactoryOwner and UniStaker contracts. This subgraph will be a valuable tool to anyone building an app that interacts with UniStaker or V3FactoryOwner.
Both Avantgarde products are in the final stages of active development and testing; their repos are subject to change.
Agora is integrating staking and delegation functionality into the app they maintain at vote.uniswapfoundation.org. Upon a successful governance vote, the new version of that app will be deployed.
If this proposal passes, it sets the stage for future proposals to turn on the Uniswap Protocol fee. In evaluating any such future proposal, delegates should consider the potential impact to the procotol’s liquidity. To this end, the UF engaged Gauntlet to produce a report that investigates the likely outcomes. Using a simulation engine that ingests months of transaction-level blockchain data, Gauntlet’s report provides a framework to think about the impact on liquidity and trade execution resulting from the introduction of a protocol fee (and to measure the results of any successful implementation).
An overview of their findings can be found here, and a full discussion of their methodology can be found here.
We encourage delegates to read through this work to inform their decision-making.
We expect an influx of new delegation, as well as adjustments to existing delegation, if this proposal passes. As such we want to share a few thoughts to help delegators.
We expect all UNI token holders to do their diligence on delegates and delegate to those who have shown good judgment, decision making, and engagement with the protocol. You can review delegate platforms and past activity here. Your choice in delegate will directly impact the future of the protocol.
Additionally, note that protocol fees will flow through the new staking and delegation contracts (not existing ones). In other words, if you delegate today or are already delegated today, you will have to re-delegate once the new contracts go live in order to receive your portion of protocol fees.
Finally, note it will still be possible to delegate without staking by using the existing delegation function on the UNI token contract.
The Uniswap Foundation supports a community of individuals and organizations dedicated to a more open, fair and decentralized financial system through education around and broader adoption of blockchain technologies and smart contract-based decentralized protocols.
This post does not constitute, and is not intended to constitute, any kind of legal advice, and readers are not to construe the contents of this brief as legal, business, tax, accounting, investment, or other advice. Each UNI token holder should consult its own advisers as to legal, business, tax, accounting, and other related matters concerning the proposal in light of such token holder’s particular circumstances.
Friday, March 1, 2024: Snapshot Link
This proposal seeks to invigorate and strengthen Uniswap’s governance system by incentivizing active, engaged, and thoughtful delegation. Specifically, we propose to upgrade the protocol so that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.
The UF team is often asked what success looks like for Uniswap governance. Quite simply, success for governance equates to the long-term sustainability and continued growth of the Protocol. Governance controls the Uniswap Treasury, and core parameters related to the Protocol’s long term sustainability (for instance, fees). In 5, 10, 20 years, Uniswap’s continued success – and whether it actually becomes the liquidity layer of the Internet – will have been the result of its delegates and the decisions they make.
Over the past year, the UF has prioritized improvements to the delegation experience. We have provided delegates with the opportunity to launch their platforms (the Delegate Race), and with information they need to make good decisions (the Bridge Report). Next week at ETHDenver we are launching GovSwap, the first of a series of in-person gatherings oriented around producing good governance outcomes by defining a common purpose. Subsequent GovSwaps will take place at ETHcc and Devcon. For delegators, we funded and launched Agora, a platform that allows delegators to find delegates that will best represent their interests.
As a result of these efforts, delegate activity has picked up, as evidenced by the increasing number of community-driven governance initiatives. For example, in the last three months:
However, there is much more that can be done. Free-riding and apathy remain existential risks to the Uniswap Protocol’s sustainability. Less than 10% of circulating UNI is used to vote on a given proposal. Further, a large portion of existing delegation is “stale”. As of February 1 2024, 14 of the top 30 delegates by voting power had not voted over the last 10 proposals, and only 7 of these delegates have ever created a proposal.
We’re excited to invigorate governance – incentivizing not only delegation but thoughtful and active delegation – by tying delegation to protocol fees. Specifically, we believe UNI token holders will be incentivized to choose delegates whose votes and engagement with the protocol will lead to the Protocol’s growth and success. If this proposal succeeds we believe we will see an influx of new delegation. And because existing delegators will be required to re-delegate to stake their tokens, we will see a shift of “stale” existing delegation to delegates who have proven their commitment to supporting the protocol. Further, this mechanism can run on its own into the future - continuing to incentivize engaged delegation, without requiring any additional facilitation.
The Uniswap Foundation has funded the research and development of the various components that are required to implement this proposal. Specifically, we have funded two new smart contracts which are designed to be deployed into and interact with the existing ecosystem of Uniswap contracts operating on-chain. If implemented by this governance proposal, they would:
Below we provide a brief overview of the two new contracts. More technical detail can be found in the Appendix.
The two new contracts are V3FactoryOwner.sol and UniStaker.sol.
If governance is supportive of this initiative, we will move forward with this vote. Specifically, a successful on-chain vote would update the owner of the mainnet UniswapV3Factory to be a deployment of V3FactoryOwner.sol, enabling the programmatic fee collection mechanism described above.
The next steps are:
setOwner function passing it the v3FactoryOwner address.These dates are subject to change based on audit results and community conversation.
Assuming a successful on-chain vote, the community will then have the option to turn on fees. To that end, Gauntlet is preparing a proposed roll-out process that they will post in the forum. Only at the completion of that separate governance process will fees begin to be collected and distributed in accordance with the contracts adopted in this proposal.
We want to thank the many grantees who have helped make this proposal possible: Scopelift, Gauntlet, Avantgarde Finance, Agora, Trail of Bits, Code4rena, and Immunefi. We also want to recognize Getty Hill for first suggesting the idea to update the owner of the V3FactoryOwner to allow for more flexible, programmatic fee collection in a May 2023 forum post.
For those who are excited by this proposal and other work the UF is taking on, we encourage you to check out our open roles. We’re currently hiring for a General Counsel and a Protocol Product Lead and would love to hear from you.
A detailed description of protocol fee mechanics as they currently exist can be found on the Uniswap Foundation blog, here.
The TL;DR is:
The proposed vote would change the owner of the UniswapV3Factory to be a deployment of V3FactoryOwner.sol.
The smart contract piece of our proposed solution consists of two custom-built contracts, designed and written by Scopelift. This appendix discusses each of them.
V3FactoryOwner.sol This contract allows for the programmatic, permissionless collection of protocol fees from the pools where they accrue while maintaining Uniswap Governance’s control over whether fees are turned on and their levels.
The mechanism that enables fee collection sets up a continuous “race” wherein external parties (we contemplate this will include MEV bots, arbitrageurs, etc.) compete to claim the fees accrued by each pool once it becomes profitable to do so. The external party that claims the fee is required to deposit (in our recommended implementation) 10 WETH to a deployment of UniStaker.sol (detailed below). In other words, once the value of accrued fees exceeds 10 WETH (plus gas), a rational actor is incentivized to convert accrued fees to 10 WETH, which is sent directly to the UniStaker.sol contract.
Additionally, V3FactoryOwner is configured to pass through the function calls from Uniswap Governance that are required to turn on and adjust protocol fees in any pool deployed from the Uniswap V3 Factory contract. Governance votes will still be required for these adjustments.
In order for this contract to work, it will need to become the owner of UniswapV3Factory. This first vote, the Upgrade vote, will update the Owner of UniswapV3Factory to the address of a deployed instance of V3FactoryOwner.sol.
V3FactoryOwner has four parameters that are configured at contract deployment.
| Parameter | Updateable by governance? | Description | UF Recommended parameter |
|---|---|---|---|
| Payout Token | No | The ERC20 used to pay out rewards to stakers. | WETH |
| Payout Amount | Yes | How much of the Payout paid in each discrete deposit. This is the amount third parties will "pay" in order to collect the fees of any given pool. Rational actors would thus not call the method until the value of accrued fees plus gas is worth this amount. | 10 WETH |
| Reward Receiver | No | The address to which third parties will send the Payout Amount of the Payout Token. | UniStaker |
| Admin | Yes | The address that can pass through function calls to the V3FactoryOwner to adjust fees. | Uniswap Timelock |
UniStaker.sol This contract manages delegation and fee distribution. Actors responding to the mechanism in V3FactoryOwner.sol deposit an ERC20 into UniStaker.sol to be distributed pro-rata to delegators.
UniStaker.sol is modeled after Synthetix’s battle-tested StakingRewards.sol. UniStaker extends StakingRewards.sol’s functionality in two key ways:
| Parameter | Updateable by governance? | Description | UF Recommended parameter |
|---|---|---|---|
| Admin | Yes | The address that can add addresses to the list of RewardsNotifiers. | Uniswap Timelock address |
| RewardsNotifiers | Yes | A list of addresses that defines where rewards can come from. | V3FactoryOwner added to the list of RewardsNotifiers |
| RewardsToken | No | The token UniStaker expects to be deposited and distributed to stakers. | WETH |
| StakeToken | No | The token users must deposit and delegate to be eligible to earn RewardsTokens. | UNI |
| Reward Duration | No | The timeframe over which rewards are distributed. This is a parameter that comes with the Synthetix staking model. Effectively, when a reward is distributed it is spread out over this time frame (unless/until the next reward comes in). Primarily, this impacts the reward rate. A longer duration will drip rewards more slowly. A shorter one will drip them more quickly. | 30 days |
Appendix C: Fee distribution logic The rate at which accrued protocol fees are distributed to UNI stakers, as well as the size of a stakers’ reward, are determined by several variables. Specifically, the inputs are:
Note that every time a deposit happens, the reward duration “clock” resets. All outstanding Reward Amounts are added to the newly deposited Reward Amount, and that amount is distributed over the subsequent Reward Duration.
To illustrate these distribution mechanics using an example, assume that we have defined the contract variables as follows:
Every time a little bit more than 10 WETH worth of fees accrue in a pool, a third party is incentivized to collect them and distribute 10 WETH into UniStaker. From there they will be allocated pro-rata to stakers over a 30 day period.
Example 1: Simple Case
Example 2: New Rewards Distribution
Example 3: New Stakers
Both V3FactoryOwner and UniStaker are fairly lightweight - the total combined lines of code is near 550. But if put into production, both are critical to the future of the Uniswap ecosystem. With that in mind we have invested considerable resources into their security.
Both contracts were developed by Scopelift. The code has meticulous in-line documentation and there is user-facing technical documentation here. The repository contains a robust test suite including unit, integration, and invariant tests. Scopelift has also written scripts for the governance proposals that will be required to transfer the ownership of the V3Factory contract and subsequently to interact with the V3FactoryOwner.
The smart contracts have been highly scrutinized by multiple teams including Trail of Bits, whose final audit report is forthcoming. The audit flagged one issue that is documented here. The full report from that audit will be added to the contract repo when their technical writing team has completed their work.
Additionally, the Uniswap Foundation is sponsoring a 10-day Code4rena contest which will further harden the contracts. That contest will begin shortly after this post is published.
Finally, in the event of a successful transfer of UniswapV3Factory ownership, the contracts will be the subject of a $1m bug bounty hosted by Immunefi.
The UF has funded two separate front ends to provide access to the UniStaker contract.
Avantgarde Finance has built a React app that enables the functionalities necessary for users to stake, delegate, and collect their fees. It is open source and its UI is purposefully unopinionated. It can be freely forked and the components copied at will for other front end teams to incorporate in their apps. This app will be deployed and hosted following a successful governance proposal; it can also be downloaded and run locally.
Avantgarde has also built a hosted subgraph that indexes the events fired by the V3FactoryOwner and UniStaker contracts. This subgraph will be a valuable tool to anyone building an app that interacts with UniStaker or V3FactoryOwner.
Both Avantgarde products are in the final stages of active development and testing; their repos are subject to change.
Agora is integrating staking and delegation functionality into the app they maintain at vote.uniswapfoundation.org. Upon a successful governance vote, the new version of that app will be deployed.
If this proposal passes, it sets the stage for future proposals to turn on the Uniswap Protocol fee. In evaluating any such future proposal, delegates should consider the potential impact to the procotol’s liquidity. To this end, the UF engaged Gauntlet to produce a report that investigates the likely outcomes. Using a simulation engine that ingests months of transaction-level blockchain data, Gauntlet’s report provides a framework to think about the impact on liquidity and trade execution resulting from the introduction of a protocol fee (and to measure the results of any successful implementation).
An overview of their findings can be found here, and a full discussion of their methodology can be found here.
We encourage delegates to read through this work to inform their decision-making.
We expect an influx of new delegation, as well as adjustments to existing delegation, if this proposal passes. As such we want to share a few thoughts to help delegators.
We expect all UNI token holders to do their diligence on delegates and delegate to those who have shown good judgment, decision making, and engagement with the protocol. You can review delegate platforms and past activity here. Your choice in delegate will directly impact the future of the protocol.
Additionally, note that protocol fees will flow through the new staking and delegation contracts (not existing ones). In other words, if you delegate today or are already delegated today, you will have to re-delegate once the new contracts go live in order to receive your portion of protocol fees.
Finally, note it will still be possible to delegate without staking by using the existing delegation function on the UNI token contract.
The Uniswap Foundation supports a community of individuals and organizations dedicated to a more open, fair and decentralized financial system through education around and broader adoption of blockchain technologies and smart contract-based decentralized protocols.
This post does not constitute, and is not intended to constitute, any kind of legal advice, and readers are not to construe the contents of this brief as legal, business, tax, accounting, investment, or other advice. Each UNI token holder should consult its own advisers as to legal, business, tax, accounting, and other related matters concerning the proposal in light of such token holder’s particular circumstances.
Generally, we support the initiative, but we would like more time to research the exact implementation.
https://gov.uniswap.org/t/temperature-check-activate-uniswap-protocol-governance/22936/73?u=kaereste
This proposal is a significant step cementing Uniswap's position as a leader of innovation for decentralized governance.
We support this as the community and the governance will have a will have a closer alignment with the protocol
Generally, we support the initiative, but we would like more time to research the exact implementation.
https://gov.uniswap.org/t/temperature-check-activate-uniswap-protocol-governance/22936/73?u=kaereste
This proposal is a significant step cementing Uniswap's position as a leader of innovation for decentralized governance.
We support this as the community and the governance will have a will have a closer alignment with the protocol
Why no further actions? any updates?
Why no further actions? any updates?
Hello Eeek
What is the update? We voted 1 year ago now.
This is a fake DAO. Rename to Uniswap Governance to a16z Governance
Hello Eeek
What is the update? We voted 1 year ago now.
This is a fake DAO. Rename to Uniswap Governance to a16z Governance
New SEC and CFTC are much more friendly
As the SEC's decision-making level is facing replacement, is there any latest progress on our proposal?
Gary is leaving the SEC on the 20th. does anyone know if there has been any movement for this?
I don't think providing liquidity should be a requirement. I think keeping it simple is best. I've seen some other newer dex that just have people stake their tokens and they get protocol fees. Anything like that to stay competitive.
Any update on this, would love to know
首先有华人社区群吗？其次，针对于UNI质押分红的提案，现在进行到哪一步了？为什么迟迟没有上线了？
Think it's really good timing actually with Unichain live
New SEC and CFTC are much more friendly
As the SEC's decision-making level is facing replacement, is there any latest progress on our proposal?
Gary is leaving the SEC on the 20th. does anyone know if there has been any movement for this?
I don't think providing liquidity should be a requirement. I think keeping it simple is best. I've seen some other newer dex that just have people stake their tokens and they get protocol fees. Anything like that to stay competitive.
Any update on this, would love to know
首先有华人社区群吗？其次，针对于UNI质押分红的提案，现在进行到哪一步了？为什么迟迟没有上线了？
Think it's really good timing actually with Unichain live
I see that the latest updates on this proposal are available on the Uniswap Foundation's Twitter account. Thank you for keeping us informed.
Could someone please let me know if the proposal has been approved and if it has been implemented? I would greatly appreciate any updates on its status.
I'm looking at Section 11 of the A16Z article. https://a16zcrypto.com/posts/article/application-tokens-economic-model-cash-flows/#section--11
It sounds like A16Z is suggesting to only charge fees on interactions originated through front end UIs. Which, to me, would mean that anyone interacting with the smart contracts directly would not be paying any fees.
Am I interpreting that correctly?
Did anyone find out what happened?
awesome idea. fully support it. we need more governance experiments to increase gov participation.
I think the protocol fees should be collected at the protocol level rather than the front end.
What if instead we add the requirement that in order to collect fees from the protocol you need to also provide liquidity? This would also ensure that ensure that people collecting revenue are also providing back to the protocol. Maybe it could work like a "boosted" pool.
Ok so Ross Shuel clarifies this in the replies to his thread on this article.
https://x.com/0xShuel/status/1821722917538820601
All the fees collected would be at the protocol level - meaning even sophisticated users interacting with Uniswap through their own front end would still be paying fees, as it should be.
Ok so Ross Shuel clarifies this in the replies to his thread on this article.
https://x.com/0xShuel/status/1821722917538820601
All the fees collected would be at the protocol level - meaning even sophisticated users interacting with Uniswap through their own front end would still be paying fees, as it should be.
So my understanding is that all front ends are subject to the same protocol-level fee. All those fees are then effectively pooled together first and then distributed to the various staking pools on a stake-weighted basis.
These various staking pools all correspond directly to a single front end UI. Some front ends will not be available to certain jurisdictions. If, for regulatory reasons, a UNI staker cannot stake to 100% of these pools, they will not earn 100% of the protocol fees they are theoretically entitled to.
While this design proposed by a16z is just an inferior bandaid solution to token value accrual, made in response to a severe lack of regulatory guidance and a history of regulation-by-enforcement in the US, it is a good idea to try, in my opinion. Until regulations change, some value accrual is better than none. As usual, US retail participants will surely be disadvantaged. Hopefully some 3rd party solutions can emerge that allow everyone to have 100% staking pool exposure.
Our Chinese community also wants to know
Can you provide any more information on this?
and will update you all once we feel more certain about future timeframes.
"and will update you all once we feel more certain about future timeframes." it's written
What was the issue that popped up?
Food for thought. Thank you for the enlightenment 🤙
I see that the latest updates on this proposal are available on the Uniswap Foundation's Twitter account. Thank you for keeping us informed.
Could someone please let me know if the proposal has been approved and if it has been implemented? I would greatly appreciate any updates on its status.
I'm looking at Section 11 of the A16Z article. https://a16zcrypto.com/posts/article/application-tokens-economic-model-cash-flows/#section--11
It sounds like A16Z is suggesting to only charge fees on interactions originated through front end UIs. Which, to me, would mean that anyone interacting with the smart contracts directly would not be paying any fees.
Am I interpreting that correctly?
Did anyone find out what happened?
awesome idea. fully support it. we need more governance experiments to increase gov participation.
I think the protocol fees should be collected at the protocol level rather than the front end.
What if instead we add the requirement that in order to collect fees from the protocol you need to also provide liquidity? This would also ensure that ensure that people collecting revenue are also providing back to the protocol. Maybe it could work like a "boosted" pool.
Ok so Ross Shuel clarifies this in the replies to his thread on this article.
https://x.com/0xShuel/status/1821722917538820601
All the fees collected would be at the protocol level - meaning even sophisticated users interacting with Uniswap through their own front end would still be paying fees, as it should be.
Ok so Ross Shuel clarifies this in the replies to his thread on this article.
https://x.com/0xShuel/status/1821722917538820601
All the fees collected would be at the protocol level - meaning even sophisticated users interacting with Uniswap through their own front end would still be paying fees, as it should be.
So my understanding is that all front ends are subject to the same protocol-level fee. All those fees are then effectively pooled together first and then distributed to the various staking pools on a stake-weighted basis.
These various staking pools all correspond directly to a single front end UI. Some front ends will not be available to certain jurisdictions. If, for regulatory reasons, a UNI staker cannot stake to 100% of these pools, they will not earn 100% of the protocol fees they are theoretically entitled to.
While this design proposed by a16z is just an inferior bandaid solution to token value accrual, made in response to a severe lack of regulatory guidance and a history of regulation-by-enforcement in the US, it is a good idea to try, in my opinion. Until regulations change, some value accrual is better than none. As usual, US retail participants will surely be disadvantaged. Hopefully some 3rd party solutions can emerge that allow everyone to have 100% staking pool exposure.
Our Chinese community also wants to know
Can you provide any more information on this?
and will update you all once we feel more certain about future timeframes.
"and will update you all once we feel more certain about future timeframes." it's written
What was the issue that popped up?
Food for thought. Thank you for the enlightenment 🤙
Yes, we agree with you! The Foundation's vagueness will only make the community suspicious!
who is this stakeholder? let us know.
Where I could see the voting results?
Yes, we agree with you! The Foundation's vagueness will only make the community suspicious!
who is this stakeholder? let us know.
Where I could see the voting results?
@eek637 Why are there no more updates on the progress of this proposal?
Democracy never works with forced participation. So the whole Idea of this proposal is a bit flawed.
Also, the actual further action is dependent from the DAO decision and the temperature check was negative.
Uniswap would lose it’s competitive edge with raised fees and loose TVL. The most important is to attract and retain liquidity. Without liquidity providers Uniswap is nothing.
Democracy never works with forced participation. So the whole Idea of this proposal is a bit flawed.
Also, the actual further action is dependent from the DAO decision and the temperature check was negative.
Uniswap would lose it’s competitive edge with raised fees and loose TVL. The most important is to attract and retain liquidity. Without liquidity providers Uniswap is nothing.
A different approach for monetisation needs to be found.
Monetisation is hard. And in the end it’ll highly likely be again a different sort of advertising business, just like web2.
Idk what you expect after what happened. You willing to read "YES WE DO THIS" or "NO WE DON'T DO THIS" in the middle of what's happening? It's obvious you can't expect and answer in a public forum.
looks like @eek637 ghosted the community
Avoiding is not the best option for solving problems. @eek637
@eek637 Thanks for the updates! Is the on-chain vote expected to be in May?
What is the plan after Uniswap Labs received a Wells notice from the SEC ?
@eek637 Why are there no more updates on the progress of this proposal?
Democracy never works with forced participation. So the whole Idea of this proposal is a bit flawed.
Also, the actual further action is dependent from the DAO decision and the temperature check was negative.
Uniswap would lose it’s competitive edge with raised fees and loose TVL. The most important is to attract and retain liquidity. Without liquidity providers Uniswap is nothing.
Democracy never works with forced participation. So the whole Idea of this proposal is a bit flawed.
Also, the actual further action is dependent from the DAO decision and the temperature check was negative.
Uniswap would lose it’s competitive edge with raised fees and loose TVL. The most important is to attract and retain liquidity. Without liquidity providers Uniswap is nothing.
A different approach for monetisation needs to be found.
Monetisation is hard. And in the end it’ll highly likely be again a different sort of advertising business, just like web2.
Idk what you expect after what happened. You willing to read "YES WE DO THIS" or "NO WE DON'T DO THIS" in the middle of what's happening? It's obvious you can't expect and answer in a public forum.
looks like @eek637 ghosted the community
Avoiding is not the best option for solving problems. @eek637
@eek637 Thanks for the updates! Is the on-chain vote expected to be in May?
What is the plan after Uniswap Labs received a Wells notice from the SEC ?
Can you update the current situation, this is the community's biggest concern
good job ! good news !
With Patience, comes something of lasting power.
Can you update the current situation, this is the community's biggest concern
good job ! good news !
With Patience, comes something of lasting power.
Butter wants to join this dialogue to contribute to the question of misalignment between LPs and UNI tokenholders, as mentioned notably by @kassandra.eth and @Edvin
Gauntlet's models show that the impact on LP returns is muted, in a given pool, after a certain amount of liquidity drain occurs. However, it remains to be shown whether LPs can enter new smart contracts, enabling them to follow different, unforeseen strategies.
Butter wants to join this dialogue to contribute to the question of misalignment between LPs and UNI tokenholders, as mentioned notably by @kassandra.eth and @Edvin
Gauntlet's models show that the impact on LP returns is muted, in a given pool, after a certain amount of liquidity drain occurs. However, it remains to be shown whether LPs can enter new smart contracts, enabling them to follow different, unforeseen strategies.
We have recently produced a theoretical model called Stackelberg Attack on Protocol Fee Governance (Ethresearch post) revealing a class of smart contracts that pose a threat to the stability of any Uniswap v3 pool with a protocol fee.
We believe this line of research is essential to the strengthening integrity of Uniswap, and by extension, to the whole DeFi space as further protocols are considering the implementation of a protocol fee. As such, we recommend funding research in that direction.
So the voting will be delayed about 1 week after the end of the 2nd contest? :thinking:
As a strong supporter of Uniswap (UNI) and its future success, we support the idea of better alignment of interest between different stakeholders of Uniswap. However, we in particular agree with @kassandra.eth and others, that the liquidity provided by LPs is essential for the success of Uniswap, and that forthcoming decisions need to properly consider the interests of the LPs in order to secure liquidity of Uniswap.
Most LPs have experienced in practice, what can be shown by simulation, that a standalone strategy of systematically providing liquidity on UNI V3 is a losing business proposition, like swimming against the tide. In order to get it to work one must have superb timing skills or unconventional approaches like inside information or market manipulation etc.
As a strong supporter of Uniswap (UNI) and its future success, we support the idea of better alignment of interest between different stakeholders of Uniswap. However, we in particular agree with @kassandra.eth and others, that the liquidity provided by LPs is essential for the success of Uniswap, and that forthcoming decisions need to properly consider the interests of the LPs in order to secure liquidity of Uniswap.
Most LPs have experienced in practice, what can be shown by simulation, that a standalone strategy of systematically providing liquidity on UNI V3 is a losing business proposition, like swimming against the tide. In order to get it to work one must have superb timing skills or unconventional approaches like inside information or market manipulation etc.
TVL on UNI V3 in ETH terms:
https://defillama.com/protocol/uniswap-v3?denomination=ETH
TL;DR: The negative development of TVL in ETH terms can be assumed to be a result of the poor financial prospects of providing liquidity on UNI V3. Further slashing the topline of LPs, which an introduced protocol fee does, could accelerate the reduction in liquidity. In the worst-case scenario, Uniswap could reach a negative "tipping point" where a majority of liquidity evaporates. Despite a positive report by Gauntlet & @eek637, it's essential to consider the incentives behind the report itself, which, in my opinion, may not prioritize the interests of the LP providers.
In summary, we support the idea that LP incentives should be evaluated. However, slashing the top line of LPs will accelerate the trend of diminishing, relevant (ETH measured) TVL.
How will fee rewards from different chains be handled? Will stakers/delegators receive the rewards from all the chains or would it all be in 1 chain (presumbly Ethereum chain)?
I am very bullish on the future of UNI and UNISWAP, but a pending vote is not a good idea and will take the heat out of us, and I hope to restart the vote soon.
This seems to be a positive step forward. However, in my opinion, it doesn't target governance activation much as soon as it is enough to restake tokens and remain passive to receive further rewards. As for me, rewards should be distributed for real & measurable contributions, such as participation in on-chain voting, proposals creation and so on. Indeed, DAOs with well-aligned incentives will potentially dilute DAOs without any clear value. However, we should reward only active collaborators for activating governance and enhancing thoughtful contributions. Same if we aim to dilute passive delegates and enhance active contributors. Holders who are delegating their tokens will need to monitor their delegates to make sure they are not losing potential rewards
will the snapshot start today?
Butter wants to join this dialogue to contribute to the question of misalignment between LPs and UNI tokenholders, as mentioned notably by @kassandra.eth and @Edvin
Gauntlet's models show that the impact on LP returns is muted, in a given pool, after a certain amount of liquidity drain occurs. However, it remains to be shown whether LPs can enter new smart contracts, enabling them to follow different, unforeseen strategies.
Butter wants to join this dialogue to contribute to the question of misalignment between LPs and UNI tokenholders, as mentioned notably by @kassandra.eth and @Edvin
Gauntlet's models show that the impact on LP returns is muted, in a given pool, after a certain amount of liquidity drain occurs. However, it remains to be shown whether LPs can enter new smart contracts, enabling them to follow different, unforeseen strategies.
We have recently produced a theoretical model called Stackelberg Attack on Protocol Fee Governance (Ethresearch post) revealing a class of smart contracts that pose a threat to the stability of any Uniswap v3 pool with a protocol fee.
We believe this line of research is essential to the strengthening integrity of Uniswap, and by extension, to the whole DeFi space as further protocols are considering the implementation of a protocol fee. As such, we recommend funding research in that direction.
So the voting will be delayed about 1 week after the end of the 2nd contest? :thinking:
As a strong supporter of Uniswap (UNI) and its future success, we support the idea of better alignment of interest between different stakeholders of Uniswap. However, we in particular agree with @kassandra.eth and others, that the liquidity provided by LPs is essential for the success of Uniswap, and that forthcoming decisions need to properly consider the interests of the LPs in order to secure liquidity of Uniswap.
Most LPs have experienced in practice, what can be shown by simulation, that a standalone strategy of systematically providing liquidity on UNI V3 is a losing business proposition, like swimming against the tide. In order to get it to work one must have superb timing skills or unconventional approaches like inside information or market manipulation etc.
As a strong supporter of Uniswap (UNI) and its future success, we support the idea of better alignment of interest between different stakeholders of Uniswap. However, we in particular agree with @kassandra.eth and others, that the liquidity provided by LPs is essential for the success of Uniswap, and that forthcoming decisions need to properly consider the interests of the LPs in order to secure liquidity of Uniswap.
Most LPs have experienced in practice, what can be shown by simulation, that a standalone strategy of systematically providing liquidity on UNI V3 is a losing business proposition, like swimming against the tide. In order to get it to work one must have superb timing skills or unconventional approaches like inside information or market manipulation etc.
TVL on UNI V3 in ETH terms:
https://defillama.com/protocol/uniswap-v3?denomination=ETH
TL;DR: The negative development of TVL in ETH terms can be assumed to be a result of the poor financial prospects of providing liquidity on UNI V3. Further slashing the topline of LPs, which an introduced protocol fee does, could accelerate the reduction in liquidity. In the worst-case scenario, Uniswap could reach a negative "tipping point" where a majority of liquidity evaporates. Despite a positive report by Gauntlet & @eek637, it's essential to consider the incentives behind the report itself, which, in my opinion, may not prioritize the interests of the LP providers.
In summary, we support the idea that LP incentives should be evaluated. However, slashing the top line of LPs will accelerate the trend of diminishing, relevant (ETH measured) TVL.
How will fee rewards from different chains be handled? Will stakers/delegators receive the rewards from all the chains or would it all be in 1 chain (presumbly Ethereum chain)?
I am very bullish on the future of UNI and UNISWAP, but a pending vote is not a good idea and will take the heat out of us, and I hope to restart the vote soon.
This seems to be a positive step forward. However, in my opinion, it doesn't target governance activation much as soon as it is enough to restake tokens and remain passive to receive further rewards. As for me, rewards should be distributed for real & measurable contributions, such as participation in on-chain voting, proposals creation and so on. Indeed, DAOs with well-aligned incentives will potentially dilute DAOs without any clear value. However, we should reward only active collaborators for activating governance and enhancing thoughtful contributions. Same if we aim to dilute passive delegates and enhance active contributors. Holders who are delegating their tokens will need to monitor their delegates to make sure they are not losing potential rewards
will the snapshot start today?
Something that isn't clear here is how L2's factor in. Mainnet has become too expensive for most people to interact with and L2's are what most people will/are using to interact with Ethereum.
My questions and concerns are: Will staking and delegation be available to users on L2's, along with collection of rewards?
has the snapshot for the voting started?
Great proposal!
Could we expect the protocol fee to be 100% distributed to UniStaker.sol?
Something that isn't clear here is how L2's factor in. Mainnet has become too expensive for most people to interact with and L2's are what most people will/are using to interact with Ethereum.
My questions and concerns are: Will staking and delegation be available to users on L2's, along with collection of rewards?
has the snapshot for the voting started?
Great proposal!
Could we expect the protocol fee to be 100% distributed to UniStaker.sol?
Also, may I ask if the stakers will be rewarded even if they don't vote?
As an active LP on Uniswap on mainnet, I disagree with any proposal that will cut LP share of the fees and will vote against if the revenue share takes from LPs to give to tokenholders.
LPs are the ones risking the capital supplying liquidity and should get the proper reward for it
Sorry, I was wrong. I clicked on vote link in this article (Uniswap Revitalization and Growth Proposal) which is something different.
Also, may I ask if the stakers will be rewarded even if they don't vote?
As an active LP on Uniswap on mainnet, I disagree with any proposal that will cut LP share of the fees and will vote against if the revenue share takes from LPs to give to tokenholders.
LPs are the ones risking the capital supplying liquidity and should get the proper reward for it
Sorry, I was wrong. I clicked on vote link in this article (Uniswap Revitalization and Growth Proposal) which is something different.
The MAKER DAO buyback model seems way more effective and efficient. Number goes up with very little earnings compared to the mcap of MAKER.
1 to 2%(me being optimistic) fee earnings is way too little to make anybody stake anything.
I mean even ETH staking gives way more return.
But the public is so hungry for action, that this still could get voted through.
Will there be any slashing for stakers?
Does it mean after this proposal has been passed, we will need to wait for another (estimated) ~21 days for Gaunlet's proposed plan to pass as well before the fee switch turns on?
Many thanks for this. Can you provide some background on the reasons to suggest WETH vs UNI as payout token?
tl;dr manage fees globally and open up updating them to the latest value for any pool
in uniswap v2 a global protocol fee is controlled from the factory, which is a sound design.
tl;dr manage fees globally and open up updating them to the latest value for any pool
in uniswap v2 a global protocol fee is controlled from the factory, which is a sound design.
in the current design of v3 factory owner setFeeProtocol needs to go through governance for each pool. this results in a very cumbersome situation in case uni holders decide to turn on a global fee switch, since a governance proposal can only contain 10 actions.
unlike v2 pools, where protocol fee is fixed at 1/6th, v3 pools allow to set the fee ranging from 1/10th to 1/4th, or even different fees for the pool constituents.
a likely outcome is the community will come up with some global fee value applicable to all pools instead of micromanaging each of them. in this case it would be reasonable to set a global protocol fee in the factory owner and then open up V3FactoryOwner.setFeeProtocol to enable or update the fees for any pool. interested parties would then run it through all the pools that yield any significant fees.
one possible edge case is reducing the fees after they have been set high. in this case a rational actor is not interested in updating the values for the pools, and a manual update might be needed from an entity like uniswap foundation.
This is an extremely exciting development for the Uniswap community and im gonna be supportive of this
Than why do you vote against?
The overall proposal is really interesting. I am excited to see the switch get turned on, and thank you to those who contributed to that! From the delegation aspect of this proposal, I am curious about some aspects.
Specifically, we propose to upgrade the protocol so that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.
The overall proposal is really interesting. I am excited to see the switch get turned on, and thank you to those who contributed to that! From the delegation aspect of this proposal, I am curious about some aspects.
Specifically, we propose to upgrade the protocol so that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.
I like the mechanism of intertwining staking alongside delegation to receive rewards. Was there an exploration of a small portion of the fees being used to incentivize active delegates too?
After the delegation contracts are reset, a UNI holder can stake and delegate to anyone and receive staking rewards. It doesn't matter if the delegate is active or not right? If so,there could be more voting power delegated but not actually be used - It's unlikely for this to happen, but how else do you plan to encourage delegators to delegate to active delegates?
Very exciting day for the protocol. I think this proposal makes a lot of sense and the timing is right for a variety of reasons. It's a great first step towards a revenue model, and there will definitely be some learnings to apply to v4 as the community migrates over.
I still am skeptical that the fee switch in its current form is viable as a sustainable, growth-oriented token model. Delegates have a limited canvas to influence the success of a governance-lite protocol like Uniswap, and it's hard to make the case that the value created by elevating the best delegates exceeds the value extracted from LPs as a result of the fee switch, especially when LPs are still struggling to make risk-adjusted returns and liquidity is increasingly being routed off-chain (UniswapX, Cowswap, etc.).
Very exciting day for the protocol. I think this proposal makes a lot of sense and the timing is right for a variety of reasons. It's a great first step towards a revenue model, and there will definitely be some learnings to apply to v4 as the community migrates over.
I still am skeptical that the fee switch in its current form is viable as a sustainable, growth-oriented token model. Delegates have a limited canvas to influence the success of a governance-lite protocol like Uniswap, and it's hard to make the case that the value created by elevating the best delegates exceeds the value extracted from LPs as a result of the fee switch, especially when LPs are still struggling to make risk-adjusted returns and liquidity is increasingly being routed off-chain (UniswapX, Cowswap, etc.).
I don't have a good answer for how to design a productive token model for Uniswap, but I think it needs to serve as a direct financial coordination mechanism and it needs to operate on the "meta-protocol" layer. That could mean using the token to direct liquidity across UV4 instances on different chains. That could mean backstopping a decentralized version of an intents protocol like UniswapX. That could mean building a discovery + reputation mechanism for long tail assets/pairs.
Delegates are very important to Uniswap, but I think there is a danger in assuming that protocol delegates influence the success of a protocol like shareholders of a corporation do. Uniswap is immutable code and blockchains are much different than c-suites.
This is definitely an interesting proposal and I think it is already visible here that there's a lot of support and excitement. My view is that this grassroots support will only increase and it's understandable why, UNI holders believe that the UNI token should concretely capture some value from the tremendous success of the Uniswap Protocol that it stewards. From this vantage point, I wholeheartedly agree and think the proposal is a great thing, I personally support the first step in this direction. But...
TLDR: In my opinion, for this to work well, there will need to be incentives introduced for Uniswap LPs in tandem, likely in the form of revitalized liquidity mining programs with the UNI token (open to other ideas as well).
This is definitely an interesting proposal and I think it is already visible here that there's a lot of support and excitement. My view is that this grassroots support will only increase and it's understandable why, UNI holders believe that the UNI token should concretely capture some value from the tremendous success of the Uniswap Protocol that it stewards. From this vantage point, I wholeheartedly agree and think the proposal is a great thing, I personally support the first step in this direction. But...
TLDR: In my opinion, for this to work well, there will need to be incentives introduced for Uniswap LPs in tandem, likely in the form of revitalized liquidity mining programs with the UNI token (open to other ideas as well).
Below is an in-depth explanation of why:
As a champion of Uniswap LPs (founder of Arrakis :wave:) this proposal needs to be balanced with the reality that the excitement apparent here is mostly around the UNI token having some value capture mechanism, and that this value is directly captured from Uniswap LPs pockets. Uniswap LPs support the protocol immensely and take a lot of risk / leak a lot of value to other parties, due to the nature of how Uniswap and all other current DEXs are designed (there is a huge amount of research and discussion going into next generation DEX designs that mitigate some of these problems, but today all the popular DEXs in production remain plagued with value leakage from LPs to arbitrageurs). Further, the Uniswap Labs user interface has already signaled it is increasingly open to reducing the amount that it's precious non-toxic order flow is routed exclusively to the Uniswap Protocol. Basically, what needs to be addressed is how Uniswap LPs are going to also benefit from such an action, because if not, there remains legitimate risk that LPs will take their inventory elsewhere. If LPs don't even lose access to Uniswap Labs order flow, then they really have nothing to lose and everything to gain by LPing on other venues. They avoid this new protocol "tax" and often gain further auxiliary token incentives used by competing DEXs to incentivize Uniswap LPs to move their inventory to new venues (famously the UNI token was actually released at least partially in response to just such a scheme by a Uni V2 copycat).
UNI holders and delegates will have financial incentive to maximize their earnings, by voting to maximize protocol fees. We've seen with other DAOs that once you introduce these direct financial incentives into what is voted on, it's hard to reason with voters on any other metric (financial incentives are a hell of a drug). It seems clear to me that there's basically no way for this to be a sustainable dynamic without also introducing new concrete incentives for LPs. After all, LPs are the bedrock of the protocol's utility (you can't swap on the protocol without having liquidity deposited by LPs to swap against).
Lastly there are some important technical questions in a world where Uni V4 is around the corner. AFAIU Uni V4's flexibility makes it almost impossible to even enforce these protocol fees (you can write hooks in such a way that you try to avoid actual "swap fees" while still properly pricing liquidity and compensating LPs, basically hooks can try and get around the protocol fee which is something that definitely needs to be carefully considered by protocol engineers). In general we don't want to create friction between LPs and UNI voters, and I see potential cat-and-mouse games once LPs can also customize DEX logic to their liking.
I really want to see the Uniswap Protocol succeed. From the beginning I have been captivated by the potential and by the groundbreaking research and engineering that is the Uniswap Protocol, a shining jewel of the ethereum application layer. I think this is a step in the right direction because the proper alignment between Uni Protocol, Uni LPs, UNI holders, and Uni Labs really needs to be investigated more. Onchain trading is currently going through a metamorphosis and Uniswap Protocol could remain at the center of it, but this isn't preordained, retaining network effects around Uniswap liquidity depth will be incredibly important.
The level of groundwork to get this discussion started is amazing. Thank you for that!
Thinking ahead, the price of staking and delegating tokens on L1 and the lack of composability of UNI tokens staked in the rest of DeFi will likely be the largest issues here. While these technical considerations don't seem to be just yet on the table, I believe that addressing them now would probably make building the necessary infra to facilitate this more straightforward.
The level of groundwork to get this discussion started is amazing. Thank you for that!
Thinking ahead, the price of staking and delegating tokens on L1 and the lack of composability of UNI tokens staked in the rest of DeFi will likely be the largest issues here. While these technical considerations don't seem to be just yet on the table, I believe that addressing them now would probably make building the necessary infra to facilitate this more straightforward.
I'm also interested in the legal strategy of the DAO to eventually distribute these tokens to stakers. The recent fee switch discussions were stopped because of these legal considerations, so what's the plan this time?
Exciting proposal! Incentivizing engaged delegates could indeed strengthen Uniswap's governance. Looking forward to the Snapshot vote
The MAKER DAO buyback model seems way more effective and efficient. Number goes up with very little earnings compared to the mcap of MAKER.
1 to 2%(me being optimistic) fee earnings is way too little to make anybody stake anything.
I mean even ETH staking gives way more return.
But the public is so hungry for action, that this still could get voted through.
Will there be any slashing for stakers?
Does it mean after this proposal has been passed, we will need to wait for another (estimated) ~21 days for Gaunlet's proposed plan to pass as well before the fee switch turns on?
Many thanks for this. Can you provide some background on the reasons to suggest WETH vs UNI as payout token?
tl;dr manage fees globally and open up updating them to the latest value for any pool
in uniswap v2 a global protocol fee is controlled from the factory, which is a sound design.
tl;dr manage fees globally and open up updating them to the latest value for any pool
in uniswap v2 a global protocol fee is controlled from the factory, which is a sound design.
in the current design of v3 factory owner setFeeProtocol needs to go through governance for each pool. this results in a very cumbersome situation in case uni holders decide to turn on a global fee switch, since a governance proposal can only contain 10 actions.
unlike v2 pools, where protocol fee is fixed at 1/6th, v3 pools allow to set the fee ranging from 1/10th to 1/4th, or even different fees for the pool constituents.
a likely outcome is the community will come up with some global fee value applicable to all pools instead of micromanaging each of them. in this case it would be reasonable to set a global protocol fee in the factory owner and then open up V3FactoryOwner.setFeeProtocol to enable or update the fees for any pool. interested parties would then run it through all the pools that yield any significant fees.
one possible edge case is reducing the fees after they have been set high. in this case a rational actor is not interested in updating the values for the pools, and a manual update might be needed from an entity like uniswap foundation.
This is an extremely exciting development for the Uniswap community and im gonna be supportive of this
Than why do you vote against?
The overall proposal is really interesting. I am excited to see the switch get turned on, and thank you to those who contributed to that! From the delegation aspect of this proposal, I am curious about some aspects.
Specifically, we propose to upgrade the protocol so that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.
The overall proposal is really interesting. I am excited to see the switch get turned on, and thank you to those who contributed to that! From the delegation aspect of this proposal, I am curious about some aspects.
Specifically, we propose to upgrade the protocol so that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.
I like the mechanism of intertwining staking alongside delegation to receive rewards. Was there an exploration of a small portion of the fees being used to incentivize active delegates too?
After the delegation contracts are reset, a UNI holder can stake and delegate to anyone and receive staking rewards. It doesn't matter if the delegate is active or not right? If so,there could be more voting power delegated but not actually be used - It's unlikely for this to happen, but how else do you plan to encourage delegators to delegate to active delegates?
Very exciting day for the protocol. I think this proposal makes a lot of sense and the timing is right for a variety of reasons. It's a great first step towards a revenue model, and there will definitely be some learnings to apply to v4 as the community migrates over.
I still am skeptical that the fee switch in its current form is viable as a sustainable, growth-oriented token model. Delegates have a limited canvas to influence the success of a governance-lite protocol like Uniswap, and it's hard to make the case that the value created by elevating the best delegates exceeds the value extracted from LPs as a result of the fee switch, especially when LPs are still struggling to make risk-adjusted returns and liquidity is increasingly being routed off-chain (UniswapX, Cowswap, etc.).
Very exciting day for the protocol. I think this proposal makes a lot of sense and the timing is right for a variety of reasons. It's a great first step towards a revenue model, and there will definitely be some learnings to apply to v4 as the community migrates over.
I still am skeptical that the fee switch in its current form is viable as a sustainable, growth-oriented token model. Delegates have a limited canvas to influence the success of a governance-lite protocol like Uniswap, and it's hard to make the case that the value created by elevating the best delegates exceeds the value extracted from LPs as a result of the fee switch, especially when LPs are still struggling to make risk-adjusted returns and liquidity is increasingly being routed off-chain (UniswapX, Cowswap, etc.).
I don't have a good answer for how to design a productive token model for Uniswap, but I think it needs to serve as a direct financial coordination mechanism and it needs to operate on the "meta-protocol" layer. That could mean using the token to direct liquidity across UV4 instances on different chains. That could mean backstopping a decentralized version of an intents protocol like UniswapX. That could mean building a discovery + reputation mechanism for long tail assets/pairs.
Delegates are very important to Uniswap, but I think there is a danger in assuming that protocol delegates influence the success of a protocol like shareholders of a corporation do. Uniswap is immutable code and blockchains are much different than c-suites.
This is definitely an interesting proposal and I think it is already visible here that there's a lot of support and excitement. My view is that this grassroots support will only increase and it's understandable why, UNI holders believe that the UNI token should concretely capture some value from the tremendous success of the Uniswap Protocol that it stewards. From this vantage point, I wholeheartedly agree and think the proposal is a great thing, I personally support the first step in this direction. But...
TLDR: In my opinion, for this to work well, there will need to be incentives introduced for Uniswap LPs in tandem, likely in the form of revitalized liquidity mining programs with the UNI token (open to other ideas as well).
This is definitely an interesting proposal and I think it is already visible here that there's a lot of support and excitement. My view is that this grassroots support will only increase and it's understandable why, UNI holders believe that the UNI token should concretely capture some value from the tremendous success of the Uniswap Protocol that it stewards. From this vantage point, I wholeheartedly agree and think the proposal is a great thing, I personally support the first step in this direction. But...
TLDR: In my opinion, for this to work well, there will need to be incentives introduced for Uniswap LPs in tandem, likely in the form of revitalized liquidity mining programs with the UNI token (open to other ideas as well).
Below is an in-depth explanation of why:
As a champion of Uniswap LPs (founder of Arrakis :wave:) this proposal needs to be balanced with the reality that the excitement apparent here is mostly around the UNI token having some value capture mechanism, and that this value is directly captured from Uniswap LPs pockets. Uniswap LPs support the protocol immensely and take a lot of risk / leak a lot of value to other parties, due to the nature of how Uniswap and all other current DEXs are designed (there is a huge amount of research and discussion going into next generation DEX designs that mitigate some of these problems, but today all the popular DEXs in production remain plagued with value leakage from LPs to arbitrageurs). Further, the Uniswap Labs user interface has already signaled it is increasingly open to reducing the amount that it's precious non-toxic order flow is routed exclusively to the Uniswap Protocol. Basically, what needs to be addressed is how Uniswap LPs are going to also benefit from such an action, because if not, there remains legitimate risk that LPs will take their inventory elsewhere. If LPs don't even lose access to Uniswap Labs order flow, then they really have nothing to lose and everything to gain by LPing on other venues. They avoid this new protocol "tax" and often gain further auxiliary token incentives used by competing DEXs to incentivize Uniswap LPs to move their inventory to new venues (famously the UNI token was actually released at least partially in response to just such a scheme by a Uni V2 copycat).
UNI holders and delegates will have financial incentive to maximize their earnings, by voting to maximize protocol fees. We've seen with other DAOs that once you introduce these direct financial incentives into what is voted on, it's hard to reason with voters on any other metric (financial incentives are a hell of a drug). It seems clear to me that there's basically no way for this to be a sustainable dynamic without also introducing new concrete incentives for LPs. After all, LPs are the bedrock of the protocol's utility (you can't swap on the protocol without having liquidity deposited by LPs to swap against).
Lastly there are some important technical questions in a world where Uni V4 is around the corner. AFAIU Uni V4's flexibility makes it almost impossible to even enforce these protocol fees (you can write hooks in such a way that you try to avoid actual "swap fees" while still properly pricing liquidity and compensating LPs, basically hooks can try and get around the protocol fee which is something that definitely needs to be carefully considered by protocol engineers). In general we don't want to create friction between LPs and UNI voters, and I see potential cat-and-mouse games once LPs can also customize DEX logic to their liking.
I really want to see the Uniswap Protocol succeed. From the beginning I have been captivated by the potential and by the groundbreaking research and engineering that is the Uniswap Protocol, a shining jewel of the ethereum application layer. I think this is a step in the right direction because the proper alignment between Uni Protocol, Uni LPs, UNI holders, and Uni Labs really needs to be investigated more. Onchain trading is currently going through a metamorphosis and Uniswap Protocol could remain at the center of it, but this isn't preordained, retaining network effects around Uniswap liquidity depth will be incredibly important.
The level of groundwork to get this discussion started is amazing. Thank you for that!
Thinking ahead, the price of staking and delegating tokens on L1 and the lack of composability of UNI tokens staked in the rest of DeFi will likely be the largest issues here. While these technical considerations don't seem to be just yet on the table, I believe that addressing them now would probably make building the necessary infra to facilitate this more straightforward.
The level of groundwork to get this discussion started is amazing. Thank you for that!
Thinking ahead, the price of staking and delegating tokens on L1 and the lack of composability of UNI tokens staked in the rest of DeFi will likely be the largest issues here. While these technical considerations don't seem to be just yet on the table, I believe that addressing them now would probably make building the necessary infra to facilitate this more straightforward.
I'm also interested in the legal strategy of the DAO to eventually distribute these tokens to stakers. The recent fee switch discussions were stopped because of these legal considerations, so what's the plan this time?
Exciting proposal! Incentivizing engaged delegates could indeed strengthen Uniswap's governance. Looking forward to the Snapshot vote
Will the staking have any lockup period for unstaking?
Is there any regulatory concern about turning on the fee switch?
Really exciting stuff @eek637 and team! It's been a pleasure to watch this proposal materialize and be able to contribute to it through Avantgarde Finance.
This proposal is very similar/copies Pauly's Pond0x ecosystem. It has already been done on Uniswap for over 175 days. :frog: :fork_and_knife: Over $500 million in swaps and $22 million given out in rewards to the community members. Cope harder.
This is a copy-pasta from pondcoin (.) com or $pndc Please give credit where it is due.
just to be clear, there is no such thing as staking uni now correct?
this staking uni would occur in the new contract that is being proposed?
Thanks for your work on this. Cheers
Will the staking have any lockup period for unstaking?
Is there any regulatory concern about turning on the fee switch?
Really exciting stuff @eek637 and team! It's been a pleasure to watch this proposal materialize and be able to contribute to it through Avantgarde Finance.
This proposal is very similar/copies Pauly's Pond0x ecosystem. It has already been done on Uniswap for over 175 days. :frog: :fork_and_knife: Over $500 million in swaps and $22 million given out in rewards to the community members. Cope harder.
This is a copy-pasta from pondcoin (.) com or $pndc Please give credit where it is due.
just to be clear, there is no such thing as staking uni now correct?
this staking uni would occur in the new contract that is being proposed?
Thanks for your work on this. Cheers
:face_with_monocle:
https://x.com/UniswapFND/status/1761029569983971567?s=20
I never thought the protocol fees were a good idea given the generally low level of rewards to risk ratio for LPs. You are probably right to incentivize people to hold UNI but you should rather work on the mechanics of the protocol to extract further value from trades and forward it to UNI stakers. For example, Uniswap could create an additional stream of revenue by making the arbitrage trades herself (see the LVR idea from Roughgarden).
you can delegate to yourself, and personally vote/participate in Uniswap governance.
More a tech question, As I don't know uniswap too well:
Can the fee turned on in old pools? Or is it just for new created pools?
And:
Protocol fees are set on a pool by pool basis, and fees are accrued in both tokens that comprise the pool.
So how is this done? Governance has to decide on which pool fee ist taken? I guess I just read this wrong?
Hey Erin,
Really great proposal, very clear and straight forward.
in terms of the RewardsToken, will this be hard defined as WETH, meaning this would not be possible to be changed down the line?
Thanks!
:face_with_monocle:
https://x.com/UniswapFND/status/1761029569983971567?s=20
I never thought the protocol fees were a good idea given the generally low level of rewards to risk ratio for LPs. You are probably right to incentivize people to hold UNI but you should rather work on the mechanics of the protocol to extract further value from trades and forward it to UNI stakers. For example, Uniswap could create an additional stream of revenue by making the arbitrage trades herself (see the LVR idea from Roughgarden).
you can delegate to yourself, and personally vote/participate in Uniswap governance.
More a tech question, As I don't know uniswap too well:
Can the fee turned on in old pools? Or is it just for new created pools?
And:
Protocol fees are set on a pool by pool basis, and fees are accrued in both tokens that comprise the pool.
So how is this done? Governance has to decide on which pool fee ist taken? I guess I just read this wrong?
Hey Erin,
Really great proposal, very clear and straight forward.
in terms of the RewardsToken, will this be hard defined as WETH, meaning this would not be possible to be changed down the line?
Thanks!
Why don't you post this update on official twitter of uniswap ??????
I appreciate the level of thought and diligence that into the design of this upgrade. I think this new surface area for delegators to collect protocol fees is an important building block that will allow the Uniswap DAO to grow sustainably into the future. Excited to vote for this proposal!
I delegate my humble amount of UNI to myself so that I can participate in governance and vote. I believe it is important to delegate your UNI to yourself and participate, or to delegate to a responsible party who will vote on your behalf.
Pierce (of the sufficiently decentralised test) is heading a taskforce. Hopefully they'd resolve the CFTC-SEC turf fight but then, does immunity from criminal matters avoid ethics investigations ... ?
TDLr; a16z who is a large UNI holder has the attention of the SEC in its relation to Uniswap Labs.
Source:
https://www.axios.com/2024/08/12/sec-questions-vcs-uniswap
Additionally:
TDLr; a16z who is a large UNI holder has the attention of the SEC in its relation to Uniswap Labs.
Source:
https://www.axios.com/2024/08/12/sec-questions-vcs-uniswap
Additionally:
a16z is worried about turning on the fee switch that would make UNI look more like a security. So is proposing alternative experimentation that is more decentralised, and governance minimized.
Source:
https://a16zcrypto.com/posts/article/application-tokens-economic-model-cash-flows/
The combination of the above and the twitter post by Dan Robinson points towards a16z stoping this proposal. It has just taken months for the slow drip of information to come out. It is unfortunate that the Uniswap Foundation @eek637 @devinwalsh could not state this clearly to the community. Especially after having spent six figure + USD of UNI token for audits and development of a v3 fee switch soultion.
Widely admitted that the rules (at least for investment contracts) are a poor fit for network tokens (non-equity). See this YouTube on the Gary gambit. The primary roles are a) information asymmetry ... hard to form a "fair" market when insiders have prior / privilege knowledge to counter-parties b) if its is supposed to be "decentralized" then why have VCs when you can crowd-source the "discount" which is due to perceived risk discount ... we can have mechanisms to say auction off "marketing" or distribution rights rather than getting implied endorsement c) rules on controlling bad actors (rug-pulls, front-running, time-locks) .... rather than trying to shoe-horn fit/proper persons and onerous reporting requirements, can there be better mechanism designs ? (eg liquid bonding curves) to create price discovery? .. its well known that IPO underwriters underprice the value to get the first day trading "bump".
Democratisation of financing (and not just for the "sophisticated" bankers) does require rethinking how R&D moves from idea to operations and how to correctly price in the risk factors when doing an exit to community.
it's strange to not be updated
any news/update about fee switch vote ?
until they change their mind last day.... :sweat_smile:
There are two classes of UNI tokens:
Decentralized: These tokens were airdropped or bought on the secondary market, representing a decentralized distribution. They are considered a commodity.
Centralized: These tokens were acquired through fundraising rounds before the airdrop. For instance, A16z holds many tokens because they acquired them via payment in a fundraising round, making these tokens akin to a security.
If a VC is leveraging these two entities to avoid financing issues themselves and instead using funds from governance token holders, then I strongly advocate for the SEC/CFTC to investigate VC practices that prioritize self-interest over decentralized technology, thereby undermining its ethos.
It is imperative to avoid ambiguity in this matter. The Uniswap Foundation was established to serve the community, not insiders. The primary focus of the UF is to utilize the funds recieved to empower the community, ensuring transparency and fairness, rather than benefiting friends of UF members.
If this decision was influenced by a singular venture capitalist, it should be disclosed. The identity of this VC should be made public, not kept secret. The Foundation is not an extension of a large VC, and the DeFi Education Fund is not an extension of a legal department of a large VC.
It is imperative to avoid ambiguity in this matter. The Uniswap Foundation was established to serve the community, not insiders. The primary focus of the UF is to utilize the funds recieved to empower the community, ensuring transparency and fairness, rather than benefiting friends of UF members.
If this decision was influenced by a singular venture capitalist, it should be disclosed. The identity of this VC should be made public, not kept secret. The Foundation is not an extension of a large VC, and the DeFi Education Fund is not an extension of a legal department of a large VC.
If a VC is leveraging these two entities to avoid financing issues themselves and instead using funds from governance token holders, then I strongly advocate for the SEC/CFTC to investigate VC practices that prioritize self-interest over decentralized technology, thereby undermining its ethos.
Reference image:
very professional for the community... same day decision ....
any news ? no update since many days
If the Uniswap Foundation primarily listens to venture capitalists (VCs) who acquired tokens through fundraising, it creates a two-class system: insiders (VCs) and outsiders (airdrop holders and secondary market buyers).
today is the big day !
Why don't you post this update on official twitter of uniswap ??????
I appreciate the level of thought and diligence that into the design of this upgrade. I think this new surface area for delegators to collect protocol fees is an important building block that will allow the Uniswap DAO to grow sustainably into the future. Excited to vote for this proposal!
I delegate my humble amount of UNI to myself so that I can participate in governance and vote. I believe it is important to delegate your UNI to yourself and participate, or to delegate to a responsible party who will vote on your behalf.
Pierce (of the sufficiently decentralised test) is heading a taskforce. Hopefully they'd resolve the CFTC-SEC turf fight but then, does immunity from criminal matters avoid ethics investigations ... ?
TDLr; a16z who is a large UNI holder has the attention of the SEC in its relation to Uniswap Labs.
Source:
https://www.axios.com/2024/08/12/sec-questions-vcs-uniswap
Additionally:
TDLr; a16z who is a large UNI holder has the attention of the SEC in its relation to Uniswap Labs.
Source:
https://www.axios.com/2024/08/12/sec-questions-vcs-uniswap
Additionally:
a16z is worried about turning on the fee switch that would make UNI look more like a security. So is proposing alternative experimentation that is more decentralised, and governance minimized.
Source:
https://a16zcrypto.com/posts/article/application-tokens-economic-model-cash-flows/
The combination of the above and the twitter post by Dan Robinson points towards a16z stoping this proposal. It has just taken months for the slow drip of information to come out. It is unfortunate that the Uniswap Foundation @eek637 @devinwalsh could not state this clearly to the community. Especially after having spent six figure + USD of UNI token for audits and development of a v3 fee switch soultion.
Widely admitted that the rules (at least for investment contracts) are a poor fit for network tokens (non-equity). See this YouTube on the Gary gambit. The primary roles are a) information asymmetry ... hard to form a "fair" market when insiders have prior / privilege knowledge to counter-parties b) if its is supposed to be "decentralized" then why have VCs when you can crowd-source the "discount" which is due to perceived risk discount ... we can have mechanisms to say auction off "marketing" or distribution rights rather than getting implied endorsement c) rules on controlling bad actors (rug-pulls, front-running, time-locks) .... rather than trying to shoe-horn fit/proper persons and onerous reporting requirements, can there be better mechanism designs ? (eg liquid bonding curves) to create price discovery? .. its well known that IPO underwriters underprice the value to get the first day trading "bump".
Democratisation of financing (and not just for the "sophisticated" bankers) does require rethinking how R&D moves from idea to operations and how to correctly price in the risk factors when doing an exit to community.
it's strange to not be updated
any news/update about fee switch vote ?
until they change their mind last day.... :sweat_smile:
There are two classes of UNI tokens:
Decentralized: These tokens were airdropped or bought on the secondary market, representing a decentralized distribution. They are considered a commodity.
Centralized: These tokens were acquired through fundraising rounds before the airdrop. For instance, A16z holds many tokens because they acquired them via payment in a fundraising round, making these tokens akin to a security.
If a VC is leveraging these two entities to avoid financing issues themselves and instead using funds from governance token holders, then I strongly advocate for the SEC/CFTC to investigate VC practices that prioritize self-interest over decentralized technology, thereby undermining its ethos.
It is imperative to avoid ambiguity in this matter. The Uniswap Foundation was established to serve the community, not insiders. The primary focus of the UF is to utilize the funds recieved to empower the community, ensuring transparency and fairness, rather than benefiting friends of UF members.
If this decision was influenced by a singular venture capitalist, it should be disclosed. The identity of this VC should be made public, not kept secret. The Foundation is not an extension of a large VC, and the DeFi Education Fund is not an extension of a legal department of a large VC.
It is imperative to avoid ambiguity in this matter. The Uniswap Foundation was established to serve the community, not insiders. The primary focus of the UF is to utilize the funds recieved to empower the community, ensuring transparency and fairness, rather than benefiting friends of UF members.
If this decision was influenced by a singular venture capitalist, it should be disclosed. The identity of this VC should be made public, not kept secret. The Foundation is not an extension of a large VC, and the DeFi Education Fund is not an extension of a legal department of a large VC.
If a VC is leveraging these two entities to avoid financing issues themselves and instead using funds from governance token holders, then I strongly advocate for the SEC/CFTC to investigate VC practices that prioritize self-interest over decentralized technology, thereby undermining its ethos.
Reference image:
very professional for the community... same day decision ....
any news ? no update since many days
If the Uniswap Foundation primarily listens to venture capitalists (VCs) who acquired tokens through fundraising, it creates a two-class system: insiders (VCs) and outsiders (airdrop holders and secondary market buyers).
today is the big day !
There are two classes of UNI tokens:
Decentralized: These tokens were airdropped or bought on the secondary market, representing a decentralized distribution. They are considered a commodity.
Centralized: These tokens were acquired through fundraising rounds before the airdrop. For instance, A16z holds many tokens because they acquired them via payment in a fundraising round, making these tokens akin to a security.
If the Uniswap Foundation primarily listens to venture capitalists (VCs) who acquired tokens through fundraising, it creates a two-class system: insiders (VCs) and outsiders (airdrop holders and secondary market buyers).
A presumed reason why a VC who owns UNI from a fundraising round might oppose the fee switch proposal is that this proposal introduces a mechanism resembling dividends, further reinforcing the classification of their holdings as securities.
As a result, the real UNI commodity holders, i.e., the airdrop recipients and secondary market buyers, are being disadvantaged.
The Uniswap Foundation appears to be choosing sides.
If a VC is leveraging these two entities to avoid financing issues themselves and instead using funds from governance token holders, then I strongly advocate for the SEC/CFTC to investigate VC practices that prioritize self-interest over decentralized technology, thereby undermining its ethos.
Ummm ... is this contradictory .... Uniswap (foundation side not labs) holds themselves as stewards of a protocol. If you invite in one regulator to claim authority and uniaterally assert supervisory powers, then you invite in every regulator (on grounds they are acting to protect their citizen investors).
Now if you want clarity on the governance process, it is well documented ... as an airdrop "gift" (for lack of legal clarity), and the fact that UniSwap labs has double-pinkie promised not to use its ownership to influence voting, then a large enough investor clique can veto anything (think vote off island). So the choices are
Without evidence of factual basis, it is hard to figure out which of the 3 would apply ... but if you are asking for regulatory oversight then the obvious question is whose taxes are being sliced where/when to pay for such (independent) supervision.
If the Uniswap Foundation primarily listens to venture capitalists (VCs) who acquired tokens through fundraising, it creates a two-class system: insiders (VCs) and outsiders (airdrop holders and secondary market buyers).
How they got the tokens is of lesser importance than the fact they didn't follow the governance process and put up the reason/concern in public (what I assume is the recognised deliberative process) via this forum. So the complaint (correct me if wrong) is the perceived privilege of bypassing the transparency governance process. If so, it sounds like you want track 3, aka the equiv of a
a) please explain "memo" to the Foundation b) requirement of a legal justification or legitimate excuse (these are legel concepts to escape blame) c) ... and if the response is not satisfactory ... a way for the community via delegates to express sentiment/sanction
The crux is how much discretion should staff of the Foundation have in handling matters ... should they be akin to a trustee with fixed instruction set and invariant duties, or are more flexible arrangements with perhaps protector/guardian in bakcground to enforce beneficiary rights (sorry ... I use UK trust law to express the powers of the delegates).
This is the point where delegates should opine whether it is a principle or practice how strictly the process should be followed. There may be reasons (eg whistle-blower shield provisions) to prevent the source of the hold-up to directly submit a public objection so best to hear all sides of the story.
great to hear ! Imagine all required votes will be "yes", could you imagine an ETA for fees switch "live" ?
@eek637 what's the updated?
At least can you say something?
Is there any updates?
@eek637
where are u @eek637 ? Please update your community ! :slight_smile:
it's a secret :( @eek637
yes, it's incredible ! 0 trust
he ghosted our community
3 billions volume, and -1 communication skills from uniswap team
Is there any progress?
The community is waiting if the proposal will proceed.
Is the fee switch vote still going to happen?
same question. Is uni fees switch still on the road?
thanks a lot ! :slight_smile: waiting for new updates :D
This is a very hot topic for the community, it's a shame that there isn't a precise and detailed update. Novelty ?
Many of us small token holders are anxious after the SEC news. We all hope that the fee switch activation will proceed. I trust that someone from Uniswap will clearly address this in case things have changed in the past few days.
What will happen if this vote is negative? Will the one promoted by the Uniswap Foundation be considered?
There are two classes of UNI tokens:
Decentralized: These tokens were airdropped or bought on the secondary market, representing a decentralized distribution. They are considered a commodity.
Centralized: These tokens were acquired through fundraising rounds before the airdrop. For instance, A16z holds many tokens because they acquired them via payment in a fundraising round, making these tokens akin to a security.
If the Uniswap Foundation primarily listens to venture capitalists (VCs) who acquired tokens through fundraising, it creates a two-class system: insiders (VCs) and outsiders (airdrop holders and secondary market buyers).
A presumed reason why a VC who owns UNI from a fundraising round might oppose the fee switch proposal is that this proposal introduces a mechanism resembling dividends, further reinforcing the classification of their holdings as securities.
As a result, the real UNI commodity holders, i.e., the airdrop recipients and secondary market buyers, are being disadvantaged.
The Uniswap Foundation appears to be choosing sides.
If a VC is leveraging these two entities to avoid financing issues themselves and instead using funds from governance token holders, then I strongly advocate for the SEC/CFTC to investigate VC practices that prioritize self-interest over decentralized technology, thereby undermining its ethos.
Ummm ... is this contradictory .... Uniswap (foundation side not labs) holds themselves as stewards of a protocol. If you invite in one regulator to claim authority and uniaterally assert supervisory powers, then you invite in every regulator (on grounds they are acting to protect their citizen investors).
Now if you want clarity on the governance process, it is well documented ... as an airdrop "gift" (for lack of legal clarity), and the fact that UniSwap labs has double-pinkie promised not to use its ownership to influence voting, then a large enough investor clique can veto anything (think vote off island). So the choices are
Without evidence of factual basis, it is hard to figure out which of the 3 would apply ... but if you are asking for regulatory oversight then the obvious question is whose taxes are being sliced where/when to pay for such (independent) supervision.
If the Uniswap Foundation primarily listens to venture capitalists (VCs) who acquired tokens through fundraising, it creates a two-class system: insiders (VCs) and outsiders (airdrop holders and secondary market buyers).
How they got the tokens is of lesser importance than the fact they didn't follow the governance process and put up the reason/concern in public (what I assume is the recognised deliberative process) via this forum. So the complaint (correct me if wrong) is the perceived privilege of bypassing the transparency governance process. If so, it sounds like you want track 3, aka the equiv of a
a) please explain "memo" to the Foundation b) requirement of a legal justification or legitimate excuse (these are legel concepts to escape blame) c) ... and if the response is not satisfactory ... a way for the community via delegates to express sentiment/sanction
The crux is how much discretion should staff of the Foundation have in handling matters ... should they be akin to a trustee with fixed instruction set and invariant duties, or are more flexible arrangements with perhaps protector/guardian in bakcground to enforce beneficiary rights (sorry ... I use UK trust law to express the powers of the delegates).
This is the point where delegates should opine whether it is a principle or practice how strictly the process should be followed. There may be reasons (eg whistle-blower shield provisions) to prevent the source of the hold-up to directly submit a public objection so best to hear all sides of the story.
great to hear ! Imagine all required votes will be "yes", could you imagine an ETA for fees switch "live" ?
@eek637 what's the updated?
At least can you say something?
Is there any updates?
@eek637
where are u @eek637 ? Please update your community ! :slight_smile:
it's a secret :( @eek637
yes, it's incredible ! 0 trust
he ghosted our community
3 billions volume, and -1 communication skills from uniswap team
Is there any progress?
The community is waiting if the proposal will proceed.
Is the fee switch vote still going to happen?
same question. Is uni fees switch still on the road?
thanks a lot ! :slight_smile: waiting for new updates :D
This is a very hot topic for the community, it's a shame that there isn't a precise and detailed update. Novelty ?
Many of us small token holders are anxious after the SEC news. We all hope that the fee switch activation will proceed. I trust that someone from Uniswap will clearly address this in case things have changed in the past few days.
What will happen if this vote is negative? Will the one promoted by the Uniswap Foundation be considered?
thank you for the update
So will the onchain vote be earlier than expected?
That mitigation will be reviewed in a shorter follow-on contest that will be scheduled at the end of March.
Has the Code4rena contest started? I don’t see any updates on their site.
Thanks!
Any updates on Code4rena audit?
updates ? very interesting topic 😎😎
so, next steps for fees switch activation ? :slight_smile:
thank you for the update
So will the onchain vote be earlier than expected?
That mitigation will be reviewed in a shorter follow-on contest that will be scheduled at the end of March.
Has the Code4rena contest started? I don’t see any updates on their site.
Thanks!
Any updates on Code4rena audit?
updates ? very interesting topic 😎😎
so, next steps for fees switch activation ? :slight_smile:
Finally fee switch :D, I've been waiting for years!
I have a technical question: will it be possible to receive Uni fees even if the token is being used as collateral on Compound or other similar platforms? Thank you.
@eek637 If this proposal passes, what's the procedure to turn on the protocol fees?
Finally fee switch :D, I've been waiting for years!
I have a technical question: will it be possible to receive Uni fees even if the token is being used as collateral on Compound or other similar platforms? Thank you.
@eek637 If this proposal passes, what's the procedure to turn on the protocol fees?
Thanks to @erek637, Devin, and the team at the Uniswap Foundation for all their hard work prior to this proposal. We think that incentivizing a more active set of governance participants is one of the most important things for the Uniswap Ecosystem moving ahead. We are generally supportive of this proposal. We continue to monitor certain active legal and regulatory matters involving DAOs, but absent any unforeseen developments that might impact the proposal, we intend to vote in favor of it.
One of the parts to highlight is the incentive alignment among UNI token holders, delegates, and builders that this proposal creates. By tying programmatic staking fees to delegation, the UF is elegantly addressing protocol economics and ecosystem vibrancy, and laying a strong foundation for greater decentralization.
Thanks to @erek637, Devin, and the team at the Uniswap Foundation for all their hard work prior to this proposal. We think that incentivizing a more active set of governance participants is one of the most important things for the Uniswap Ecosystem moving ahead. We are generally supportive of this proposal. We continue to monitor certain active legal and regulatory matters involving DAOs, but absent any unforeseen developments that might impact the proposal, we intend to vote in favor of it.
One of the parts to highlight is the incentive alignment among UNI token holders, delegates, and builders that this proposal creates. By tying programmatic staking fees to delegation, the UF is elegantly addressing protocol economics and ecosystem vibrancy, and laying a strong foundation for greater decentralization.
Any change to the Uniswap protocol, like this proposal, introduces uncertainty and could lead to additional risks. As we have written about extensively, we believe the Uniswap DAO should continue to investigate the adoption of a formal legal entity structure in order to better position itself to handle such challenges. However, because this proposal solely relates to a protocol upgrade and does not yet contemplate turning on the fee switch, a conclusion on legal entity structure does not yet need to be reached.
Based on the technical architecture, we believe the trade-offs weigh in favor of establishing a programmatic fee structure to boost participation. The heart of decentralized networks is their ability to channel different stakeholders towards a common goal – in this case, sustainable, long-term Uniswap ecosystem growth. This is a positive step in that direction.
We look forward to engaging in thoughtful debate about this proposal among Uniswap DAO members and we encourage all members to independently assess the risks and benefits of the proposal prior to voting.
Porter and Miles
None of the above should be taken as investment advice or an advertisement for investment services; Some of the companies mentioned above are portfolio companies of a16z. Please see https://a16z.com/disclosures/ for more information.
A list of investments made by a16z is available at https://a16z.com/investment-list/.
The design looks well thought out. I share other's excitement to see movement with the fee switch.
One of the interesting things about the design is how the rewards can be delegated to another address. I am imagining that the individual staking if desired could pass fees to an active delegator, charity address, family member, etc. I am curious how the claim function works for an address that is set that is not owned. Will that other address have to claim or is it claimed from the address staking/delegating and then it is sent to the designated address?
The design looks well thought out. I share other's excitement to see movement with the fee switch.
One of the interesting things about the design is how the rewards can be delegated to another address. I am imagining that the individual staking if desired could pass fees to an active delegator, charity address, family member, etc. I am curious how the claim function works for an address that is set that is not owned. Will that other address have to claim or is it claimed from the address staking/delegating and then it is sent to the designated address?
Is the WETH required to deposit and claim for the pool fee's permanently chosen in the code? Or can this parameter be voted in the future?
Great job on getting the ball rolling on this!
Yeah this was my thought as well FWIW...a16z has written some great things on directly incentivizing governance participation. Delegation feels like a poor proxy and there is a chance to do something a bit more innovative
I suspect though the point is just to do staking but they're worried about securities laws issues so added the delegation bit for that reason alone. Which to be clear I'm also totally fine with haha, but it might save us all some energy to just think about it that way instead.
re are some important technical questions in a world where Uni V4 is around the corner. AFAIU Uni V4’s flexibility makes it almost impossible to even enforce these protocol fees (you can write hooks in such a way that you try to avoid actual “swap fees” while still properly pricing liquidity and compensating LPs, basically hooks can try and get around the protocol fee which is something that definitely needs to be carefully considered by protocol engine
Thank you, @eek637, for suggesting this change to the community. This could be a turning point. While we may not agree on every detail, having the ability to "disagree but commit" can revitalize the Uniswap community and bring back excitement. Thanks to @eek637 for providing a common ground for us. I wholeheartedly support the proposal and appreciate everyone who has dedicated significant time to make it a reality!
On the proposal itself, I would love to learn more about the WETH decision as the rewards token.
There should be a historical snapshot of large LPs, who took all the risk in the past, and weren't rewarded, and who will again take the risk in the future. Appart from that, I find it a good proposal.
Thanks to @erek637, Devin, and the team at the Uniswap Foundation for all their hard work prior to this proposal. We think that incentivizing a more active set of governance participants is one of the most important things for the Uniswap Ecosystem moving ahead. We are generally supportive of this proposal. We continue to monitor certain active legal and regulatory matters involving DAOs, but absent any unforeseen developments that might impact the proposal, we intend to vote in favor of it.
One of the parts to highlight is the incentive alignment among UNI token holders, delegates, and builders that this proposal creates. By tying programmatic staking fees to delegation, the UF is elegantly addressing protocol economics and ecosystem vibrancy, and laying a strong foundation for greater decentralization.
Thanks to @erek637, Devin, and the team at the Uniswap Foundation for all their hard work prior to this proposal. We think that incentivizing a more active set of governance participants is one of the most important things for the Uniswap Ecosystem moving ahead. We are generally supportive of this proposal. We continue to monitor certain active legal and regulatory matters involving DAOs, but absent any unforeseen developments that might impact the proposal, we intend to vote in favor of it.
One of the parts to highlight is the incentive alignment among UNI token holders, delegates, and builders that this proposal creates. By tying programmatic staking fees to delegation, the UF is elegantly addressing protocol economics and ecosystem vibrancy, and laying a strong foundation for greater decentralization.
Any change to the Uniswap protocol, like this proposal, introduces uncertainty and could lead to additional risks. As we have written about extensively, we believe the Uniswap DAO should continue to investigate the adoption of a formal legal entity structure in order to better position itself to handle such challenges. However, because this proposal solely relates to a protocol upgrade and does not yet contemplate turning on the fee switch, a conclusion on legal entity structure does not yet need to be reached.
Based on the technical architecture, we believe the trade-offs weigh in favor of establishing a programmatic fee structure to boost participation. The heart of decentralized networks is their ability to channel different stakeholders towards a common goal – in this case, sustainable, long-term Uniswap ecosystem growth. This is a positive step in that direction.
We look forward to engaging in thoughtful debate about this proposal among Uniswap DAO members and we encourage all members to independently assess the risks and benefits of the proposal prior to voting.
Porter and Miles
None of the above should be taken as investment advice or an advertisement for investment services; Some of the companies mentioned above are portfolio companies of a16z. Please see https://a16z.com/disclosures/ for more information.
A list of investments made by a16z is available at https://a16z.com/investment-list/.
The design looks well thought out. I share other's excitement to see movement with the fee switch.
One of the interesting things about the design is how the rewards can be delegated to another address. I am imagining that the individual staking if desired could pass fees to an active delegator, charity address, family member, etc. I am curious how the claim function works for an address that is set that is not owned. Will that other address have to claim or is it claimed from the address staking/delegating and then it is sent to the designated address?
The design looks well thought out. I share other's excitement to see movement with the fee switch.
One of the interesting things about the design is how the rewards can be delegated to another address. I am imagining that the individual staking if desired could pass fees to an active delegator, charity address, family member, etc. I am curious how the claim function works for an address that is set that is not owned. Will that other address have to claim or is it claimed from the address staking/delegating and then it is sent to the designated address?
Is the WETH required to deposit and claim for the pool fee's permanently chosen in the code? Or can this parameter be voted in the future?
Great job on getting the ball rolling on this!
Yeah this was my thought as well FWIW...a16z has written some great things on directly incentivizing governance participation. Delegation feels like a poor proxy and there is a chance to do something a bit more innovative
I suspect though the point is just to do staking but they're worried about securities laws issues so added the delegation bit for that reason alone. Which to be clear I'm also totally fine with haha, but it might save us all some energy to just think about it that way instead.
re are some important technical questions in a world where Uni V4 is around the corner. AFAIU Uni V4’s flexibility makes it almost impossible to even enforce these protocol fees (you can write hooks in such a way that you try to avoid actual “swap fees” while still properly pricing liquidity and compensating LPs, basically hooks can try and get around the protocol fee which is something that definitely needs to be carefully considered by protocol engine
Thank you, @eek637, for suggesting this change to the community. This could be a turning point. While we may not agree on every detail, having the ability to "disagree but commit" can revitalize the Uniswap community and bring back excitement. Thanks to @eek637 for providing a common ground for us. I wholeheartedly support the proposal and appreciate everyone who has dedicated significant time to make it a reality!
On the proposal itself, I would love to learn more about the WETH decision as the rewards token.
There should be a historical snapshot of large LPs, who took all the risk in the past, and weren't rewarded, and who will again take the risk in the future. Appart from that, I find it a good proposal.
re are some important technical questions in a world where Uni V4 is around the corner. AFAIU Uni V4’s flexibility makes it almost impossible to even enforce these protocol fees (you can write hooks in such a way that you try to avoid actual “swap fees” while still properly pricing liquidity and compensating LPs, basically hooks can try and get around the protocol fee which is something that definitely needs to be carefully considered by protocol engine
Agreed, there should be an incentive for active LPs actually, not only for active delegators and voters.
Incredible update! This proposal aligns participations with the interests and success of the protocol. I'm super excited to see this go forward!
Is there a threshold in being able to vote as a delegate?
Why not just skip the delegation part and directly reward governance participation (whether as a delegate or otherwise)?
re are some important technical questions in a world where Uni V4 is around the corner. AFAIU Uni V4’s flexibility makes it almost impossible to even enforce these protocol fees (you can write hooks in such a way that you try to avoid actual “swap fees” while still properly pricing liquidity and compensating LPs, basically hooks can try and get around the protocol fee which is something that definitely needs to be carefully considered by protocol engine
Agreed, there should be an incentive for active LPs actually, not only for active delegators and voters.
Incredible update! This proposal aligns participations with the interests and success of the protocol. I'm super excited to see this go forward!
Is there a threshold in being able to vote as a delegate?
Why not just skip the delegation part and directly reward governance participation (whether as a delegate or otherwise)?
Isn't this sort of like paying people not to personally vote/participate in Uniswap governance except by delegating their decisionmaking to others? seems odd and not very DAO-like, but maybe I'm missing something...
Isn't this sort of like paying people not to personally vote/participate in Uniswap governance except by delegating their decisionmaking to others? seems odd and not very DAO-like, but maybe I'm missing something...
Last week, we announced that this proposal would be deployed onchain today. Over the last week, a stakeholder raised a new issue relating to this work that requires additional diligence on our end to fully vet. Due to the immutable nature and sensitivity of our proposed upgrade, we have made the difficult decision to postpone posting this vote. This was unexpected, and we apologize for the postponement. We will keep the community apprised of any material changes and will update you all once we feel more certain about future timeframes.
Last week, we announced that this proposal would be deployed onchain today. Over the last week, a stakeholder raised a new issue relating to this work that requires additional diligence on our end to fully vet. Due to the immutable nature and sensitivity of our proposed upgrade, we have made the difficult decision to postpone posting this vote. This was unexpected, and we apologize for the postponement. We will keep the community apprised of any material changes and will update you all once we feel more certain about future timeframes.
Nope, the Spearbit audit is starting tomorrow and we're chatting w/ another firm about running another audit afterwards. Pretty much on schedule with what Devin posted above, but we reserve the right to keep auditing these contracts given their immutable natures.
Results will be announced shortly. Tl;dr - the final results were three low-severity findings so we'll not be doing the mitigation contest.
Spearbit's auditors completed their initial review last week; the results were good. Scopelift is making some small changes and optimizations this week that will be reviewed again.
An additional audit by ABDK has been arranged; it will start shortly following Spearbit's review of changes is complete and run for approximately 10 days.
Hi all - I wanted to give a quick update on this proposal and the next steps in its implementation.
TL;DR, we are running additional audits on the protocol upgrade. Due to that, we now expect to post our on-chain vote in mid-April (It’s possible this may change pending the results of those audits).
Amendment
Hi all - I wanted to give a quick update on this proposal and the next steps in its implementation.
TL;DR, we are running additional audits on the protocol upgrade. Due to that, we now expect to post our on-chain vote in mid-April (It’s possible this may change pending the results of those audits).
Amendment
A group of delegates proposed an amendment to our proposal. A Snapshot poll was launched to weigh community sentiment on this proposal; 60% of voters were against the amendment. As of right now we plan to move forward with our proposal as written.
Code4rena Results and Additional Audits
Our original discussion of security considerations is here. The Code4rena contest has ended. Scopelift has reviewed the findings and we plan to mitigate one issue. That mitigation will be reviewed in a shorter follow-on contest that will be scheduled at the end of March.
Since posting our original proposal, we have made the decision to conduct additional audits on the UniStaker and V3FactoryOwner contracts.
Following the Code4rena review, we have engaged Spearbit for another conventional audit which is tentatively scheduled to start April 2 and run for a week.
We have discussed another review with a third firm following Spearbit; those discussions are ongoing.
A testnet deployment of the contracts (in their pre-Spearbit state) should be available soon. Stay tuned to updates to this post, and to our Twitter, for details.
Timing of on-chain vote
We will initiate an on-chain vote following the mainnet deployment of the fully-audited UniStaker and V3FactoryOwner contracts.
This on-chain vote will likely come in mid-April, with the understanding that the date might change based on the results of the remaining audits.
This proposal only explicitly considers mainnet fees. That said, UniStaker can receive fees from multiple sources, so it’s likely that future proposals will address non-mainnet deployments.
Thanks for your research. I replied in more detail in the Ethresearch forum.
The SEC chief can't be fired by the president until 2026, so it's too early to talk about it
TL;DR
TL;DR
Context The contracts described in the original post have now undergone three audits and a week-long contest. Generally, there were no high severity issues discovered, very few medium-severity issues, and some minor and informational issues. The exact results of each can be found in the UniStaker repo here with the exception of the latest ABDK audit which will be posted shortly after the report is cleaned up. The codebase will be covered by a $1m bug bounty managed by Immunefi. That program will be live next week and this post will be updated with a link to the relevant information.
A successful Snapshot vote concluded on March 6, 2024 with 55m UNI voting in favor of proceeding with the proposal as described. As a reminder, if passed, this proposal would transfer ownership of the mainnet UniswapV3Factory to a newly deployed instance of V3FactoryOwner. This vote will not turn on fees; that will be accomplished in a future proposal. If fees are eventually enabled, they will flow autonomously to UNI holders who have staked and delegated their UNI in this deployment of the UniStaker contract using the payout race mechanism described here.
How to vote If you hold UNI and want it to be eligible to vote on this proposal, you must delegate it (either to yourself, or to a third-party delegate) prior to Friday, May 31. To find a third-party delegate, check out the delegate profiles on either Agora or Tally.
To delegate to yourself on Agora, go to the same link, search for your address, and click delegate. To delegate to yourself on Tally, go to this link, connect your wallet, click “Delegate” and choose “Myself”.
One note, if you have used UNI as collateral elsewhere in DeFi (e.g. Compound or Aave), you will not be able to use that UNI to vote unless you close those positions. Post any questions you have in the comments below.
What happens next? If this vote passes, we intend to propose another upgrade to Protocol Governance to further streamline the fee setting process. Today (whether or not this proposal passes), a full onchain vote requiring quorum would be required for fees to be turned on, and for every adjustment in the future. Over the past few months we have heard feedback from the community and worked with Scopelift to design a mechanism that would upgrade this process in order to:
Increase the efficiency with which the protocol charges fees by shortening the time and lessening the resources required to adjust them
Decrease the governance burden on delegates
Maintain the protocol’s credible neutrality
Assuming a successful result in this first onchain vote, we will post an RFC in the forum fully describing this mechanism and the steps required for its implementation.
Technical Notes
Unistaker has been deployed here with the following parameters:
`V3FactoryOwner has been deployed here with the following parameters:
The calldata comprising the proposal to transfer ownership will be generated using the scripts in the directory here.
Hi all - timing update:
The Code4rena contest finished today, reports will get cleaned up and come back in a week or so. We'll address any required fixes and push those through another contest.
Timing for the onchain vote is TBD based on that process.
Having had the chance to be part of the GovSwap discussions in Denver, we think this proposal has significant potential to scale Uniswap governance and lead it to the next stage of maturity. By linking delegation and staking, we see it being the right first step to help grow Uniswap’s voter participation rate and re-activate stale delegations. Since UNI holders can delegate to themselves, this proposal does not directly lead to any concentration of power in a certain subset of delegates, which is crucial.
Concerns and Mitigations: We acknowledge that there are a few concerns top of mind, namely the question of turning on the fee switch and the concern posed by @Juanbug around VCs and large UNI holders part of the ‘stale delegation’ cohort not actively using this opportunity to participate in governance.
Thanks @eek637 for bringing up this proposal!
Stanford Blockchain Club is excited to be supporting this proposal, one which we believe will cement Uniswap’s position as a leading exemplar for mature decentralized governance by using protocol fees to incentivize healthy delegation and governance. While this proposal excellent overall, there are a few areas and implications that this proposal brings, that we’d like to work with you and fellow delegates to further refine, possibly in future proposals.
Thanks @eek637 for bringing up this proposal!
Stanford Blockchain Club is excited to be supporting this proposal, one which we believe will cement Uniswap’s position as a leading exemplar for mature decentralized governance by using protocol fees to incentivize healthy delegation and governance. While this proposal excellent overall, there are a few areas and implications that this proposal brings, that we’d like to work with you and fellow delegates to further refine, possibly in future proposals.
Uniswap’s long-term success relies on having deep, liquid markets for a large varieties. Liquidity Providers (LPs) thus are vital to Uniswap’s success as a protocol. One question that emerges is a principal-agent problem of how to align these LPs with UNI holders and delegates. Others have already mentioned how protocol fees eat into the already thin margins for LPs, which may disincentivize them from providing more liquidity.
We believe the overall solution lies in coordinating incentives between UNI holders/delegates and LPs, possibly through looking at the following directions:
“Specifically, we believe UNI token holders will be incentivized to choose delegates whose votes and engagement with the protocol will lead to the Protocol’s growth and success.”
One question with this is how “successful votes” can be accurately discerned and measured, especially since it is hard to quantitative attribute value creation to a specific proposal. There are several proxy metrics available, such as UNI token price, participation rates, activity on forums etc. but these all contain major flaws.
Nonetheless, we believe that being able to gauge the quality of contribution for each voting delegate is important for delegators, reducing informational asymmetry and allowing for the success of the whole ecosystem. Having such a metric could also allow future targeted incentives to reward high-quality delegates. We would love to work with UF and other fellow delegates to discuss how this can be successfully implemented.
We believe that going forward, it would be useful to keep track of Uniswap governance’s overall decentralization over time, establishing a bellweather as to if the protocol’s governance is heading in a healthy direction. One potential idea to this effect would be to implement entropy-based metrics, such as adapting Austgen et al.’s (2023) Voting Block Entropy mechanism to measure decentralization of the DAO over time and assess future directions. However, given that this is another open design space, this is something that we would need to work with UF and other fellow delegates to identify how this can be effective, and how it can be used as a tool to provide information to voting delegates.
Overall, we're really excited to be supporting this proposal, and can't wait to see where we go from here :)
The transaction flows are described here. Generally, the Uniswap timelock is the admin of the V3FactoryOwner and can call the privileged functions on that contract that get passed through to the V3Factory.
If this proposal passes, fees could be turned on in individual pools by governance vote. Gauntlet has drafted a proposal that outlines a potential fee roll out strategy that would occur over a series of votes over several months. They're planning to post that proposal next week.
The below response reflects the views of L2BEAT’s governance team, composed of @kaereste and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
The discussion around the fee switch has been going on for a few years and we’re excited to see this proposal being brought forward by Uniswap Foundation. Overall, we’re supportive of the initiative to activate the fee switch and start directing some of the protocol fees to stakers and people who delegate their UNI.
The below response reflects the views of L2BEAT’s governance team, composed of @kaereste and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
The discussion around the fee switch has been going on for a few years and we’re excited to see this proposal being brought forward by Uniswap Foundation. Overall, we’re supportive of the initiative to activate the fee switch and start directing some of the protocol fees to stakers and people who delegate their UNI.
We are aware if the discussion regarding the lack of a setOwner() function which would allow governance to make amendments to the current implementation if needed, as discussed here. We were part of the group discussing this issue during GovHack in Denver and briefly discussed it with @eek637 as well. While we find this discussion important, it does not affect our overall support of the original proposal being voted on here.
We’ll be voting in favor of the proposal during temp-check, but we’d like to see the discussion around the setOwner() function be resolved before going to an on-chain vote.
re: the impact of a protocol fee on liquidity providers - cc @kassandra.eth @kfx @mjc716 @research
This is an important topic that we will address in two points: on fee switch impact on LPs specifically, and then on the UF’s decision to reward delegators.
re: the impact of a protocol fee on liquidity providers - cc @kassandra.eth @kfx @mjc716 @research
This is an important topic that we will address in two points: on fee switch impact on LPs specifically, and then on the UF’s decision to reward delegators.
First, we want to acknowledge the concern that the protocol fee hurts LPs. That is true – all else equal, a protocol fee would lower LP returns. Based on Gauntlet’s recent analysis here, we expect the impact to be muted across the pools that they analyzed. And based on our previous discussions with Gauntlet, we would expect that any pool which has more negative impacts on TVL (which we would interpret as a negative impact on LP returns) than anticipated would have its fees turned off as a result.
Second, in designing this system we considered how to distribute rewards in a way which would best sustain the Protocol for the long term. Over time, market conditions will change, new versions of the Protocol will be developed, and the surface area of the Protocol’s business model may expand. Our proposal empowers Delegates to design incentive systems for any group of protocol stakeholders, liquidity providers included, and adjust those systems as conditions change. Delegates are the only stakeholder, with their privileges over the Treasury, who have the ability to design, observe, and adjust these types of incentive programs to optimize for the Protocol’s best interest.
With that in mind, we would welcome any LPs that want to become delegates to do so! Create a platform on Agora to get started.
We're very excited to see this proposal and discussion; it represents a significant step forward in enhancing the governance mechanisms of the Uniswap protocol.
We have already seen several community and socially-driven initiatives to spur governance activity, but this proposal furthers those initiatives at a structural level. We agree that tying staking rewards to delegation will revitalize the delegate pool and encourage more communities to experiment with positive and negative financial incentive mechanisms to bolster their governance health.
Thanks Uniswap Foundation and @eek637 for putting up an amazing proposal.
We are largely supportive of the outlined specs and think it’s a solid foundation towards promoting a stronger governance ecosystem.
Thanks Uniswap Foundation and @eek637 for putting up an amazing proposal.
We are largely supportive of the outlined specs and think it’s a solid foundation towards promoting a stronger governance ecosystem.
We do have some general thoughts about the overall design. As a starting point, the current contracts are rather barebone, simple, straightforward, and highly immutable which is perfectly fine and intended.
But echoing what @gfxlabs said, we think it’s important for V3FactoryOwner.sol to be able to change the owner of UniswapV3Factory.sol; or at the very least allow for RewardReceiver to be updateable.
By having RewardReceiver updateable you can have additional contracts between both UniV3FactoryOwner and UniStaker which could allow for experimentation while maintaining the state of UniStaker.sol (no need for redelegations, unstaking, etc.).
This would provide the DAO with future optionality as to how they could allocate protocol fees towards efforts that could further strengthen Uniswap’s governance I.e., rewarding top/recognized delegates & their delegators.
Incentive designs and mechanisms are constantly evolving in DeFi and we wouldn’t want Uniswap to be locked into a system that meets the needs of the community now but maybe not in the future!
Nope - if the proposal passes and subsequent proposals pass which turn on fees, you'll need to delegate and stake your UNI in the new contract described in this post.
Hi Squirrel - Once we’ve deployed the contracts and assuming a successful vote to transfer ownership, we won’t be able to adjust the payout token. This decision was made for a number of reasons, foremost among them was a desire to minimize complexity in UniStaker. Such complexity would be required for the contract to properly account for receiving and paying out rewards in arbitrary tokens. That complexity would increase the risk of bugs being introduced to the contract.
Good question! UniStaker can be configured to distribute any ERC20, but we quickly narrowed in on three potential Payout Tokens.
Given UniStaker’s immutable nature (see our pending response to GFX), our primary concerns in choosing the Payout Token were:
Nope, the Spearbit audit is starting tomorrow and we're chatting w/ another firm about running another audit afterwards. Pretty much on schedule with what Devin posted above, but we reserve the right to keep auditing these contracts given their immutable natures.
Results will be announced shortly. Tl;dr - the final results were three low-severity findings so we'll not be doing the mitigation contest.
Spearbit's auditors completed their initial review last week; the results were good. Scopelift is making some small changes and optimizations this week that will be reviewed again.
An additional audit by ABDK has been arranged; it will start shortly following Spearbit's review of changes is complete and run for approximately 10 days.
Hi all - I wanted to give a quick update on this proposal and the next steps in its implementation.
TL;DR, we are running additional audits on the protocol upgrade. Due to that, we now expect to post our on-chain vote in mid-April (It’s possible this may change pending the results of those audits).
Amendment
Hi all - I wanted to give a quick update on this proposal and the next steps in its implementation.
TL;DR, we are running additional audits on the protocol upgrade. Due to that, we now expect to post our on-chain vote in mid-April (It’s possible this may change pending the results of those audits).
Amendment
A group of delegates proposed an amendment to our proposal. A Snapshot poll was launched to weigh community sentiment on this proposal; 60% of voters were against the amendment. As of right now we plan to move forward with our proposal as written.
Code4rena Results and Additional Audits
Our original discussion of security considerations is here. The Code4rena contest has ended. Scopelift has reviewed the findings and we plan to mitigate one issue. That mitigation will be reviewed in a shorter follow-on contest that will be scheduled at the end of March.
Since posting our original proposal, we have made the decision to conduct additional audits on the UniStaker and V3FactoryOwner contracts.
Following the Code4rena review, we have engaged Spearbit for another conventional audit which is tentatively scheduled to start April 2 and run for a week.
We have discussed another review with a third firm following Spearbit; those discussions are ongoing.
A testnet deployment of the contracts (in their pre-Spearbit state) should be available soon. Stay tuned to updates to this post, and to our Twitter, for details.
Timing of on-chain vote
We will initiate an on-chain vote following the mainnet deployment of the fully-audited UniStaker and V3FactoryOwner contracts.
This on-chain vote will likely come in mid-April, with the understanding that the date might change based on the results of the remaining audits.
This proposal only explicitly considers mainnet fees. That said, UniStaker can receive fees from multiple sources, so it’s likely that future proposals will address non-mainnet deployments.
Thanks for your research. I replied in more detail in the Ethresearch forum.
The SEC chief can't be fired by the president until 2026, so it's too early to talk about it
TL;DR
TL;DR
Context The contracts described in the original post have now undergone three audits and a week-long contest. Generally, there were no high severity issues discovered, very few medium-severity issues, and some minor and informational issues. The exact results of each can be found in the UniStaker repo here with the exception of the latest ABDK audit which will be posted shortly after the report is cleaned up. The codebase will be covered by a $1m bug bounty managed by Immunefi. That program will be live next week and this post will be updated with a link to the relevant information.
A successful Snapshot vote concluded on March 6, 2024 with 55m UNI voting in favor of proceeding with the proposal as described. As a reminder, if passed, this proposal would transfer ownership of the mainnet UniswapV3Factory to a newly deployed instance of V3FactoryOwner. This vote will not turn on fees; that will be accomplished in a future proposal. If fees are eventually enabled, they will flow autonomously to UNI holders who have staked and delegated their UNI in this deployment of the UniStaker contract using the payout race mechanism described here.
How to vote If you hold UNI and want it to be eligible to vote on this proposal, you must delegate it (either to yourself, or to a third-party delegate) prior to Friday, May 31. To find a third-party delegate, check out the delegate profiles on either Agora or Tally.
To delegate to yourself on Agora, go to the same link, search for your address, and click delegate. To delegate to yourself on Tally, go to this link, connect your wallet, click “Delegate” and choose “Myself”.
One note, if you have used UNI as collateral elsewhere in DeFi (e.g. Compound or Aave), you will not be able to use that UNI to vote unless you close those positions. Post any questions you have in the comments below.
What happens next? If this vote passes, we intend to propose another upgrade to Protocol Governance to further streamline the fee setting process. Today (whether or not this proposal passes), a full onchain vote requiring quorum would be required for fees to be turned on, and for every adjustment in the future. Over the past few months we have heard feedback from the community and worked with Scopelift to design a mechanism that would upgrade this process in order to:
Increase the efficiency with which the protocol charges fees by shortening the time and lessening the resources required to adjust them
Decrease the governance burden on delegates
Maintain the protocol’s credible neutrality
Assuming a successful result in this first onchain vote, we will post an RFC in the forum fully describing this mechanism and the steps required for its implementation.
Technical Notes
Unistaker has been deployed here with the following parameters:
`V3FactoryOwner has been deployed here with the following parameters:
The calldata comprising the proposal to transfer ownership will be generated using the scripts in the directory here.
Hi all - timing update:
The Code4rena contest finished today, reports will get cleaned up and come back in a week or so. We'll address any required fixes and push those through another contest.
Timing for the onchain vote is TBD based on that process.
Having had the chance to be part of the GovSwap discussions in Denver, we think this proposal has significant potential to scale Uniswap governance and lead it to the next stage of maturity. By linking delegation and staking, we see it being the right first step to help grow Uniswap’s voter participation rate and re-activate stale delegations. Since UNI holders can delegate to themselves, this proposal does not directly lead to any concentration of power in a certain subset of delegates, which is crucial.
Concerns and Mitigations: We acknowledge that there are a few concerns top of mind, namely the question of turning on the fee switch and the concern posed by @Juanbug around VCs and large UNI holders part of the ‘stale delegation’ cohort not actively using this opportunity to participate in governance.
Thanks @eek637 for bringing up this proposal!
Stanford Blockchain Club is excited to be supporting this proposal, one which we believe will cement Uniswap’s position as a leading exemplar for mature decentralized governance by using protocol fees to incentivize healthy delegation and governance. While this proposal excellent overall, there are a few areas and implications that this proposal brings, that we’d like to work with you and fellow delegates to further refine, possibly in future proposals.
Thanks @eek637 for bringing up this proposal!
Stanford Blockchain Club is excited to be supporting this proposal, one which we believe will cement Uniswap’s position as a leading exemplar for mature decentralized governance by using protocol fees to incentivize healthy delegation and governance. While this proposal excellent overall, there are a few areas and implications that this proposal brings, that we’d like to work with you and fellow delegates to further refine, possibly in future proposals.
Uniswap’s long-term success relies on having deep, liquid markets for a large varieties. Liquidity Providers (LPs) thus are vital to Uniswap’s success as a protocol. One question that emerges is a principal-agent problem of how to align these LPs with UNI holders and delegates. Others have already mentioned how protocol fees eat into the already thin margins for LPs, which may disincentivize them from providing more liquidity.
We believe the overall solution lies in coordinating incentives between UNI holders/delegates and LPs, possibly through looking at the following directions:
“Specifically, we believe UNI token holders will be incentivized to choose delegates whose votes and engagement with the protocol will lead to the Protocol’s growth and success.”
One question with this is how “successful votes” can be accurately discerned and measured, especially since it is hard to quantitative attribute value creation to a specific proposal. There are several proxy metrics available, such as UNI token price, participation rates, activity on forums etc. but these all contain major flaws.
Nonetheless, we believe that being able to gauge the quality of contribution for each voting delegate is important for delegators, reducing informational asymmetry and allowing for the success of the whole ecosystem. Having such a metric could also allow future targeted incentives to reward high-quality delegates. We would love to work with UF and other fellow delegates to discuss how this can be successfully implemented.
We believe that going forward, it would be useful to keep track of Uniswap governance’s overall decentralization over time, establishing a bellweather as to if the protocol’s governance is heading in a healthy direction. One potential idea to this effect would be to implement entropy-based metrics, such as adapting Austgen et al.’s (2023) Voting Block Entropy mechanism to measure decentralization of the DAO over time and assess future directions. However, given that this is another open design space, this is something that we would need to work with UF and other fellow delegates to identify how this can be effective, and how it can be used as a tool to provide information to voting delegates.
Overall, we're really excited to be supporting this proposal, and can't wait to see where we go from here :)
The transaction flows are described here. Generally, the Uniswap timelock is the admin of the V3FactoryOwner and can call the privileged functions on that contract that get passed through to the V3Factory.
If this proposal passes, fees could be turned on in individual pools by governance vote. Gauntlet has drafted a proposal that outlines a potential fee roll out strategy that would occur over a series of votes over several months. They're planning to post that proposal next week.
The below response reflects the views of L2BEAT’s governance team, composed of @kaereste and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
The discussion around the fee switch has been going on for a few years and we’re excited to see this proposal being brought forward by Uniswap Foundation. Overall, we’re supportive of the initiative to activate the fee switch and start directing some of the protocol fees to stakers and people who delegate their UNI.
The below response reflects the views of L2BEAT’s governance team, composed of @kaereste and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
The discussion around the fee switch has been going on for a few years and we’re excited to see this proposal being brought forward by Uniswap Foundation. Overall, we’re supportive of the initiative to activate the fee switch and start directing some of the protocol fees to stakers and people who delegate their UNI.
We are aware if the discussion regarding the lack of a setOwner() function which would allow governance to make amendments to the current implementation if needed, as discussed here. We were part of the group discussing this issue during GovHack in Denver and briefly discussed it with @eek637 as well. While we find this discussion important, it does not affect our overall support of the original proposal being voted on here.
We’ll be voting in favor of the proposal during temp-check, but we’d like to see the discussion around the setOwner() function be resolved before going to an on-chain vote.
re: the impact of a protocol fee on liquidity providers - cc @kassandra.eth @kfx @mjc716 @research
This is an important topic that we will address in two points: on fee switch impact on LPs specifically, and then on the UF’s decision to reward delegators.
re: the impact of a protocol fee on liquidity providers - cc @kassandra.eth @kfx @mjc716 @research
This is an important topic that we will address in two points: on fee switch impact on LPs specifically, and then on the UF’s decision to reward delegators.
First, we want to acknowledge the concern that the protocol fee hurts LPs. That is true – all else equal, a protocol fee would lower LP returns. Based on Gauntlet’s recent analysis here, we expect the impact to be muted across the pools that they analyzed. And based on our previous discussions with Gauntlet, we would expect that any pool which has more negative impacts on TVL (which we would interpret as a negative impact on LP returns) than anticipated would have its fees turned off as a result.
Second, in designing this system we considered how to distribute rewards in a way which would best sustain the Protocol for the long term. Over time, market conditions will change, new versions of the Protocol will be developed, and the surface area of the Protocol’s business model may expand. Our proposal empowers Delegates to design incentive systems for any group of protocol stakeholders, liquidity providers included, and adjust those systems as conditions change. Delegates are the only stakeholder, with their privileges over the Treasury, who have the ability to design, observe, and adjust these types of incentive programs to optimize for the Protocol’s best interest.
With that in mind, we would welcome any LPs that want to become delegates to do so! Create a platform on Agora to get started.
We're very excited to see this proposal and discussion; it represents a significant step forward in enhancing the governance mechanisms of the Uniswap protocol.
We have already seen several community and socially-driven initiatives to spur governance activity, but this proposal furthers those initiatives at a structural level. We agree that tying staking rewards to delegation will revitalize the delegate pool and encourage more communities to experiment with positive and negative financial incentive mechanisms to bolster their governance health.
Thanks Uniswap Foundation and @eek637 for putting up an amazing proposal.
We are largely supportive of the outlined specs and think it’s a solid foundation towards promoting a stronger governance ecosystem.
Thanks Uniswap Foundation and @eek637 for putting up an amazing proposal.
We are largely supportive of the outlined specs and think it’s a solid foundation towards promoting a stronger governance ecosystem.
We do have some general thoughts about the overall design. As a starting point, the current contracts are rather barebone, simple, straightforward, and highly immutable which is perfectly fine and intended.
But echoing what @gfxlabs said, we think it’s important for V3FactoryOwner.sol to be able to change the owner of UniswapV3Factory.sol; or at the very least allow for RewardReceiver to be updateable.
By having RewardReceiver updateable you can have additional contracts between both UniV3FactoryOwner and UniStaker which could allow for experimentation while maintaining the state of UniStaker.sol (no need for redelegations, unstaking, etc.).
This would provide the DAO with future optionality as to how they could allocate protocol fees towards efforts that could further strengthen Uniswap’s governance I.e., rewarding top/recognized delegates & their delegators.
Incentive designs and mechanisms are constantly evolving in DeFi and we wouldn’t want Uniswap to be locked into a system that meets the needs of the community now but maybe not in the future!
Nope - if the proposal passes and subsequent proposals pass which turn on fees, you'll need to delegate and stake your UNI in the new contract described in this post.
Hi Squirrel - Once we’ve deployed the contracts and assuming a successful vote to transfer ownership, we won’t be able to adjust the payout token. This decision was made for a number of reasons, foremost among them was a desire to minimize complexity in UniStaker. Such complexity would be required for the contract to properly account for receiving and paying out rewards in arbitrary tokens. That complexity would increase the risk of bugs being introduced to the contract.
Good question! UniStaker can be configured to distribute any ERC20, but we quickly narrowed in on three potential Payout Tokens.
Given UniStaker’s immutable nature (see our pending response to GFX), our primary concerns in choosing the Payout Token were:
Having had the chance to be part of the GovSwap discussions in Denver, we think this proposal has significant potential to scale Uniswap governance and lead it to the next stage of maturity. By linking delegation and staking, we see it being the right first step to help grow Uniswap’s voter participation rate and re-activate stale delegations. Since UNI holders can delegate to themselves, this proposal does not directly lead to any concentration of power in a certain subset of delegates, which is crucial.
Concerns and Mitigations: We acknowledge that there are a few concerns top of mind, namely the question of turning on the fee switch and the concern posed by @Juanbug around VCs and large UNI holders part of the ‘stale delegation’ cohort not actively using this opportunity to participate in governance.
With regard to the fee switch, Gauntlet’s findings indicate that losses to TVL and toxic MEV volume may be significant even with a conservative fee switch. However, this is mitigated by the impact on core, non-MEV volume being very minor under all but the most extreme fees. This provides a road forward - nonetheless, it is very important to ensure a method of aligning LP interests here, since they are the lifeblood of Uniswap.
Regarding the concern around low governance participation, we think a middle ground should be found by allocating fees based upon voter participation. We share the view, that if, for example, a VC delegates to themselves and does not participate in governance, they should not get any yield. It is important for these considerations to be embedded into the fee distribution mechanics to incentivize actual increases in governance participation.
All in all, this proposal is most definitely a step in the right direction and we commend @eek637 and the UF team big time for drafting it.
We're very excited to see this proposal and discussion; it represents a significant step forward in enhancing the governance mechanisms of the Uniswap protocol.
We have already seen several community and socially-driven initiatives to spur governance activity, but this proposal furthers those initiatives at a structural level. We agree that tying staking rewards to delegation will revitalize the delegate pool and encourage more communities to experiment with positive and negative financial incentive mechanisms to bolster their governance health.
Although we have settled on support for this proposal, we want to share some of our initial questions below:
1) Immutability of the Contracts We had some trepidation about making staking mechanisms immutable, as removing the ability to make changes could be detrimental in the face of unforeseen challenges. After discussion, we respect the commitment to trust and safety as a core tenet and understand that more experimentation can be undertaken on future implementations such as V4. We are glad this is still possible because it is crucially necessary. An ideal end state for strong feedback loops in governance would ensure that a delegatee sets the delegation AND those delegates actively participate in governance to receive rewards. In future experiments, this could be accomplished with periodic resets or negative reinforcement (slashing) of staking rewards for those who have staked to inactive delegates.
2) Effect on Existing Delegate Programs The delegation initiatives over the past year have promoted a strong body of active delegates. Through conversations with the @eek637 and the Uniswap Foundation, we understand that this proposal does not negate the importance of socially enforceable mechanisms to increase delegate activity, such as incentive programs or delegation races.
3) Impact of Fees on Liquidity The eventual introduction of fees could negatively impact liquidity as users migrate to alternatives with less overhead cost. We have confidence in the modelling done by @gauntlet that will ensure the protocol fees will be introduced in a measured and intentional way that does not detrimentally affect the existing liquidity.
We are grateful that the Uniswap Foundation and partners in this initiative have candidly and collaboratively discussed these topics (and more) at their recent GovSwap during ETHDenver. This level of engagement was optional and has helped alleviate our concerns while making the governance process more inclusive.
We look forward to this proposal moving forward as a significant step to ensure that Uniswap remains the liquidity layer.
Good question! UniStaker can be configured to distribute any ERC20, but we quickly narrowed in on three potential Payout Tokens.
Given UniStaker’s immutable nature (see our pending response to GFX), our primary concerns in choosing the Payout Token were:
On those axes, WETH was a clear winner. It also comes with some nice composability benefits. I’m sure you’re already thinking about a wrapper contract that allows stakers to automatically harvest WETH and do something clever with it on Eigenlayer.
I'm broadly supportive of the proposal, and can only agree that the preparation work is excellent.
At the same time, I do have concerns related to LPs, and can echo the sentiment from @kassandra.eth and others in the comments that the needs of UNI stakers should be balanced with the needs of the LPs. LP interests should be more widely represented in the DAO voting, otherwise we have a situation where there's taxation without (sufficient) representation.
I'm broadly supportive of the proposal, and can only agree that the preparation work is excellent.
At the same time, I do have concerns related to LPs, and can echo the sentiment from @kassandra.eth and others in the comments that the needs of UNI stakers should be balanced with the needs of the LPs. LP interests should be more widely represented in the DAO voting, otherwise we have a situation where there's taxation without (sufficient) representation.
A longer blogpost with my thoughts: https://atise.medium.com/protocol-fee-sharing-and-the-future-of-uniswap-9c636afeef28
Good thoughts here - we appreciate the time spent thinking it through. We’re also interested in hearing feedback from the broader community on this.
Our initial reaction is that this change would create limitations on future optimizations on protocol fees. While in the very short term this might not be a focus, we think it’s likely that governance would be interesting exploring optimizations to mitigate negative impact on LPs, and to bolster delegator rewards, which are likely to require different fee levels set on a pool by pool basis based on the characteristics of the given pool.
Hey John, we have two thoughts here:
UNI token holders who stake will by definition have “skin in the game” for Uniswap’s success. This upgrade directly ties their delegation decisions to the Protocol’s growth and success. With this model we believe they are not only incentivized to delegate but to delegate to those whose efforts have the greatest positive impact on the Protocol.
There are separate initiatives which delegates might put forward to reward the kind of activity you mention. Doo from StableLabs recently put one such initiative forward here. We’re excited to see further experimentation around incentive programs for positive behavior from delegates.
This comment is intended to be purely from a governance delegate perspective. I speak personally but feel this sentiment is likely shared: I want the outcome of this proposal to increase the total amount of $UNI that actively participates in governance. This is accomplished by both shifting around stagnant delegations but more importantly, bringing in more delegators to the protocol. In short, I’m concerned the outcome of this will be delegators delegating to inactive “burn” addresses in order to earn yield and not actually increasing governance participation… or as much as we may think.
The first idle delegations part is easy; in order to earn yield, delegators will need to shuffle their tokens around and in the process of which be forced to reevaluate their current delegations.
This comment is intended to be purely from a governance delegate perspective. I speak personally but feel this sentiment is likely shared: I want the outcome of this proposal to increase the total amount of $UNI that actively participates in governance. This is accomplished by both shifting around stagnant delegations but more importantly, bringing in more delegators to the protocol. In short, I’m concerned the outcome of this will be delegators delegating to inactive “burn” addresses in order to earn yield and not actually increasing governance participation… or as much as we may think.
The first idle delegations part is easy; in order to earn yield, delegators will need to shuffle their tokens around and in the process of which be forced to reevaluate their current delegations.
As for the second point, after personally chatting with dozens of VCs while trying to vie for delegation, the two main reasons for rejection were:
This new vote easily solves the financial incentive question. However, just thinking if I were a fund, particularly one who hasn’t delegated Uni beforehand due to legal concerns, I would simply delegate to myself, or a vacant burn address. This would qualify me for yield, yet have little to no extra governance related legal risk. Because of this, I fear that delegations from many new delegators won’t exactly increase the number of active $UNI in play.
Some solutions to this that I can think of are:
Both of these I’m sure require substantial extra developer work. I’m not sure if these are the best solutions, but I think the problem described is genuinely a real one.
Happy to hear what everyone has to say and any other possible “solutions.”
Update after irl GovSwap event discussions:
Therefore, it should be a trade off:
Ccing some people who all chatted on this, wanna hear your thoughts 😊: @eek637, @kydo, @Getty, @DAOstrat.C, @AbdullahUmar, @404DAO
We are not voting against and in fact, it's not even up in the vote so one can't vote for or against yet
I think what’s missing here is some fees going to delegates who have a large amount of voting power and actively create & vote on proposals.
There's an ongoing proposal discussion about rewarding delegates. Would appreciate a feedback 🙏
https://gov.uniswap.org/t/rfc-uniswap-delegate-reward/22909?u=doo_stablelab
There are 3 core reasons here: maintaining immutability as a core value, optimizing for security, and we still preserve the ability to experiment in the future.
One of Uniswap Protocol’s core defining characteristics is its immutability (Ethereum Values section here). Immutability is important for a protocol as an input to credible neutrality, which in turn maximizes stakeholder trust. Specifically, trust that a protocol and its underlying mechanisms won’t change (either for or against their interests). It creates stability (Gwart sums up this benefit nicely here).
There are 3 core reasons here: maintaining immutability as a core value, optimizing for security, and we still preserve the ability to experiment in the future.
One of Uniswap Protocol’s core defining characteristics is its immutability (Ethereum Values section here). Immutability is important for a protocol as an input to credible neutrality, which in turn maximizes stakeholder trust. Specifically, trust that a protocol and its underlying mechanisms won’t change (either for or against their interests). It creates stability (Gwart sums up this benefit nicely here).
An additional benefit we get from immutability is removing the risk of bugs being introduced, and user funds being hacked in the future. When you look at major protocols which have been hacked in the past, many have occurred due to bugs which have been introduced during protocol upgrades. While there are certainly tradeoffs to this approach, by removing setOwner we are optimizing for future security of stakers.
We believe that this proposal and its accompanying technical changes achieve many goals which have been voiced by delegates in the past, and cement those in the protocol. While the changes are immutable, they also allow for future experimentation to the extent it may be desirable. For instance, delegators are able to route their rewards (or, with the development of new contracts, a portion of rewards) to arbitrary addresses in the future.
I am not qualified to speak to the second question, but to the first: no. You can stake and unstake at will. But you only earn rewards while you are staked. Here are some docs on how the mechanics work:
After GFX Lab's attempt last May to activate the fee switch, we are thrilled to see the Uniswap Foundation and ScopeLift work closely to deliver an elegant production-ready proposal. We are particularly intrigued by the staking system introduced.
If it wasn't obvious already, you can count on our support!
After GFX Lab's attempt last May to activate the fee switch, we are thrilled to see the Uniswap Foundation and ScopeLift work closely to deliver an elegant production-ready proposal. We are particularly intrigued by the staking system introduced.
If it wasn't obvious already, you can count on our support!
@bendi. Thank you for your and your team's efforts here. Question for you. Is there a reason the V3FactoryOwner does not have a function to set a new owner to UniswapV3Factory? If delegates someday wish to transition to a new system, it would be necessary to do so as it is today. Or do you envision this proposal as a permanent change to the protocol?
Thank you for the proposal. This is one of the most significant governance proposals for Uniswap as this means the community and the governance will have a closer alignment with the protocol, including sharing the benefit of its growth :fire:
Governance can choose to turn on fees for any Uniswap V3 Pool
Check out this documentation on how fees are translated into staking rewards for governance participants:
Super exciting development!
Considering that the step of actually turning on fees for specific pool will take place in subsequent proposals, I think this proposals shouldn't create any significant risk to the protocol's competitiveness or performance (as long as there are no serious findings in code audit/audit competition).
Super exciting development!
Considering that the step of actually turning on fees for specific pool will take place in subsequent proposals, I think this proposals shouldn't create any significant risk to the protocol's competitiveness or performance (as long as there are no serious findings in code audit/audit competition).
Think it will also be worthwhile to develop a way to claim/consolidate fees from Uniswap v2 (imo it may make sense to turn on v2 fees before v3) as well as process for handling fees on cross-chain deployments. But this is a really important first step.
Launch of staking will also provide an opportunity to refresh delegations and engage more UNI holders in governance; when the protocol first launched in 2020, delegation wasn't required to claim (as has been implemented in many other airdrops later on such as ENS and Gitcoin), so this could be a helpful reset for governance.
UF and all involved contributors deserve commendations for bringing this proposal to fruition. Thank you!
This is an extremely exciting development for the Uniswap community and we're fully supportive of the initiative. It can be a game changer for fuelling further governance participation!
This is incredibly exciting and we are looking forward to this vote over the next few weeks and months. By incentivizing delegation at mass scale, this will be unprecedented in DeFi and will hopefully set in motion future protocols to follow suit.
Think this is generally pretty great.
I think what's missing here is some fees going to delegates who have a large amount of voting power and actively create & vote on proposals.
Think this is generally pretty great.
I think what's missing here is some fees going to delegates who have a large amount of voting power and actively create & vote on proposals.
In other DAOs, there's been a large amount of delegation, but the delegates themselves don't participate or keep the ecosystem alive. If we incentivize delegation but not actual participation by top voters, we'll be missing out on a lot of potential.
I'm sure there are some strange incentives there but wanted to call this out. Perhaps one solution is only rewarding people who delegated to someone who actually participates in governance.
Having had the chance to be part of the GovSwap discussions in Denver, we think this proposal has significant potential to scale Uniswap governance and lead it to the next stage of maturity. By linking delegation and staking, we see it being the right first step to help grow Uniswap’s voter participation rate and re-activate stale delegations. Since UNI holders can delegate to themselves, this proposal does not directly lead to any concentration of power in a certain subset of delegates, which is crucial.
Concerns and Mitigations: We acknowledge that there are a few concerns top of mind, namely the question of turning on the fee switch and the concern posed by @Juanbug around VCs and large UNI holders part of the ‘stale delegation’ cohort not actively using this opportunity to participate in governance.
With regard to the fee switch, Gauntlet’s findings indicate that losses to TVL and toxic MEV volume may be significant even with a conservative fee switch. However, this is mitigated by the impact on core, non-MEV volume being very minor under all but the most extreme fees. This provides a road forward - nonetheless, it is very important to ensure a method of aligning LP interests here, since they are the lifeblood of Uniswap.
Regarding the concern around low governance participation, we think a middle ground should be found by allocating fees based upon voter participation. We share the view, that if, for example, a VC delegates to themselves and does not participate in governance, they should not get any yield. It is important for these considerations to be embedded into the fee distribution mechanics to incentivize actual increases in governance participation.
All in all, this proposal is most definitely a step in the right direction and we commend @eek637 and the UF team big time for drafting it.
We're very excited to see this proposal and discussion; it represents a significant step forward in enhancing the governance mechanisms of the Uniswap protocol.
We have already seen several community and socially-driven initiatives to spur governance activity, but this proposal furthers those initiatives at a structural level. We agree that tying staking rewards to delegation will revitalize the delegate pool and encourage more communities to experiment with positive and negative financial incentive mechanisms to bolster their governance health.
Although we have settled on support for this proposal, we want to share some of our initial questions below:
1) Immutability of the Contracts We had some trepidation about making staking mechanisms immutable, as removing the ability to make changes could be detrimental in the face of unforeseen challenges. After discussion, we respect the commitment to trust and safety as a core tenet and understand that more experimentation can be undertaken on future implementations such as V4. We are glad this is still possible because it is crucially necessary. An ideal end state for strong feedback loops in governance would ensure that a delegatee sets the delegation AND those delegates actively participate in governance to receive rewards. In future experiments, this could be accomplished with periodic resets or negative reinforcement (slashing) of staking rewards for those who have staked to inactive delegates.
2) Effect on Existing Delegate Programs The delegation initiatives over the past year have promoted a strong body of active delegates. Through conversations with the @eek637 and the Uniswap Foundation, we understand that this proposal does not negate the importance of socially enforceable mechanisms to increase delegate activity, such as incentive programs or delegation races.
3) Impact of Fees on Liquidity The eventual introduction of fees could negatively impact liquidity as users migrate to alternatives with less overhead cost. We have confidence in the modelling done by @gauntlet that will ensure the protocol fees will be introduced in a measured and intentional way that does not detrimentally affect the existing liquidity.
We are grateful that the Uniswap Foundation and partners in this initiative have candidly and collaboratively discussed these topics (and more) at their recent GovSwap during ETHDenver. This level of engagement was optional and has helped alleviate our concerns while making the governance process more inclusive.
We look forward to this proposal moving forward as a significant step to ensure that Uniswap remains the liquidity layer.
Good question! UniStaker can be configured to distribute any ERC20, but we quickly narrowed in on three potential Payout Tokens.
Given UniStaker’s immutable nature (see our pending response to GFX), our primary concerns in choosing the Payout Token were:
On those axes, WETH was a clear winner. It also comes with some nice composability benefits. I’m sure you’re already thinking about a wrapper contract that allows stakers to automatically harvest WETH and do something clever with it on Eigenlayer.
I'm broadly supportive of the proposal, and can only agree that the preparation work is excellent.
At the same time, I do have concerns related to LPs, and can echo the sentiment from @kassandra.eth and others in the comments that the needs of UNI stakers should be balanced with the needs of the LPs. LP interests should be more widely represented in the DAO voting, otherwise we have a situation where there's taxation without (sufficient) representation.
I'm broadly supportive of the proposal, and can only agree that the preparation work is excellent.
At the same time, I do have concerns related to LPs, and can echo the sentiment from @kassandra.eth and others in the comments that the needs of UNI stakers should be balanced with the needs of the LPs. LP interests should be more widely represented in the DAO voting, otherwise we have a situation where there's taxation without (sufficient) representation.
A longer blogpost with my thoughts: https://atise.medium.com/protocol-fee-sharing-and-the-future-of-uniswap-9c636afeef28
Good thoughts here - we appreciate the time spent thinking it through. We’re also interested in hearing feedback from the broader community on this.
Our initial reaction is that this change would create limitations on future optimizations on protocol fees. While in the very short term this might not be a focus, we think it’s likely that governance would be interesting exploring optimizations to mitigate negative impact on LPs, and to bolster delegator rewards, which are likely to require different fee levels set on a pool by pool basis based on the characteristics of the given pool.
Hey John, we have two thoughts here:
UNI token holders who stake will by definition have “skin in the game” for Uniswap’s success. This upgrade directly ties their delegation decisions to the Protocol’s growth and success. With this model we believe they are not only incentivized to delegate but to delegate to those whose efforts have the greatest positive impact on the Protocol.
There are separate initiatives which delegates might put forward to reward the kind of activity you mention. Doo from StableLabs recently put one such initiative forward here. We’re excited to see further experimentation around incentive programs for positive behavior from delegates.
This comment is intended to be purely from a governance delegate perspective. I speak personally but feel this sentiment is likely shared: I want the outcome of this proposal to increase the total amount of $UNI that actively participates in governance. This is accomplished by both shifting around stagnant delegations but more importantly, bringing in more delegators to the protocol. In short, I’m concerned the outcome of this will be delegators delegating to inactive “burn” addresses in order to earn yield and not actually increasing governance participation… or as much as we may think.
The first idle delegations part is easy; in order to earn yield, delegators will need to shuffle their tokens around and in the process of which be forced to reevaluate their current delegations.
This comment is intended to be purely from a governance delegate perspective. I speak personally but feel this sentiment is likely shared: I want the outcome of this proposal to increase the total amount of $UNI that actively participates in governance. This is accomplished by both shifting around stagnant delegations but more importantly, bringing in more delegators to the protocol. In short, I’m concerned the outcome of this will be delegators delegating to inactive “burn” addresses in order to earn yield and not actually increasing governance participation… or as much as we may think.
The first idle delegations part is easy; in order to earn yield, delegators will need to shuffle their tokens around and in the process of which be forced to reevaluate their current delegations.
As for the second point, after personally chatting with dozens of VCs while trying to vie for delegation, the two main reasons for rejection were:
This new vote easily solves the financial incentive question. However, just thinking if I were a fund, particularly one who hasn’t delegated Uni beforehand due to legal concerns, I would simply delegate to myself, or a vacant burn address. This would qualify me for yield, yet have little to no extra governance related legal risk. Because of this, I fear that delegations from many new delegators won’t exactly increase the number of active $UNI in play.
Some solutions to this that I can think of are:
Both of these I’m sure require substantial extra developer work. I’m not sure if these are the best solutions, but I think the problem described is genuinely a real one.
Happy to hear what everyone has to say and any other possible “solutions.”
Update after irl GovSwap event discussions:
Therefore, it should be a trade off:
Ccing some people who all chatted on this, wanna hear your thoughts 😊: @eek637, @kydo, @Getty, @DAOstrat.C, @AbdullahUmar, @404DAO
We are not voting against and in fact, it's not even up in the vote so one can't vote for or against yet
I think what’s missing here is some fees going to delegates who have a large amount of voting power and actively create & vote on proposals.
There's an ongoing proposal discussion about rewarding delegates. Would appreciate a feedback 🙏
https://gov.uniswap.org/t/rfc-uniswap-delegate-reward/22909?u=doo_stablelab
There are 3 core reasons here: maintaining immutability as a core value, optimizing for security, and we still preserve the ability to experiment in the future.
One of Uniswap Protocol’s core defining characteristics is its immutability (Ethereum Values section here). Immutability is important for a protocol as an input to credible neutrality, which in turn maximizes stakeholder trust. Specifically, trust that a protocol and its underlying mechanisms won’t change (either for or against their interests). It creates stability (Gwart sums up this benefit nicely here).
There are 3 core reasons here: maintaining immutability as a core value, optimizing for security, and we still preserve the ability to experiment in the future.
One of Uniswap Protocol’s core defining characteristics is its immutability (Ethereum Values section here). Immutability is important for a protocol as an input to credible neutrality, which in turn maximizes stakeholder trust. Specifically, trust that a protocol and its underlying mechanisms won’t change (either for or against their interests). It creates stability (Gwart sums up this benefit nicely here).
An additional benefit we get from immutability is removing the risk of bugs being introduced, and user funds being hacked in the future. When you look at major protocols which have been hacked in the past, many have occurred due to bugs which have been introduced during protocol upgrades. While there are certainly tradeoffs to this approach, by removing setOwner we are optimizing for future security of stakers.
We believe that this proposal and its accompanying technical changes achieve many goals which have been voiced by delegates in the past, and cement those in the protocol. While the changes are immutable, they also allow for future experimentation to the extent it may be desirable. For instance, delegators are able to route their rewards (or, with the development of new contracts, a portion of rewards) to arbitrary addresses in the future.
I am not qualified to speak to the second question, but to the first: no. You can stake and unstake at will. But you only earn rewards while you are staked. Here are some docs on how the mechanics work:
After GFX Lab's attempt last May to activate the fee switch, we are thrilled to see the Uniswap Foundation and ScopeLift work closely to deliver an elegant production-ready proposal. We are particularly intrigued by the staking system introduced.
If it wasn't obvious already, you can count on our support!
After GFX Lab's attempt last May to activate the fee switch, we are thrilled to see the Uniswap Foundation and ScopeLift work closely to deliver an elegant production-ready proposal. We are particularly intrigued by the staking system introduced.
If it wasn't obvious already, you can count on our support!
@bendi. Thank you for your and your team's efforts here. Question for you. Is there a reason the V3FactoryOwner does not have a function to set a new owner to UniswapV3Factory? If delegates someday wish to transition to a new system, it would be necessary to do so as it is today. Or do you envision this proposal as a permanent change to the protocol?
Thank you for the proposal. This is one of the most significant governance proposals for Uniswap as this means the community and the governance will have a closer alignment with the protocol, including sharing the benefit of its growth :fire:
Governance can choose to turn on fees for any Uniswap V3 Pool
Check out this documentation on how fees are translated into staking rewards for governance participants:
Super exciting development!
Considering that the step of actually turning on fees for specific pool will take place in subsequent proposals, I think this proposals shouldn't create any significant risk to the protocol's competitiveness or performance (as long as there are no serious findings in code audit/audit competition).
Super exciting development!
Considering that the step of actually turning on fees for specific pool will take place in subsequent proposals, I think this proposals shouldn't create any significant risk to the protocol's competitiveness or performance (as long as there are no serious findings in code audit/audit competition).
Think it will also be worthwhile to develop a way to claim/consolidate fees from Uniswap v2 (imo it may make sense to turn on v2 fees before v3) as well as process for handling fees on cross-chain deployments. But this is a really important first step.
Launch of staking will also provide an opportunity to refresh delegations and engage more UNI holders in governance; when the protocol first launched in 2020, delegation wasn't required to claim (as has been implemented in many other airdrops later on such as ENS and Gitcoin), so this could be a helpful reset for governance.
UF and all involved contributors deserve commendations for bringing this proposal to fruition. Thank you!
This is an extremely exciting development for the Uniswap community and we're fully supportive of the initiative. It can be a game changer for fuelling further governance participation!
This is incredibly exciting and we are looking forward to this vote over the next few weeks and months. By incentivizing delegation at mass scale, this will be unprecedented in DeFi and will hopefully set in motion future protocols to follow suit.
Think this is generally pretty great.
I think what's missing here is some fees going to delegates who have a large amount of voting power and actively create & vote on proposals.
Think this is generally pretty great.
I think what's missing here is some fees going to delegates who have a large amount of voting power and actively create & vote on proposals.
In other DAOs, there's been a large amount of delegation, but the delegates themselves don't participate or keep the ecosystem alive. If we incentivize delegation but not actual participation by top voters, we'll be missing out on a lot of potential.
I'm sure there are some strange incentives there but wanted to call this out. Perhaps one solution is only rewarding people who delegated to someone who actually participates in governance.
