DeFi
In a DAO community poll, a split vote scenario was enough to hold back a proposed Uniswap V3 fee switch that had seen popular support.
A recent GFX Labs proposal aimed to charge liquidity providers a fraction of fees across Uniswap V3 pools, with earnings then redistributed to the UNI community. Even though a total of more than 50% of UNI tokens were in favor of turning on fees, it wasn’t enough for the feedback proposal to pass.
The vote in support of fees was split between a range of options, pitted against a singular “no fee” vote. The proposal had shown “pretty broad base support,” according to Bell Curve podcast host and Blockworks co-founder Mike Ippolito, but failed by a “relatively slim margin.”
“The whole vote,” Blockworks co-founder Jason Yanowitz says, “was structured incorrectly.”
“If you actually look at the vote,” Yanowitz added, the fee switch failed “even though there are more votes in favor of adding a fee than not adding.”
The exact fraction of the proposed fee was split between three possibilities; 1/5, 1/6 or 1/10, while only a single option to vote against any sort of fee was offered. Yanowitz points out that a total of 22 million UNI voted in favor of turning on some sort of fee, but the 18 million who were opposed to fees ended up winning anyway.
“So there should have been two separate polls here.”
“There should have been a yes or no fee switch,” he says, “and then if it said ‘yes’ for the fee switch, it should have been, how big should the fee switch be?”
A series of polls were planned, Framework Ventures co-founder Michael Anderson noted, first to determine fee options, followed by a second regarding the initial deployment chain and a third determining assets held in treasury.
“The first poll,” Anderson says, should have been “whether or not to go forward with this” rather than choosing between fee options. “And that’s what they should have been voting on here.”
Consensus is building
Based on the popular vote, Yanowitz says that “the fee switch is getting closer” to acceptance.
Framework Ventures co-founder Vance Spencer concurs, adding “I wouldn’t say this is a failure.”
“It seems like the consensus is building,” he says. “I think about Uniswap on the path to this fee switch and then what they will do with it, not whether this is gonna happen at all.”
Ippolito suggests one of the reasons fee switches are being held back is that individual delegates at Uniswap may be fearful of personal liability. He explains that a recent SEC lawsuit versus LBRY implied that the limited liability protection enjoyed by corporations in America might not extend to DAOs.
“If a fee switch is turned on,” Ippolito says, “then the token ends up looking a lot more like a security than it does today.”
“That hasn’t been decided yet. That is still in process,” Anderson says.
“The argument put forth is that, in fact, these DAOs are more like unincorporated partnerships,” Anderson says, “which don’t incur the limited liability protections that you would have with these other legal entity structures.”
Spencer adds, “You should view this as a startup working in the most punitive jurisdiction in the most, probably, punitive potential asset.”
“It’s pretty interesting, bullish and optimistic that they’re going down this path despite all of that.”
Bad timing?
Yanowitz says now is not the right time to switch fees on anyway. “Why would you turn on the fee switch right now?” he asks.
“Think about turning on the fee switch in a bull market.”
“That is a huge token catalyst,” he says. “You are just wasting that big opportunity in the bear markets.”
Another reason, Yanowitz adds, “is you’re turning on a fee switch at the most risky time in the history of crypto regulation.”
“The legal and tax implications of turning on the fee switch right now are massive,” he says. “Why take that risk?”
Ippolito counters, “One of the advantages of the bear market is that you have cover.”
“The stakes feel much higher when it’s a bull market and everything is growing super fast and competition feels really fierce,” he says. “This is the period of time that you have to experiment.”
“If you don’t take risks now, you’re not gonna do it during the bull market.”
