Uniswap Governance: A Deep Dive

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TL;DR

Governance is considered a critical component for the decentralization and community-driven development of DeFi protocols. We take a look at one of the largest goverance ecostystems in DeFi, Uniswap. In this blog post, we'll discuss the landscape of Uniswap's governance, pulling data from empirical research to dissect the system's delegates and proposals, revealing some interesting findings.

Uniswap's Governance: A Primer

Who Holds the Reins?

Contrary to the ideals of a decentralized democracy, Uniswap's governance structure more closely resembles traditional shareholder meetings. Our research shows that governance is substantially controlled by a small set of entities, including powerhouse venture firms like a16z.

Voting Mechanism: Off-Chain vs On-Chain

Uniswap's governance utilizes a three-step voting process: off-chain polls conducted on their forum and snapshot, and on-chain commitments. Interestingly, these off-chain polls serve as reliable indicators for the subsequent on-chain outcomes. Uniswap has made recent changes to UNI token requirements for off-chain voting, aiming to filter out trivial proposals.

Lifecycle of a Proposal

The process of moving a proposal from temp check to on-chain vote and then to final execution is a critical aspect of the Uniswap governance system. Our analysis of this process reveals interesting patterns.

The boxplot above titled "Time to On-chain Vote" shows the distribution of the time it takes for a proposal to move from temp check to on-chain vote. There's significant variation in this time period, indicating that the speed at which proposals move to the voting stage can greatly differ.

In contrast, the boxplot titled "Time to Execution" shows the distribution of the time it takes for a vote to be finalized and executed. Unlike the time it takes for a proposal to be put to an on-chain vote, the time to execution is relatively consistent, taking 10-15 days for almost all proposals.

This difference in time for each stage is likely because the temperature check process is meant to hear input from the community and iterate on whatever changes to the proposal may be necessary, if any. However, there are a few outliers that took significantly longer to execute, potentially due to exceptional circumstances or complexities associated with the specific proposals.

A Closer Look at Delegates

To further our understanding, we classified UNI holders into five categories: Whales, Dolphins, Fish, Shrimps, and Planktons. Key insights include:

• The top 100 wallets are more likely to delegate their votes, thereby centralizing governance power.

• Voter turnout among the top 20 delegates shows marked inconsistency, particularly for hot-button issues like Layer 2 deployments.

For a more granular view, check out the pie chart on delegate distribution.

Topics That Resonate

Data indicates that proposals focusing on Layer 2 solutions like Arbitrum and zkSync receive the most attention. This is followed by governance changes and feature updates. Evidently, the Uniswap community prioritizes scalability and the integrity of governance.

Autonomous Proposals: A New Frontier

How is Uniswap governance getting around some of the issues with stakeholder participation? They’ve started to look towards ways to streamline their governance mechanisms. One of these is autonomous proposals.

Lowering the Barriers to Entry

Uniswap's implementation of Autonomous Proposals, originally developed by Compound, tries to improve grassroots participation. With a lower UNI token threshold, community members who don't have substantial financial backing can still introduce governance proposals. This helps to counterbalance the concentration of power among large stakeholders and creates a more inclusive governance environment.

Fostering Innovation

The lower entry barrier also encourages more community members to bring innovative ideas to the table. As governance becomes accessible to a broader range of perspectives, the Uniswap community benefits from a plethora of creative solutions to complex challenges, whether it's scalability issues, bug fixes, Layer 2 integrations, or new feature rollouts.

Enabling Rapid Decision-Making

Autonomous Proposals can be quicker to execute than traditional governance proposals. This speed enables the Uniswap ecosystem to adapt more nimbly to market changes, regulatory shifts, and technological advancements.

Creating a Ripple Effect Across DeFi

Uniswaps adoption of Autonomous Proposals could serve as a blueprint for other DeFi protocols, encouraging a democratization trend across the entire DeFi ecosystem. As a follow on from Compound, if Uniswap proposals of this type gain traction, other protocols could look towards updating their governance process in a similar manner.

Conclusion

Uniswap's governance isn't a one-size-fits-all model. It's a complex landscape influenced by numerous factors—from whale activity to the subject matter of proposals. It is a continually growing and evolving ecosystem in which the governance dynamics are set to keep the system both inclusive and