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- Voting proposal on Ethereum DeFi protocol, Uniswap, rejected by users’ abstention.
- Dharma CEO, presenter of the proposal on Uniswap, calls the voting process disappointing.
The first voting process with a decentralized governance model has occurred in the Ethereum DeFi Uniswap protocol. Despite the overwhelming support for the proposal, which received 98% of votes in favour or 39,596,759 from UNI delegates, the lack of participation led to its rejection.
Data from Uniswap show that only 696,857 voted against the proposal. However, there is a minimum of 40 million UNI that must be reached in a vote to be approved. Ironically, the proposal sought to reduce this to make the governance model “more accessible”. One user compared it to the US elections and stated:
This is the DeFi equivalent of winning the popular vote but losing the electoral college. https://t.co/0V9rF4NqZH
— 𝕯𝖆𝖓𝖌𝖊𝖗 (@safetyth1rd) October 19, 2020
Accessible voting on Ethereum-based protocol?
The proposal was made by the Dharma loan protocol, according to the Uniswap website. In addition to making Uniswap’s governance model more “accessible,” the proposal sought to ensure “that Uniswap governance is not subject to unilateral deleterious actors”. Therefore, Dharma proposed changing the limit for submitting a proposal to 3 million UNI, as opposed to the 10 million UNI that is currently needed.
In addition, Dharma proposed reducing the quorum to approve a proposal from 40 million to 30 million UNI. This constitutes 3% of the current supply of the UNI governance token. The proposal envisaged the introduction of a new governance contract called GovernorAlpha that would implement 4 new parameters in the configuration. Dharma stated:
We believe this proposal will help foster a vibrant Uniswap governance process, and we are excited to participate in these governance decisions.
Via his Twitter account, Hollander called the result “disappointing”. However, Dharma’s CEO believes that voters will be more motivated for a second attempt and believes that the final result will be more beneficial to Uniswap:
Despite the vote having 85+% turnout (!), >95% support, with 272 voting FOR and 48 voting AGAINST, the vote still failed. The vote seems to have galvanized users to delegate in much higher numbers — we are now at 74m UNI delegated (as opposed to the paltry 47m delegated at time of the initial proposal).
Dharma controls about 15 million UNI. One of the main criticisms of their proposal was the possible centralization of the protocol by reducing the minimum necessary to submit a change for a vote and reducing the quorum to approve it. This could allow a whale like Dharma to have greater control over governance in the decentralized exchange. In contrast to Hollander’s statements, the developer Agustin Aguilar believes that the users abstained to take a position against Dharma’s proposal:
It’s impossible to know how many of the abstained votes wanted to vote no, with a quorum of >50% abstaining means voting no, and many voters knew that.