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DeFi Governance Weekly - Aug 3rd 2021
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Aug 3rd 2021
Today's post - which is really last week's post - comes a little late as I've been travelling. I still plan a further governance update this coming Friday (Aug 6th), which comes right after the monthly Celo governance call (if interested, add to your calendar here).
Celo blockchain approves inclusion of carbon credits in its reserve
An uncensored Uniswap user interface emerges as certain tokens are removed from the Uniswap website partly for regulatory reasons
Uniswap considers issuing rewards to boost participation in v3 pools
Helium rewards are cut in half for hotspots
Vote passes to for Celo blockchain to include carbon credits in its reserve
In last week's governance recap I covered the debate around including MCO2 carbon credits as 0.5% of the Celo blockchain reserve. The vote passed easily, making Celo perhaps the first blockchain to be collateralised, in part, by carbon credits.
It is too early to know whether this kind of collateral helps or hinders stability in a crypto down market. However, at an allocation of just 0.5%, it is unlikely to have a major effect. Some interesting further forum discussions here.
Uniswap removes certain tokens from its platform to stay compliant with regulations
Many DeFi companies are themselves incorporated as traditional companies. For example, Uniswap is a US corporation. So, although Uniswap smart contracts are decentralised, Uniswap itself as a company (that owns a US website, app.uniswap.org) is under pressure to stay aligned with US regulations.
One notable feature of decentralised crypto exchanges (like Uniswap) is that you can typically set up a liquidity pool and trade any kind of token - provided it is an Ethereum (ERC-20) type token. This means that there is significant potential for fraud because it is possible to imitate legitimate tokens with similarly named fakes. It also means that buggy/flawed tokens - like Tether Gold - might be purchased by unknowing users.
To address this, Uniswap has cut off access to certain tokens. However, Uniswap has also closed off access to certain tokenized stocks (crypto tokens that mirror the price of well known stocks), not for reasons of fraud but presumably for reasons for staying compliant in the US (where mirrored stock tokens are not permitted).
As a solution to this it has been proposed that a separate and uncensored user interface for the Uniswap smart contracts be deployed at uniswap.eth . This would allow users to see a full set of tokens to be displayed.
Basically, what's happening here is that app.uniswap.org will use a userinterface provided by Uniswap the US company. uniswap.eth will provide an uncensored interface that is not owned by anyone and so wouldn't come under regulation.
This is an interesting example of how crypto is building parallel systems, those in specific regulatory compliance/censorship, and those outside of nation state government. (Of course, governments can block specific websites, but that is difficult with VPN).
To be clear, this is not a criticism of Uniswap labs. It is rather a comment on how - even crypto companies - end up making large use of traditional corporate structures and remain constrained by state laws. This tweet by Uniswap founder Hayden Adams lays out the different pieces behind Uniswap:
Uniswap governance keeps an eye on competition
Read here on how high transaction fees remain an issue for Uniswap and how Binance is taking advantage of this with its lower transaction fees on Binance Smart Chain. My view is that the threat of Binance Smart Chain is small because Ethereum is more decentralised and therefore trustworthy. Still, fees are an issue on Ethereum and layer 2 seems to be slow coming.
On a related topic, Uniswap governance forums are considering issuing UNI token rewards to those providing liquidity in their v3 pools (see here for an explainer of v2 vs v3). Uniswap v3 is generally seen as superior to competitors like Sushiswap (originally a knockoff of Uniswap), so it is questionable as to whether rewards are needed to enhance liquidity. Already many v3 pools on Uniswap are larger than the v2 equivalents. This governance debate is not the highest quality but gives a flavour for how different stakeholders stand to benefit from a rewards program, notably those managing the program. The snapshot (non binding) vote ended today and passed easily, meaning this will likely move to a formal vote:
Helium Hotspot Rewards are cut in half
As per Helium Improvement Proposal (HIP) 20, the rate of issuance of HNT rewards has been cut in half as of August 1st 2021. This reduces incentives to purchase and install a Helium hotspot.
Demand for Helium hotspots has remained very high with many manufacturers having two to three months of backorders to fill. The growth rate of the network has been quite impressive, with the global number of hotspots rising from just a few thousand this time last year to now over 100,000 hotspots worldwide. The next halving will be in two years - August 2023.
That's it for this week. Subscribe on Pinotio.com for this weekly governance recap as well as investment reports.