The Uniswap DAO is voting to reclaim approximately $42 million worth of UNI governance tokens previously loaned to key delegates and its foundation. The initiative, which distributed 12.5 million tokens between 2022 and 2023, was designed to boost governance participation. Governance lead Erin Koen stated the loans have served their purpose, citing high voter turnout. The proposal also addresses criticisms about centralization and aims to resolve potential incentive misalignments within the decentralized exchange’s governing body.
The digital cooperative governing Uniswap is voting on a proposal to take back about $42 million worth of governance tokens from delegates. Between 2022 and 2023, the Uniswap DAO loaned 12.5 million UNI to the Uniswap Foundation and several top delegates to boost governance participation.
According to the proposal’s author Erin Koen, the protocol’s governance is now much more active. “Today, Uniswap’s governance environment looks very different,” Koen said.
The proposal comes as Uniswap Labs and the Foundation work to address criticism that the protocol’s governance isn’t as decentralized as it appears. Critics have previously argued the Foundation holds too much influence.
Others lament how large token holders and venture capital firms like a16z crypto dominate voting power. The situation attracted attention from US Representatives, with Sean Casten questioning the DAO’s decentralization during a hearing in June.
In response, a previous proposal aimed to align incentives across Uniswap Labs, the Foundation, and the DAO. That proposal passed a DAO vote in December and included measures like adding protocol fees to buy back UNI.
Taking back the loaned tokens also resolves a potential incentive misalignment, Koen said. The original distribution didn’t ensure alignment between delegates’ voting power and their own economic exposure.
Data compiled by snapshot shows 56 delegates now hold more than 1 million UNI in voting power. “The potential for this misalignment should not persist indefinitely when the original reason for implementing it is no longer a concern,” Koen stated.
The vote to return the governance tokens to the DAO ends on May 8. So far, 53% of votes have been cast in favor, with 46% voting to abstain.
