DeFi protocol Uniswap has concluded its first governance vote with a failure to come to quorum by a minuscule margin. The good news is that it keeps the platform relatively decentralized … for now.
The first governance vote for automated market maker Uniswap concluded on October 20 with 98% of the votes in favour of the proposal, but that wasn’t enough to secure it.
As previously reported by CoinGape, the highly-contentious proposal raised a number of centralization concerns as it would effectively grant the most voting power to the largest couple of UNI holders, which were Dharma and Gauntlet at the time.
Crypto trading platform Dharma proposed a reduction of the thresholds for voting and quorum from 1% of the total supply to 0.3%, and 4% of the total to just 3% respectively. It has been reported that Dharma was not happy with the airdrop and distribution of UNI tokens and felt that their users should have got more.
Winning this vote would have enabled Dharma to have more control over the distribution process through subsequent proposals, which it would have won with collaboration from Gauntlet.
A Whisker Short of Winning
In order to seal the proposal, 40 million votes were required but it fell just short with just below 39,600. The majority of those came from just three accounts held by Dharma, Gauntlet, and Yuni.Finance, which is managed by other DeFi whales and big bag holders.
Naturally, the Dharma CEO and co-founder was disappointed with the outcome, almost calling it ‘undemocratic’;
A disappointing outcome that demonstrates the impetus for the proposal in the first-place:
Despite the vote having 85+% turnout (!), >95% support, with 272 voting FOR and 48 voting AGAINST, the vote still failed.
There is a silver lining, though… https://t.co/iXZgwxC5da
— Nadav from Dharma (@NadavAHollander) October 19, 2020
While other industry observers hailed it a victory for ‘everyday users’ and against centralization;
DeFi founders, investors & whales learned a very important lesson in the past 24 hours:
Once you tokenize governance, there's no assurance that things will always go your way.
Everyday DeFi users – it's time to wake up & realize the power belongs to you. https://t.co/NFV3PRDTJB
— Chris Blec (@ChrisBlec) October 19, 2020
DeFi Watch’s Blec added;
“The vote didn’t pass because users learned about the issue and decided not to vote for it. This is how tokenized governance is *supposed* to work. Votes shouldn’t just pass by default.”
Many simply abstained from voting either not wanting to spend the gas or seeing little point in going against the whales which had the majority.
UNI Price Reaction
UNI prices have retreated around 4% over the past few hours as news of the failed proposal circulates. As with the voting, the largest bagholders have the greatest influence over markets and price action should they decide to sell.
Currently, UNI prices are down over 60% from their peak on September 19. Prices may descend further when yield farming pools expire on November 17 and rewarded tokens flood the markets.