Bridge wars: Uniswap and Politics in Crypto Governance

On behalf of the Uniswap community, 0xPlasma Labs submitted a Governance Proposal to deploy Uniswap v3 to BNB Chain.
Cryptocurrency
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Decision making is one of the most important aspects of any organization. But often there is a disparity between stakeholders and key decision makers. Disparity arises due to the centralized nature of the decision making. Crypto addressed this issue with the concept of governance tokens. The primary purpose of governance tokens is to decentralize decision making and give holders a say in how the project is run. Uniswap protocol, second largest DEX in the world, has UNI as their native token and holders of UNI token have a voting right in the direction of Uniswap. As utopian as it may sound in writing, in reality it's not. In today’s edition, we will briefly talk about something political that happened in Uniswap forums right under our noses. 

Background

In December, on behalf of the Uniswap community, 0xPlasma Labs submitted a Governance Proposal to deploy Uniswap v3 to BNB Chain. For those wondering the motive behind this move, it had to do with the expiry of Uniswap’s license which prevents others from forking their source code. But the license expires in April post which anyone can copy the code and deploy in any chain they want. BNB Chain is currently the second-largest blockchain infrastructure by volume and user base. It makes sense for Uniswap to launch on the BNB chain as soon as possible to have a first mover advantage, therefore the proposal. But prior to a proposal’s on-chain execution, a few steps must be completed:

  • • Proposal discussion on Uniswap forum
  • • Temperature check: an off-chain vote for assessing sentiment
  • • Proposal iteration based on community feedback
  • • On-chain vote for finalizing the proposal

Uniswap facing major issues

An important question arose during the proposal discussion. That is, what bridge should the protocol use to enable cross-chain Uniswap governance messaging between Ethereum and BNB Chain?

The presented options were Wormhole, LayerZero, Celer, and deBridge. All protocols put forth their arguments as to why theirs is the best solution for this. Protocols like LayerZero and Wormhole don’t become crypto behemoths without massive backing. Numerous stakeholders are involved in uplifting and developing these platforms. The most persuasive stakeholders are the investors because they have the most to lose. Since neither LZ nor Wormhole offer public tokens, their investors are currently in the private market. LZ is backed by the likes of A16z and Sequoia. Wormhole is practically owned and created by jump trade and is associated with other crypto VCs like Paraficapital. This is in part why the other bridges CelerNetwork and deBridgeFinance became overlooked during the voting period.

Bridge wars

This quickly turned into a lobbying effort as delegates with a large number of votes were being contacted by bridge protocols to sway the vote. Now, a16z with 15 million votes didn’t vote during the temperature check (which is an offline vote) that happened on Jan 31st. Why because they had custodied their UNI tokens with Fireblocks which prevents them from voting on off-chain proposals but allows for on-chain. So, the off-chain voting ended with Wormhole selected as the bridge with the highest number of votes. As soon as the on-chain vote went live, A16z immediately rejected the entire Uniswap to BNB Chain deployment proposal simply because their bridge of choice, LayerZero, lost to Wormhole. 

Repercussions

Although there’s 5 more days for the vote to end, if the proposal fails, then Uniswap will lose the first mover advantage on the BNB chain. A wasted opportunity. But these debates reveal the DAO political structures and the future of cross-chain messaging. 

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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