Uniswap Grantees Slammed for Dumping $10M in UNI
- The DeFi Education Fund has sold half of the UNI tokens it received from Uniswap’s treasury for $10 million.
- The sale has been widely criticized, with many raising questions over the purpose of the project.
- Many have raised concerns over Uniswap’s apparent lack of decentralization as a small group of investors have large influence over the governance process.
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The controversial DeFi Education Fund, recently voted into existence following a Uniswap governance proposal, has come under fire for selling half of its UNI token grant. The sale was worth $10 million.
DeFi Education Fund Under Fire
The newly formed DeFi Education Fund, which was established following a Uniswap governance proposal, has been criticized for selling $10 million worth of UNI tokens.
The $10 million had been allocated to the group as a grant from the Uniswap treasury; the group received a total of $20 million worth of UNI.
The recent sale has raised eyebrows across the crypto community after the group announced it had sold the tokens on Twitter. Some argued that it pointed to a lack of transparency as the community was not given prior notice of the transaction.
In a single transaction, half of all tokens allocated to the fund were sold off. Meanwhile, the community was not given prior notice about this transaction, outside of an announcement tweet. The move has been bashed by cryptocurrency experts for lacking transparency. Moreover, the announcement was posted on a suspiciously empty Twitter account with only one previous post and no avatar. The group sold 500,000 UNI tokens through Genesis Trading without providing any details on how the proceeds would be used.
Igor Igamberdiev, a Research Analyst at The Block, also pointed out that Larry Sukernik, one of the multi-signers for the DeFi Education Fund, sold $50,000 worth of UNI from his own wallet hours before the fund’s $10 million UNI sale.
With the help of @GenesisTrading, we sold 500k UNI for ~$10.2M USDC in order to fund the efforts of the Defi Education Fund.
In the next 24 hours, we will be sending 500k UNI to Genesis and receiving ~$10.2M USDC in return.
— Defi Education Fund (@fund_defi) July 12, 2021
The fund was proposed by Harvard Law Blockchain & FinTech Initiative (HarvardLawBFI), a student group at Harvard Law. The proposal asked for 1 million UNI tokens (worth $20 million at current prices) to create a non-profit entity that would defend the protocol from legal and regulatory threats. It also intended to use the money for DeFi education as well as lobbying efforts. On Jun. 1, the group said that it expected funds to be allocated “over 4-5 years,” something many critics have pointed out since the sale announcement.
HarvardLawBFI suggested that selling any allocated tokens would not have any adverse impact on the UNI price due to the likely vesting period. But as it sold half of the allocated tokens in one transaction, onlookers have raised questions over the group’s motives.
Is Uniswap Decentralized?
Uniswap is governed by a community of token holders who vote on various proposals. UNI holders voted in favor of creating the DeFi Education Fund last month. While the proposal passed, it’s become a topic of much debate. Critics say there was too much influence from large delegators over the protocol’s governance. Charlie Watkins, a member of the core team at Curve Finance, mentioned “opaque lobbying organisations” in reference to the group.
Opaque lobbying organisations courtesy of a couple of large DeFi protocols, strong-armed by VCs and funded by $UNI holders but don’t worry, it’s an “Education Fund”. https://t.co/3zV5OEuDty
— Charlie Watkins (@charlie_eth) July 13, 2021
Chris Blec, a vocal opponent of the proposal and founder of DeFi Watch, told Crypto Briefing that the voting process was set up to represent the interest of venture capitalists. He said:
“The proposal largely passed due to votes from delegates who weren’t using their own voting power. They were hand-picked and delegated voting power by Uniswap VCs and team members.”
The majority of the votes for the proposal came from student groups that early Uniswap investors like Andreessen Horowitz had delegated (Andreessen Horowitz received UNI tokens for investing in Uniswap and has since delegated some of its voting power to several student groups).
In fact, of the 37 million votes the proposal received, more than 10 million came from HarvardLawBFI, along with other student body groups that received voting rights from VCs, including Penn Blockchain (8 million), UCLA Blockchain (5 million).
Many crypto users have suggested that Uniswap is lacking in decentralization as investors like Andreessen Horowitz could effectively vote in proposals by using their voting power and enlisting the help of delegates. Hsaka, a popular crypto trader, has described Uniswap’s governance set-up as “decentralization theatrics” following the incident.
Uniswap is decentralization theatrics at its best.
The proposal to allocate 1m $UNI ($20m) to a “DeFi education fund” got passed just by the votes the proposer and Penn Blockchain (all the student orgs are a16z delegates)
Instantly liquidated half of it.
What a clusterfuck. https://t.co/VT1gukPlwA
— Hsaka (@HsakaTrades) July 13, 2021
Analysts have long questioned Uniswap’s degree of decentralization. In September 2020, Glassnode found that due to delegate voting pools and a quorum of 4% of tokens required to pass a proposal, most UNI holders had very little voting power compared to the team and investors.
UNI currently trades at $18.75, down roughly 4% since the $10 million sale.
DeFi Education Group did not respond to requests for comment at press time.
Disclosure: Andre Cronje is an equity holder in Crypto Briefing.
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