Uniswap Governance Rejects Proposal Enabling DAO To Make Fee Changes

The Uniswap community has rejected a governance proposal seeking to empower the DAO to make changes to its fee mechanism.

The voting period for the proposal closed on March 9, with 59.9% of mobilized UNI cast in opposition. The proposal sought to allow the DAO to make changes to Uniswap’s fee mechanism for increased flexibility and potential future upgrades to the protocol.

The proposal was shot down two days after a separate proposal to enable protocol revenue collection was passed with borderline unanimous support.

Community members have long sought the activation of a fee-switch since Uniswap airdropped its UNI token to early adopters in 2020.

Threats and concerns

Discussions surrounding the recent proposal gave rise to concerns surrounding the security and technical risks associated with allowing Uniswap's DAO to make changes to the code underpinning the protocol's fee mechanism.

“Upgradeable contracts introduce the ability for governance to rug token holders / ecosystem builders,” said Leighton Cusack, the founder of Pool Together. “It will be hard for this system to get traction if it can be changed."

“If we were to adopt this amendment, each time that base-level contract infrastructure changed it would present technical and implementation risk that is not negligible… the entire system would need to be re-written, re-audited, and re-deployed,” said Erin Koen of the Uniswap Foundation. “A V3FactoryOwner or UniStaker that rewarded multiple stakeholders in different ways would have a necessarily complex internal accounting system. Each time one aspect of this system changed (say, gas rebates for swappers) the others would be at risk.”

UNI is up 10% in the past week, according to CoinGecko.

CORRECTION @ 1230pm ET - The headline and article were corrected to highlight that the failed vote concerns upgradeable contracts and not the fee-switch proposal, which is proceeding through the governance process.