A group of anonymous Uniswap users is trying to unite the many small holders of the UNI governance token to deal with potential problems in the automated market maker’s (AMM) governance. Yet that is what the launch of UNI last week was supposed to do.
The big initiative being promoted by this “union” is UNI Innamorare (or UNII), a token to be used by the Uniswap community. However, while Uniswap forks SushiSwap and SashimiSwap essentially took away Uniswap’s liquidity, this newly launched token promises to help Uniswap’s market to grow and potentially consolidate prices for UNI, which is held by more than 80,000 addresses at press time.
It is unclear who is behind the initiative. Its website said that the UNII is “backed by unii.finance.” A Silicon Valley-based investor familiar with the matter told CoinDesk that the group includes people from both UNI retail holders and some sub-communities of Uniswap. As press time, only around 20 people joined have joined its Telegram group.
The group is asking UNI holders to claim UNII tokens in order to form a party within the UNI community that can counter the power from the founding team and investors, according to a Medium post on Sept. 20.
The UNII token’s distribution will include two stages: after the initial airdrop of 15% of its total supply of 1 billion tokens, 30% of the UNII will be mined in the first staking pool, which requires UNI holders to stake their UNI and UNII at the ratio of 98:2. In a subsequent staking pool, UNI holders will only be required to stake their UNI and UNII at the ratio of 50:50 in order to mine 50% of the total UNII supply. The even split means that UNI holders are taking bigger mining risks compared with the first stage, which only requires a ratio of 2:98. As they stake more UNI tokens in this second pool, it could theoretically stabilize or even move up UNI’s price, said the same source who is close to the group.
The remaining 5% of the UNII will be reserved in what they are referring to as a “celebration pool” to reward UNII members if UNII becomes one or more of the token-pairs listed under UNI’s liquidity mining pool.
Prices for UNI were traded at $4.37 as the time of writing, down 48.4% from its all-time high at $8.40 on Sept. 18, according to CoinGecko.
When the hottest DeFi project has a decentralization problem
The launch of Uniswap’s governance token UNI on Sept. 16 was partly to tackle a long-existing issue for the venture capital-backed project: it is not 100% community-owned. After the decentralized exchange airdropped a share of its new governance token to everyone that had ever used it (up to Sept. 1), it received instant praise from both its users and the crypto community. However, as some took a deeper look at how UNI was distributed, they began to question just how much control the community will truly have.
Of the total supply of 1 billion UNI tokens, around 40% of them will eventually be allocated to team members, investors and advisors, according to a blog post on Uniswap’s website. That leaves 60% to the community.
While 60% may not sound too bad, the people behind UNII see a big hurdle in the fact that 1% and 4% of UNI total supply are required, respectively, to submit a governance proposal and to vote “yes” to reach quorum.
“We are all minions in terms of voting power,” according to a pre-launched page by the anonymous group, as they explained why a union within the Uniswap’s community is very much needed.
Uniswap is not the only decentralized finance (DeFi) project that uses such governance parameters. DeFi lending protocol Compound also requires 1% of its governance token COMP to submit a governance proposal.