Uniswap Foundation Proposes Legal Formalization of Governance
On Monday, the Uniswap Foundation introduced a significant proposal aimed at legally formalizing Uniswap Governance, the decentralized exchange’s governing body comprised of members, delegates, and token holders. If accepted, the plan would establish a Wyoming Decentralized Unincorporated Nonprofit Association (DUNA), providing the organization with enhanced legal clarity, as explained by Uniswap Foundation’s General Counsel, Brian Nistler.
Transition to DUNA Framework
Nistler pointed out that until now, Uniswap Governance has functioned without a formal legal structure. By opting for the DUNA framework, they would create a legal entity located in the U.S. that safeguards members’ involvement in decision-making processes. This transition could facilitate new opportunities, such as effectively managing funds and employing accountants and legal advisors without placing individual members at risk of liability.
Potential Fee Switch and Legal Clarity
Moreover, with this newfound legal clarity, Uniswap Governance may revisit the potential implementation of a fee switch. There have been ongoing discussions regarding whether Uniswap (UNI) token holders could be granted access to a portion of the trading fees generated by the DEX. However, these initiatives have stalled due to apprehensions over possible violations of U.S. securities regulations. In the past month alone, Uniswap has accumulated an impressive $122 million in fees, bolstered by $6 billion in digital assets currently utilized within the platform, according to DefiLlama, a crypto data analytics provider.
Decentralized Autonomous Organization (DAO)
Uniswap Governance operates as a Decentralized Autonomous Organization (DAO), which eliminates the need for a centralized authority. Instead, it uses a community-driven model, where UNI holders can cast votes on various proposals relevant to the ecosystem. Nistler highlighted that while they would not be the first to adopt the innovative Wyoming DUNA structure, Uniswap would potentially be the largest entity to do so, setting a significant precedent in the industry.
Role of the Uniswap Foundation
The Uniswap Foundation, a separate U.S.-registered nonprofit funded by Uniswap Governance yet acting independently from both the governance body and Uniswap Labs—the original creators of Uniswap on the Ethereum blockchain—plays a crucial role in this initiative.
Wyoming’s DUNA Law
Wyoming’s DUNA law, which came into effect last year, allows decentralized organizations like DAOs to attain legal recognition without compromising their decentralized nature. According to Toku, a firm specializing in cryptocurrency payroll and tax compliance, these legal entities can enter contracts, hold assets, engage in litigation, and fulfill tax obligations, whereas traditional DAOs often bear the risk of treating all token holders as liable in the event of legal disputes.
Recognition of Wyoming as a Pioneer
Importantly, a recent White House report on the cryptocurrency sector acknowledged Wyoming as a pioneering state with laws tailored for DAOs. In contrast, Colorado has its own legal framework for DAOs recognized as Limited Cooperative Associations, exemplified by the SporkDAO that hosts an annual Ethereum conference in Denver.
Maintaining Decentralization
Despite the transition to a legal framework, Nistler assured that Uniswap Governance would retain its essential decentralized characteristics. He stated that existing governance procedures and smart contracts would remain intact, allowing for continued community engagement, discussion, and voting through established channels such as forum posts and snapshot votes, thus ensuring on-chain participation remains a priority.
