The Unsiwap governance vote ended with whale dominance.
An ETH flash crash could take place when UNI mining ends in November.
The governance systems for DeFi protocols remain largely centralized
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The first vote on Uniswap’s governance was controversial due to concerns over its possible centralization. However, these may not be the only risks looming, as industry watchers and analysts begin to unearth more gloomy details.
The first Bitcoin Revolution scam governance vote was completed before the end of the voting period, as the “Whale Final Report” voted in favor of Dharma’s proposal to reduce the number of votes required to obtain a consensus.
This effectively strengthens the governance power of just a few addresses that hold the majority of UNI tokens . The three addresses with the most tokens accounted for almost all of the 39.5 million votes in favor of the proposal, while nearly 700,000 people voted against.
Chris Blec, of DeFi Watch, spoke vehemently about the voting process which erodes any notion of decentralization of the protocol:
Your DeFi heroes Andre Cronje, @kaiynne, @StaniKulechov & @tarunchitra used the delegated power of https://yuni.finance to vote in favor of the full buyout of the governance of $ UNI by Dharma and Gauntlet.
I would like to hear one of them explain this decision which kills decentralization.
As BeInCrypto reports, the success of this vote gives Dharma and Gauntlet almost all of the power, provided they both vote on the same side for future governance decisions.
Other risks for DeFi
Centralizing Uniswap isn’t the only risk, as Predictions Global creator Ryan Berckmans (@RyanBerckmans) observed.
The coming weeks could prove to be volatile for Uniswap and the entire DeFi industry, he explained, adding that centralized governance is still one of the biggest threats:
1 / The governance of Uniswap through UNI could present urgent risks in the coming weeks.
The worst-case scenario looks terrible for UNI and bad for DeFi.
The good news is that the community has a lot of power to avoid this worst case scenario.
Here are the risks as I see them now.
New airdrops from UNI (via governance proposals) to a centralized party or smart contract appear to be a flagrant violation of the spirit of UNI’s first airdrop .
These toxic airdrops, as he describes them, could alter the balance of governing power. However, as we have already seen, the whales already control the protocol.
Fears about an ETH flash crash
The second risk would be the end of UNI’s cash mining , which is due to expire on November 17. As it stands, over $ 2.16 billion in ETH, stablecoin, and Bitcoin wrapped exists in collateral spread across the four liquidity pools.
Mr Berckmans added that up to $ 800 million in ETH would be withdrawn from the pools when they expire, which could lead to a flash crash and destabilize the DeFi ecosystem. He suggested expanding the UNI output farm incentive to maintain industry stability.
It has also been suggested that “executives” be appointed to serve as those charged with governance, such as when Ethereum had Tim Beiko work on PIE 1559 .
DeFi protocols are essentially experimental, Uniswap being the most important of all. By their very nature, they should place decentralization at the top of their list of priorities.
However, as we have seen so often this year, the whales are still in the driver’s seat, especially with these often flawed governance systems.