Authors: Toby Shorin, Joanna Pope, Laura Lotti, Aaron Z. Lewis, Maria Gomez
Supported by Uniswap Grants Program & Ethereum Foundation
Table of Contents
Crypto has made it possible to create applications that are owned and developed by a decentralized community of contributors. Anyone, anywhere in the world can access and participate in these open, borderless, and censorship-resistant apps without needing permission from a trusted institution at the center. By contributing resources to the network (e.g. computing power or storage space), participants can be rewarded with tokens that confer ownership in the network itself. A subset of these tokens also confer rights on community members — often the ability to “vote with their wallets” on issues like the design of the protocol and the disbursement of funds from protocol treasuries. These “governance tokens” are often distributed directly to early contributors and adopters.
As the space has evolved, many crypto communities have emphasized the importance and promise of on-chain governance. With on-chain governance, the rules for changing protocol parameters are embedded into the protocol itself. All decisions are brought to a formal vote, and community members use tokens to express their preferences. "Off-chain governance" typically refers to voting processes that do not trigger an on-chain protocol change, such as "signaling votes" or other forms of deliberation.
With all the focus on formal voting mechanisms, not enough attention is being paid to the design of the informal gathering places where discourse and decision-making take place. These cultural centers are the soil in which on-chain proposals and other meaningful contributions take root. We believe that the social architecture and organizational psychology of crypto community spaces deserves as much attention as formal voting systems. The conversational infrastructure (i.e. Discord channels, forum organization, group chat surfaces, etc.) that orders discussions is absolutely critical to the development of thriving virtual communities.
Discord servers have already become the de facto venue where people can learn about a protocol, meet community members and discover ways to participate in the network. Ideally, it is in Discord chats and forum debates that ideas for proposals are generated and developed through conversation and at time healthy disagreement. The informal exchanges that unfold through these channels are key for growing engagement and participation in a crypto community. ****Moreover, they are instrumental in attracting and identifying key stakeholders and contributors that otherwise would not be taken into account within a formal governance system — for instance, for not having enough tokens to meaningfully inflect voting processes. Thus, decentralized protocols should cultivate the spaces and conditions for generative informal exchanges alongside their formal governance processes.
If you'd like your protocol's Discord to be part of this research initiative, please reach email@example.com.
The Uniswap community is currently one of the largest protocol communities with on-chain governance. While it is not the first crypto community to adopt this process, the scale of its initiative is quite expansive. With over $4 billion (USD) in its treasury and a 24-hour trading volume of $782 million, the community around Uniswap is staging a very large trial of decentralized decision-making.
Uniswap Protocol is a decentralized currency exchange that allows users to trade one cryptocurrency for another, without a 3rd party intermediary. For the first few years, the core team was mostly focused on building out core functionality and increasing usage of its platform. Last year, Uniswap Labs (the core developers of the protocol) created a native cryptocurrency called UNI and distributed ~$500 million (USD) to all users who executed an exchange or provided liquidity prior to September 2020. The goal of this distribution was to enable "shared community ownership, development, [and] a vibrant, diverse, and dedicated governance system, which will actively guide the protocol towards the future and self-sustainability." UNI is a "governance token", which means that holders can use it to cast votes on proposals put forward by the community. The more UNI you hold, the more influence you have in any given vote. This system allows community members to express the intensity of their preferences in a way that a traditional Yes/No checkbox does not.
Uniswap Labs and the Uniswap Community want the protocol and treasury to be governed by the people who use it. There are two different components to this formal governance system: on-chain voting regarding protocol parameters, and on-chain voting regarding the distribution of funds from the treasury. But there are also more informal parts of the governance process. Uniswap hosts a Discord channel where users and stakeholders gather for chats and support, as well as a Discourse forum for longer-form discussions about proposals. These platforms play a major role in Uniswap's off-chain governance — i.e. the social processes and rules that precede on-chain decisions such as treasury allocation.