The Bridge Wars: Battle for Uniswap's Cross-Chain Governance
There’s an on-going governance vote on Uniswap. The outcome of this vote will determine the future direction of not only Uniswap but will likely set the precedent for other dApps to follow. The importance of this vote cannot be understated.
There are two heavyweight cross-chain protocols (AMBs), Wormhole and LayerZero, competing for the governance vote on Uniswap. Both projects are backed by influential venture capital firms (Jump and a16z respectively), who are using their resources and connections to sway the vote in their favor. There's a lot of lobbying and politics involved, as the VCs try to win over key stakeholders and community members.
The situation is intense, with both sides trying to win at all costs. As a result, the community is divided. In the end, the outcome of the vote will have a major impact on the future of DeFi governance and the crypto industry as a whole. The importance of this vote cannot be understated and thus, it’s vital that we spread awareness about this topic.
Here’s all you need to know about this vote and the bridge wars that have unfolded because of it. Let’s dive in!
Where it all Started
On 11 December 2021, when ilia_0x, founder of 0xPlasma Labs drafted a proposal on the Uniswap Forum, suggesting to deploy Uniswap V3 on BNB Chain. According to ilia_0x, this was the right moment for Uniswap to deploy on BNB Chain for many reasons:
BNB Chain is one of the most prominent chains with a massive user base, a strong brand, unique features, and billions locked in its DeFi system, making it a no-brainer for Uniswap to expand to a potential new market.
Uniswap V3’s BUSL license will expire in April 2023, and to avoid any last-minute mistakes in deploying in a rush, it would make sense to start the process early.
PancakeSwap, a direct Uniswap V2 fork, currently dominates on BNB Chain with the most trading volume and utilization. By deploying Uniswap V3 on BNB Chain, Uniswap can eat up PancakeSwap’s market share and reduce the possibility + incentive for PancakeSwap to fork Uniswap V3 when the license expires.
The logic behind this proposal was sound and welcomed by the Uniswap community. Everything sounds good, how do we move forward with this proposal?
As we’re all aware, such decisions for Uniswap are governed by the Uniswap DAO, which has approximately 370k token holders and 28k unique voters historically. Thus, even though everything sounds logical and in the best interest of Uniswap, one cannot simply execute a proposal on-chain so quickly. Before any Uniswap proposal is moved forward for on-chain governance, the following steps must be completed:
Proposal discussion on the Uniswap Forum — kicked off by ilia_0x on 11 Dec 2022.
Temperature check to assess the Uniswap community’s sentiment towards the proposal — Jan 16 to 21, 2023, a temperature check to deploy Uniswap V3 on BNB Chain using Celer’s cBridge goes live and is passed with 20M UNI Votes. However, this proposal did not move forward to the final governance and later, a temperature check was conducted between Jan 27 to 31, to decide which bridge Uniswap V3 should use for cross-chain governance message passing between Ethereum and BNB Chain, given that the proposal to deploy on BNB Chain passes.
Iterating the proposal based on the community feedback received during the temperature check.
The final on-chain vote for the proposal.
To say that these 4 steps had a lot of drama and complications would be an understatement. To understand what makes this proposal so controversial, let’s dig into the details of each of these steps.
Temperature Check — Which AMB should Uniswap V3 use for x-chain governance?
While the original temperature check regarding ‘Should Uniswap V3 be deployed to BNB Chain’ passed with 20M votes to “YES”, it was the temperature check to decide which AMB should be used for V3’s cross-chain messaging needs that caused a lot of drama. At this stage, it felt like the real bridge wars was unfolding in-front of us.
Originally per the initial proposal by 0xPlasma Labs, the team suggested using their message-passing solution, Hyperloop, for Uniswaps’ cross-chain governance needs. While Hyperloop is a viable solution for this case, as more community members, specifically other bridge builders, learned about the proposal, many alternative bridging solutions began to be proposed on the forum. The most notable ones that were later included in the temperature check included:
Additionally, while this was not part of the temperature check, an alternative multi-bridge implementation was also suggested, and it’s still believed that in the long term, instead of relying on a singling bridging solution, a multi-bridge solution could be the way to go (more on this later).
While there were 4 bridges in the running, it quickly became clear that the battle to be crowned Uniswaps’ go-to bridge provider would be coming down to Wormhole and LayerZero, at least for the sake of this temperature check.
Eventually, Wormhole came out on top in the temperature check with 28M UNI votes compared to LayerZero’s 17M. However, there’s one big detail that the screenshot below doesn’t convey.
a16z enters the forum
If you thought the role of governance in DeFi was a touchy topic, wait until you hear about the role a16z has to play in all of this.
While Wormhole was leading the temperature check, one big party behind the scenes was yet to make its move, and when it did, everyone stopped and took notice.
Eddy Lazzarin, an investing partner at a16z, took to the Uniswap Forum and conveyed that a16z was unable to participate in the temperature check due to certain technical issues. However, if they could vote, they would’ve voted their 15M UNI tokens towards LayerZero so “please count us this way”.
While this did not change anything at that time, it made the big picture clearer in the grand scheme of things — there’s a big roadblock in Wormhole’s road to being Uniswap’s go-to bridge solution in the form of a16z.
Now that we’re updated with everything that went down in what has turned out to be a major battle between key stakeholders of our ecosystems (bridges, community members, and most importantly, VCs), let’s take a look at where we stand today.
Present day — Is there a winner after all?
At the moment, there’s a final governance vote being conducted in accordance with the recent temperature check. As per this proposal, Uniswap V3 will be deployed on BNB Chain with Wormhole as the selected bridge and community members can vote for or against it. And as expected and stated by a16z earlier, they have used their 15M UNI tokens to vote against this proposal.
While this has reignited the debate around Uniswap’s governance and the role of governance tokens in DeFi, things might not be as bad as everyone expected earlier. Initially, the consensus was that a16z would single-handedly swing the vote against Wormhole with their 15M UNI tokens, but as things stand currently, the community seems to be rallying to push this proposal to deployment.
This is believed to be because of the following reasons:
Irrespective of the selected bridging solution, it’s vital to deploy Uniswap V3 on BNB Chain as early as possible, given the time constraints due to the license expiration in early April.
Any bridging solution chosen for the moment (in this case, Wormhole) is only temporary until a multi-bridge implementation is worked out using the cross-chain assessment process outlined by Devin Walsh.
It’s still unclear how Uniswap will move forward with its plans to deploy on BNB Chain (and others) and how cross-chain governance will work out eventually. But the fact that everyone in the ecosystem is debating DeFi governance and bridge security must be seen as a big win for all of us.
Considering all of these facts and opinions, here’s LI.FI’s stance and proposal (from a neutral and unbiased perspective) on the entire saga 👇
We hope that a productive solution that helps the ecosystem grow and move in the right direction can come out from these discussions, and we look forward to how this story develops in the near future.
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