A particularly worrying sign revealed a vote underway in the Uniswap (UNI) community, as one entity managed to control the outcome of the election “battle”, something that is not supposed to happen in decentralized projects.
Specifically, Andreessen Horowitz (a16z) – a company that is making investments in the cryptocurrency space – used its voting “block”, which it acquired due to holding UNI tokens worth 15 million, to vote down a proposal that provided for the use of the “bridge”, Wormhole, to deploy Uniswap V3 on the BNB Chain.
In essence, a16z used the voting power of its UNI token holdings to drive the decision where it wanted it to go.
What is striking about the whole story is the fact that the proposal to deploy the latest version of Uniswap on the BNB Chain was submitted on February 2, by 0xPlasma Labs, on behalf of the Uniswap community, after a primary survey showed that 80% of the community was in favor of the proposal.
Voting will formally conclude on February 10.
The a16z audit
The move by a16z has sparked an outpouring of anger in the cryptocurrency community, which is demanding answers to the question of why a protocol that claims to be decentralized has reached the point of being controlled by an investment firm.
However, we should separate the control over the governance of Uniswap, which a16z seems to have gained, and the operation of the exchange, which is secured by smart contracts that run continuously and cannot be controlled or tampered with.
Either way, control by an entity over proposals involving Uniswap should not normally exist, but such decisions should be made democratically by its community.
Why it was voted down
The decision to vote down the proposal seems to have been triggered because the Wormhole “bridge” was chosen to port the new version of Uniswap, at a time when a16z prefers LayerZero.
At this point we should note that a16z led a $135 million investment round in the blockchain interoperability protocol, LayerZero, in March 2022.
However, to be fair in what we are recording we should remember that in 2022 the Wormhole protocol suffered one of the largest hacks targeting “bridges”, resulting in the loss of 120,000 Wrapped Ether tokens (wETH), worth $321 million at the time.
Specifically, an attacker found a vulnerability in the protocol’s smart contract and was able to create 120,000 wETH in Solana and subsequently exchanged them for ETH.
On the outcome of the vote, Binance chief executive Changpeng Zhao said:
“The vote showed that the ‘whales’ control the blockchain. Just like shareholders do.”
UNI price outlook
Uniswap’s governance token, UNI, lost 3.9% of its value on the day. In addition, it should be mentioned that UNI failed to weather the rally in the cryptocurrency industry of January, as it rallied just 25%, a performance lower than the average for this period.