Binance has denied allegations that it intends to use customers’ Uniswap tokens (UNI) held on its exchange for governance votes. A Binance spokesperson acknowledged that it moved 4.6 million UNI between wallets and activated its delegation, but said the reason for the transfer was misreported and it never intended to vote with the tokens.
The transfer gave Binance a chance to become Uniswap’s second-biggest voter on governance proposals.
Today, a Binance wallet holds enough UNI to give it over 13.2 million votes on DAO governance proposals. Uniswap creator Hayden Adams pointed out that Binance is Uniswap’s second-largest delegate — giving it considerable clout if it ever decides to vote on proposals. (It has never cast a vote to date.)
Binance holds 5.9% of the voting power on Uniswap. For context, the venture capital firm a16z has 6.7% and has voted on 14 proposals. Consensys previously held second place with more than 7 million votes and still sits in the top 10 delegates by vote weight with 3.145% of Uniswap’s voting power.
Adams called Binance’s clout as a rogue voter a “very interesting situation.”
How does Uniswap’s governance work?
Theoretically, anyone who owns UNI may create or vote on any proposal. Their influence is weighted based on how many UNI tokens they own.
UNI holders could designate themselves as delegates or pool their votes with other UNI token holders by selecting another entity to cast votes on their behalf. A16z votes on behalf of 42 token holders, for instance.
Voting is one thing, but actually implementing a change is another. Some users have complained that delegates might as well not bother voting on proposals because they might not get implemented anyway. Indeed, Uniswap’s developers once failed to implement a fee switch proposal that overwhelmingly passed every voting round.
The fee switch proposal proved controversial because it could attract unwanted attention from regulators. Even Hester Pierce, an SEC commissioner who champions the digital asset industry among regulators, warned that a “decentralized in name only” organization could attract SEC enforcement action.
For example, one UNI token holder described a fee switch proposal that would likely gain overwhelming popular support yet would almost certainly not be implemented due to Uniswap insiders who don’t want to violate SEC regulations.
Binance UNI wallet action misunderstood
Naturally, Binance received backlash over its movement of UNI tokens. Media reported the idea that it might use its customers’ UNI to establish itself as Uniswap’s second-largest delegate. Shortly after the movement of UNI, Hayden Adams called on Binance CEO Chengpeng Zhao (CZ) to clarify his intentions.
Some people theorized that Binance planned to use its clout to convince Uniswap to support Binance’s BNB Smart Chain. However, a proposal to that effect hasn’t shown up on a list of upcoming Uniswap votes.
A Binance spokesperson told CoinDesk, “We’re currently in discussions to improve the process to prevent any further misunderstandings from happening again.”
Replying to Hayden Adams, Binance said it merely transferred 4.6 million UNI tokens between internal wallets. It claimed this transfer somehow automatically triggered the wallet’s “designate” status for Uniswap governance voting. Binance said it was currently disarming the wallet with the Uniswap team’s support.