Uniswap Community Synopsis

​​This is the ninth of a series of 12 discrete stories about how a variety of web3 projects (ranging from crowd-funding platforms and NFTs to DeFi and gaming) have approached decentralized community building. You can read an aggregated overview of insights across all of these projects here.

Fully Decentralized ⬤ ⬤ ⬤ ⬤ ⬤ Fully Centralized

Every great project gets its start somewhere, and Uniswap – today’s largest decentralized cryptocurrency exchange – is no exception. 

Back in 2017, at the advent of early Ethereum protocol development, a lot of ideas and possibilities were tossed to the community – on blogs, on Twitter, and even on Reddit – including this thread where Ethereum founder Vitalk first envisioned how decentralized exchanges might work. While a lot of people read Vitalik’s blog and saw that Reddit post, one engineer, Hayden Adams, decided to pick up the idea and build a prototype when he lost his full-time job. 

As Hayden recounts in this “history of” Uniswap blog post, the early days were a series of twists and turns to get the protocol just right, before announcing v1 live via a Tweet on November 2, 2018 at Devcon 4. According to that overview, approximately $30,000 was deposited into those v0 smart contracts immediately prior to launch, enabling swaps of about $100 each. In this way, Uniswap’s origin (and Hayden’s story) mirrors the narrative of several other crypto-native projects that I explored in this research – including PartyBid, Loot, and Nouns – which similarly rewarded proactive individuals who just started to build. 

Over the next two years, traction grew and Uniswap supported $20 billion in volume across 250,000 unique addresses. They also secured more than $1 billion in liquidity from 49,000+ liquidity providers (LPs) on their platform, which started to put more pressure on the ecosystem to respond to demands of the community.

Eventually, a pseudonymous developer known as Chef Nomi forked the Uniswap blockchain to create a “clone protocol” called SushiSwap, in part as a way to better influence the future of the community and protocol. Initially, SushiSwap incentivized users to contribute Uniswap LP tokens in exchange for SUSHI’s own token – which ultimately drained nearly $800 million in liquidity from Uniswap.

As one of the most high-profile cases of a so-called “vampire attack,” this external maneuver forced their hand, and Uniswap launched their own governance token, $UNI in September of 2020, via an airdrop to wallets of people who had previously engaged with the protocol. This set the stage for a new era of community-directed governance.  

“SushiSwap’s vampire attack of Uniswap sent a clear message to other leading DeFi protocols. If they did not meet the community and industry’s expectations, they could be forked.” (via Gemini)

Things for Uniswap today look a lot more robust than in those early days. There’s Uniswap Labs, the company – with close to 100 full-time employees – and there’s Uniswap the DAO, which runs the protocol. The web interface is Uniswap’s preeminent product (and the primary way that people interact with the protocol) – then there’s the underlying governance system, enabled by the UNI token.

Over the past few years, as more and more crypto newcomers discovered Uniswap through the crypto bull market run-up, their daily trade volume now rivals that of centralized exchanges, like Coinbase, and Uniswap has become known as “the most beloved dApp” within the ecosystem and community.

With 90,000+ people in the Discord, today’s version of community at Uniswap consists of a mixture of developers building on top of the protocol, liquidity providers, or token swappers who use the web interface. Interestingly, Uniswap has adopted somewhat of a “church and state” mentality with regard to centralization. Uniswap the DAO manages the protocol; Uniswap Labs is a C-corp that builds products on top of the protocol. Employees don’t have a right to create proposals. 

As with many community-driven protocols, you can follow along with the growth and developments of the community through their public governance portal. You can see how this played out through a recent example from March - July 2022, when Uniswap v3 was ultimately deployed on Celo through a process including a temperature check (to gauge interest from the community), consensus check, governance proposal, and ultimately, the launch itself.

Notably, the very first successful governance proposal (from December 2020) was funding the early version of the Uniswap grants program, which set out to further the growth of the Uniswap ecosystem by “rewarding talent early with developer incentives, bounties, and infrastructure support.” The community just recently voted to evolve this into a more formal entity, the Uniswap Foundation just last month (August 2022), through a process that was discussed & voted upon in real time.

There are two notable components to unpack in the community origin story of Uniswap. First – the team’s quick response to the sudden forking of their protocol showed an impressive ability to course-correct and listen to their users. While the perfect model of community-driven governance may still be a work in progress, their quick ability to react in real time to the market and respond (by creating and deploying their own token) kept them in the game. As many teams know, this is easier said than done.

Second – their selective decentralization has served them well. That the core team has elected to retain control over the product (but not necessarily the protocol) is key to their layered community involvement. “Decentralization at all costs” is not the end goal, particularly when mainstream adoption is in sight. Due to the fact that much of Uniswap’s retail investors and users of the web interface are relatively new to crypto, the team recognized the importance of maintaining some centralized frameworks to onboard the next generation of crypto users. One interesting example of this is the choice to maintain a centralized support queue for their web interface vs. try to manage one-off requests through Discord channels or DMs. (Ultimately, this protects users who may otherwise put themselves in a vulnerable state to fall prey to hackers or scammers.)

• Uniswap Labs - core team of ~90 employees which operates as their own C-corporation; they execute things like hiring

• Uniswap DAO - UNI token holders can vote based on proposals; any decisions related to the protocol are proposed, discussed and voted upon 

• Uniswap Foundation - while still very new, according to their proposal, the Foundation will provide grants to builders, researchers, organizers, academics, analysts, and more to grow the Protocol and plan for its future.

• Community / Discord – anyone using the protocol – not governance, per say, but moderators manage the Discord, and assigned other helpers with permissions can chime in as needed

• “Just build it” – Hayden’s initial decision to pick up an idea put out to the ecosystem is just about one of the best ways for any new builder to “tag in” to the world of web3

• Reading the room – The balance with any community-led project is choosing between the needs of the community and the needs of the core team; over time, Uniswap’s progressive shift toward more decentralization has kept pace with much of the external expectations

• Transparent docs & governance – With such a large breadth of their community (and so many eyes on the project, regulators included), Uniswap’s very visible governance is often looked to as an exemplar in the space

Hindsight makes it easy to look back on a project like Uniswap and see success as predestined from day one: After all, by today’s standards, a decentralized exchange makes so much sense. But it certainly wasn’t always the case. Like a lot of front-runners in any market, there was almost certainly an element of “right place, right time, and right person” that played into their initial traction. And Hayden (inspired by Vitalik’s initial idea) chose wisely. After all, for most major technological shifts, timing is everything. **

Special thanks to Stephanie Bell for their contributions to this narrative. You can also view the complete repository of articles and references across all projects as part of this study.**