8% rebound is just an appetizer? Uniswap's major upgrade may turn UNI around completely

Author: BitpushNews

The largest decentralized exchange on Ethereum, Uniswap, is planning to put a legal "armor" around its governance organization. On August 11, the Uniswap Foundation (UF) submitted a proposal to the community to register the Uniswap DAO as a DUNA (Decentralized Unincorporated Nonprofit Association) in Wyoming and establish a new entity called DUNI.

If the proposal is approved, the Uniswap DAO will become the largest decentralized organization to adopt this framework to date. This is not only an important step towards DAO compliance but may also provide a legal basis for the long-standing "fee switch."

DUNA: The "Legal ID" and Shield of DAO

1. Global Context of Legalization

The governance principles of decentralized autonomous organizations emphasize on-chain autonomy and permissionless participation, but this model often lacks a legitimate subject identity within real legal frameworks. Without legal identity, DAOs cannot sign contracts, hire lawyers or accountants, open bank accounts, nor can they respond to lawsuits as independent entities in legal disputes.

Wyoming was the first state to introduce the DAO LLC bill in 2021, providing a limited liability company structure for on-chain organizations. In March 2024, the state further introduced the DUNA bill, allowing nonprofit DAOs to gain legal recognition with a lighter structure. This legislation is seen as a milestone in the global compliance of DAOs.

For ordinary investors, DUNA can be understood as the legal ID + shield of a DAO:

• Legal ID: After registration, the DAO can sign contracts with law firms and auditing agencies, and report to tax authorities like a company.
• Shield: Members are no longer personally liable for the DAO's legal and tax issues. It's like buying "governance insurance"; in the event of legal disputes or tax repayments, the risk is borne by the entity, not the individual wallet.
• Operational Upgrade: Under the DUNA structure, the DAO can hire service providers, retain professional advisors, and manage funds and compliance matters more efficiently.
• Simple Understanding: DUNA is a bridge for the DAO to move from the "gray area" to "legal compliance," without sacrificing the principle of decentralization while providing protection for real-world operations.

Proposal Details: Funding Allocation and Execution Mechanism

According to the proposal, the establishment of DUNI will be accompanied by a series of funding arrangements and management structures:

• $16.5 million equivalent in UNI: To pay historical tax liabilities (expected to be under $10 million) and establish a legal defense budget.
• $75,000 equivalent in UNI: To be paid to the Wyoming company Cowrie, responsible for tax reporting and financial statement preparation. Cowrie co-founder David Kerr was involved in drafting the DUNA bill.
• Role of Uniswap Foundation: To act as the ministerial agent of DUNI, responsible for document submission, contract signing, and hiring service providers.
• Role of Cowrie: As the administrator of DUNI, providing ongoing tax and financial compliance services.

It is worth noting that organizations under the DUNA structure are not allowed to distribute dividends to members, unless it is reasonable service compensation or cost reimbursement. This means that even if the fee switch is implemented in the future, funds flowing into the DAO treasury cannot be directly distributed to token holders but must be used for public expenditures, research and development, or incentives through governance decisions.

Fee Switch: A Potential Revenue Engine

The fee switch is a reserved feature in the Uniswap protocol that can divert a portion of the liquidity providers' (LP) fee income to the DAO treasury. For example, from the existing 0.3% trading fee, 0.05% may be directed to a fund controlled by the DAO.

According to DefiLlama data, Uniswap users paid over $123 million in swap fees in the past month. Even if only 1/6 of that is diverted to the DAO, it would mean approximately $20.5 million in new monthly revenue, annualizing to over $240 million. This would significantly enhance UNI's governance and fund allocation capabilities.

In recent years, multiple proposals for the fee switch have been shelved due to compliance risks. The uncertainty of U.S. securities law poses potential legal risks for directly distributing protocol income to token holders. The DUNA structure is seen as a key step in overcoming this legal barrier.

Governance and Power Dynamics: The Collision of DAO Ideals and Reality

Although DAOs are ideologically decentralized, the governance reality of Uniswap is far more complex than it appears.

1. Controversy of Power Centralization

U.S. Congressman Sean Casten pointed out in Congress that the Uniswap Foundation can unilaterally influence governance directions, which may undermine its decentralized nature. While UF denies having excessive power, in practice, significant proposals are often initiated and pushed by the foundation, with a relatively limited approval rate for community proposals.

2. Influence of Venture Capital

In 2023, UF withdrew a fee switch proposal due to new questions raised by a stakeholder. Paradigm partner Dan Robinson accused this of being a concession to large venture capital firms, with widespread speculation that the party involved was a16z. Notably, a16z publicly praised DUNA as the "oasis for DAOs," raising concerns among some community members that legalization may come with an increase in capital influence.

3. Balancing Decentralization and Efficiency

In on-chain governance, it is often difficult to achieve both decentralization and decision-making efficiency. Some projects (such as LayerZero Foundation and Yuga Labs) have chosen to re-centralize some power to improve execution efficiency. Uniswap's DUNA proposal is, to some extent, also seeking this balance.

On the day the proposal was announced, UNI briefly rose nearly 8% before retreating, indicating that the market holds positive expectations for compliance and revenue reform. However, historical data shows that UNI remains at a low level:

• All-Time High (ATH): May 2, 2021, $44.97
• Current decline from ATH: approximately -75.76%

On-chain data shows that Uniswap maintains its leading position among decentralized exchanges across multiple networks, including Ethereum, Polygon, Arbitrum, and Optimism, with monthly trading volumes stable between $30 billion and $50 billion. However, the low value capture rate of protocol income is a long-term valuation bottleneck for UNI.

Outlook: Compliance or Power Restructuring?

If the preliminary vote on August 18 passes, the Uniswap DAO will become one of the first large decentralized organizations to adopt the DUNA structure. This could not only mark a milestone in industry compliance but also change the value capture logic of UNI.

However, opportunities and risks coexist:

• Positive Side: Compliance reduces legal risks, and the implementation of the fee switch is expected to bring stable capital inflows, enhancing the value support for the UNI token.
• Potential Challenges: Centralization of power and the influence of capital may exacerbate governance divisions within the community.

For investors, the DUNI proposal is not only an adjustment of governance structure but also an industry experiment on "how DAOs mature." The outcome will affect not just the future of Uniswap but may also provide a model for balancing compliance and decentralization for the entire DeFi industry.