After seeing regulators go behind cryptocurrency exchange and other platforms, Decentralized Finance (DeFi) platforms like Uniswap have started taking actions to shield themselves.
Back on Friday 23, Uniswap Labs decided to blacklist several tokens from its app interface as a result of its monitoring of the “evolving regulatory landscape”.
The announcement was made by the group, which is behind the development of Unisawp’s interface, website, blog, and other components, via a blog post.
With other DeFi projects deciding to start taking actions to protect against future actions by regulators, Uniswap Lab’s decision is limited to restricting those tokens from showing up via the official interface.
The announcement tried to minimize controversy around the decision by stating:
“The Uniswap Protocol — unlike the interface — is a set of autonomous, decentralized, and immutable smart contracts. It provides unrestricted access to anyone with an Internet connection. Similarly, this action has no impact on the Uniswap Interface code, which remains open-source, or the many other portals or locally-run instances used to access the Uniswap Protocol.”
With cryptocurrency and DeFi being born from the ideal of decentralization, it is hard to see how Uniswap Labs intends to, “continue to develop products and contribute to the Uniswap Protocol, in a way that is consistent with the broader DeFi industry’s values” after having succumbed to regulation pressure… before it was even applied.
What Does The Decision Mean For Uniswap?
With Uniswap’s official interface being the main medium by which many of its users interact with the protocol, the effect of the decision is not that different from blacklisting the tokens in their entirety.
These tokens seem to be those with a higher risk of being classified as securities by regulators like the Securities and Exchange Commission, which has taken actions against companies like Ripple Labs in the past.-
While the delisting of the tokens will only affect the official Uniswap interface, the decision was not well received by the crypto community. Many users found themselves asking why the decision was not taken via a governance vote or after consulting with the community.
The news has set a precedent that is likely to ripple and affect the protocol’s future as it is clear that Uniswap Labs has decided it has the autonomy to make impactful decisions without taking community sentiment in the process.
While UNI’s value saw only a slight decrease during the hours following the announcement, the governance token’s value quickly recovered.
Hayden Adams, the inventor of the Uniswap Protocol, was quick to point out that the “official” Uniswap interface doesn’t account for most of the volume and the decision makes it seems like, “…a good time to learn the difference between an interface and a protocol and how decentralization works.”
However, concerns around the subject of just how decentralized Uniswap really are have been on the rise for months, with the latest example of such discussion taking place some weeks ago when the DeFi Education Fund sold $10 million worth of UNI.
The Dream of True Decentralization
With founding teams having such a big influence on the way DeFi projects develop and evolve, true decentralization seems to be an aspect more difficult to achieve.
While Adam’s remarks about the impact of the decision in a technical sense are entirely correct, it seems to be forgetting about the social element it implies. Decentralization is more than a technical aspect of DeFi.
Stanislav Kulechov, the founder of DeFi protocol Aave, referred to options that projects could take to diminish the impact of founding teams by tweeting:
“DeFi front-ends should actually move to hosting on IPFS as protocols are getting more decentralized and there is less dependency on the founding teams. Also BYOF (Bring-Your-Own-Front-end) where downloading software on desktop provides accessibility to DeFi could be interesting solution from decentralization viewpoint”
Others like Gabriel Shapiro, General Counselor at Delphi Labs, suggested that forking Uniswap ‘s interface could be a viable alternative while implying that such an effort would depend on Uniswap Labs not filing a DMCA (Digital Millennium Copyright Act) takedown request.
While decentralization might be the ultimate objective of DeFi, no protocol seems to have been able to achieve it so far beyond a technical level.
The truth may be that for as long as founding teams continue to direct development efforts, regulators can put pressure on development teams, or certain parties can have an exponentially bigger impact than other users, true decentralization will only be a dream for the moment.