Uniswap DAO prepares to expand $5bn treasury beyond UNI. Here’s why

Uniswap DAO is voting on the first step to diversify its treasury.
The DAO holds $5 billion in its reserves.
Almost all of its reserves are in UNI tokens.

Uniswap DAO, crypto’s third-richest protocol with a $5 billion treasury, has been content to keep its reserves denominated solely in its native UNI token. But that may be changing

With Uniswap exploring a new revenue-sharing model that will include token holders, the DAO, which administers the decentralised exchange, is seeking ways to extend its runway without depleting the the project’s reserves.

Like other DAOs, or decentralised autonomous organisations, Uniswap uses its treasury to fund its DAO’s activities, including paying contributors and marketing the project among other functions.

“We should be in a position where if the DAO needs to fund certain initiatives, there are reserves to draw from without causing significant impairment to the token price.”
— Uniswap DAO proposal

With mostly UNI tokens in its treasury, Uniswap’s reserves have mirrored the price swings of its native token and the fortune of the broader crypto market.

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The value of Uniswap’s treasury rose to nearly $19 billion at its peak in 2021 but crashed to $1.5 billion during the 2022 market collapse — such volatility in the value of Uniswap’s endowment is not ideal, the proposal said.

To prevent further instability, the DAO is now voting on a proposal to create an advisory committee to help Uniswap diversify its treasury.

Apart from diversification, the committee’s goal is to research ways to transform Uniswap’s treasury from a dormant reserve of UNI tokens into a fund pool that can earn yield and additional revenue for the DAO, the proposal said.

“We should be in a position where if the DAO needs to fund certain initiatives, there are reserves to draw from without causing significant impairment to the token price,” the proposal said.

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Dubbed the Uniswap Treasury Working Group, the committee will explore plans to manage the protocol’s reserves and create additional revenue for the project, the proposal stated while recommending a $74,000 budget for eight weeks of research work for members.

Early voting figures show significant support for the proposal with 74% approval among participants, data from offchain voting platform Snapshot shows.

The exercise, which ends on March 31, is a temperature check vote — a preliminary poll used to gauge sentiment among DAO members before the proposal moves to a final vote to execute the plan.

While there is support for the proposal, regulatory concerns persist given that action taken to diversify the treasury would involve selling UNI tokens from Uniswap’s reserves. That sale could have tax implications.

The committee may also explore the recent DUNA framework to navigate such regulatory concerns.

DUNA stands for Decentralised Unincorporated Nonprofit Association Act, a new law passed in the US state of Wyoming that recognises DAOs as legal entities.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.