Uniswap’s Bold Legal Move Aims to Democratize DAO Power

The Uniswap Foundation has announced a significant transition in governance structure, aiming to formalize its Decentralized Autonomous Organization (DAO) through a new legal framework known as the Decentralized Unincorporated Nonprofit Association (DUNA). This proposal, named DUNI, is designed to operate under Wyoming law and provides a legal structure that supports both decentralized governance and operational capabilities, including tax compliance, contracting, and legal defense [1]. The move is intended to facilitate the activation of the long-discussed “fee switch,” a mechanism that would allow Uniswap Governance to redirect a portion of liquidity provider (LP) fees—potentially between 10-25% on a pool-by-pool basis—to the DAO’s treasury or UNI token holders who stake and delegate their tokens, without increasing costs for traders [1].

The DUNI structure includes a $16.5 million allocation in UNI tokens to address past tax obligations and fund a legal defense budget, alongside a $75,000 UNI allocation for administrative services through 2026 [1]. This legal structure is also intended to incentivize governance participation, which currently stands at less than 10% of the total UNI supply, by redistributing fees and enhancing the value of UNI tokens. However, the potential implementation of the fee switch may impact liquidity provision by reducing LP rewards. Additionally, it raises regulatory risks, especially concerning compliance with securities laws and tax requirements [1].

The proposed governance model aims to mitigate past governance centralization issues, where some delegates hold significant voting power, by providing legal protections and enabling broader community participation. While the DUNA structure is expected to reduce institutional influence, critics argue that these protections may not fully address concerns about governance centralization [1]. The fee switch proposal has been under debate since 2022, with previous proposals failing due to regulatory concerns and voter apathy. The DUNA structure is expected to streamline these governance processes, although its success will depend on community approval and the ability to navigate regulatory challenges [1].

In parallel with the DUNA proposal, the Uniswap community has approved several initiatives to support the growth of the Unichain network and Uniswap V4 protocol. These include a $165 million funding plan under the “Uniswap Unleashed” initiative, which allocates resources for a new grants program, liquidity incentives, and the initial steps toward implementing the fee switch mechanism [1]. Additionally, a separate proposal allocated $113 million to support a treasury delegation program, aiming to boost the ecosystem with periodic evaluations every three months. The community has also approved a proposal to distribute 10 million UNI tokens (valued at approximately $60 million) to underrepresented DAO delegates with less than 2.5 million UNI in voting power but high participation rates, with the goal of enhancing accountability and engagement [1].

Uniswap’s transition to a more formalized governance structure is underscored by its substantial on-chain presence, including a $5.4 billion treasury and $20 billion in weekly trading volume. The community has also passed a proposal to amend the governance process, aiming to streamline decision-making, with nearly 100% community support recorded in a December 2024 vote [1]. These developments signal a broader effort to align the protocol’s governance with its decentralized ethos while addressing operational and regulatory challenges. The upcoming summer of 2025 is expected to be pivotal, with plans for a bundled vote on both the DUNA structure and the fee switch mechanism [1].

Source: [1] Uniswap Foundation Proposal for 'DUNI' Highlights the Growing Trends Embedded in DAO (https://www.tekedia.com/uniswap-foundation-proposal-for-duni-highlights-the-growing-trends-embedded-in-dao/?srsltid=AfmBOor5Grw7i2n6Do3nSpZuJn0rb_AFRyFbJsQPVS3T0ZbPI1cPU1M)