Sebastian Sinclair

Decentralized exchange trading activity has begun to pick up steam, with some of the DEX sector’s biggest players booking a notable bump in trading volumes this week.



Ethereum-based Uniswap was leading the pack toward the end of the work week in New York, hovering around the 50% mark of total DEX volume, equating to a week-over-week double-digit jump to around $12 billion, data from <a href="https://defillama.com/dexs" target="_blank" rel="noreferrer noopener">DeFiLlama</a> shows.



Its closest rival, PancakeSwap was holding steady around 8% via the same market cap metric — up about 20% since the week prior, clocking in around $2.1 billion. The DEX still leads on <a href="https://twitter.com/Blockpour/status/1623668554137751552?s=20&amp;t=ihhtwohhnDZvzdZcS-9Kjw" target="_blank" rel="noreferrer noopener">trader count</a> on Binance’s BNB Chain.



Notable DEXes Curve and SushiSwap have also seen significant increases in trading volumes,  jumping 12% and 63% respectively, in the last seven days through early Friday morning in New York. 



Average increase for volumes across all DEXes popped 16% or so on the week. 



Unlike centralized exchanges, which are run by a single entity, decentralized rivals are built on decentralized infrastructure — including smart contracts — allowing traders to swap assets directly with one another, eliminating the need for an intermediary.&nbsp;



Their popularity has continued to grow following the fourth quarter collapse of the centralized FTX — leaving the funds of retail and institutional investors alike frozen to this day.



Decentralized exchanges that were battle-tested last year, have come out on top, according to Toby Chapple, head of trading for the Australian trading firm Zerocap.



“The use of smart contracts on public blockchains cures a large part of counterparty-related issues related to centralized single-point entities,” Chapple told Blockworks. “The smart contracts themselves handle the crisis exactly as the rules that govern them said they would — they liquidated market participants as per the terms of the DEX.”



That’s now especially true for some market participants up in arms over the SEC’s move against centralized entity <a href="https://blockworks.co/news/kraken-settles-sec-crypto-staking-program">Kraken to shutter its US staking operations</a>. Hester Peirce, a long-tenured SEC commissioner, went as far as to <a href="https://blockworks.co/news/sec-commissioner-speaks-out-kraken">blast her own agency as “paternalistic” and “lazy”</a> in terms of Gensler’s most recent crypto crackdown. 



The centralized exchange settled with the SEC without confirming, nor denying fault, and agreed to pay a $30 million fine in the process.  



“Staking is never going away,” Bill Hughs, senior counsel and director of global regulatory matters at ConsenSys, told Blockworks in a statement. “Access to it will only grow because that is what people all around the world will demand.”



Staking remains crucial to scores of <a href="https://blockworks.co/news/proof-of-work-vs-proof-of-stake-whats-the-difference">proof-of-stake networks</a>, providing a mechanism for reaching consensus — and providing reward-based incentives to validate transactions and ensure a blockchain’s stability and security. 



DAO governance participants — and other individuals looking to accrue cryptocurrencies outside of the scope of regulatory scrutiny — have continued to tap DEXes in large numbers as an alternative to centralized routes. 



The sentiment appears to be increasing, according to Chapple, as exchanges continue to roll out offerings designed to win over user trust, even considering current complications.



“Going forward, the growth of DEX&#8217;s will need to address the smart contract vulnerabilities to hacking risk that seems to still plague the industry from time to time, before mainstream adoption by TradFi can be contemplated,” Chapple said.



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DEX Trading Activity Picks Up Steam as Markets Spurn Centralization

Bessie Liu

The Uniswap Foundation is hoping to revamp the popular decentralized exchange’s governance process, giving community members more time to discuss and gauge proposals.



As is the case with DAOs, holders of Uniswap’s native token UNI can vote on potential adjustments to the protocol. They can also delegate their tokens to a third party who votes on their behalf.



Currently, proposals must pass three milestones:



<ul>
<li>First, a “temperature check” needs 25,000 UNI ($150,000) in votes across a three-day poll.</li>



<li>Then, a “consensus check” needs 50,000 UNI ($300,000) in votes on an iterated proposal across a five-day poll.</li>



<li>Thirdly, final proposers must attract 2.5 million UNI ($14.85 million) in delegations, while the actual proposal needs 40 million UNI ($237.6 million) in votes to reach quorum.</li>
</ul>



The Uniswap Foundation has pitched replacing the first three-day poll with a seven-day “Request for Comment” (RFC) period.



Devin Walsh, executive director of Uniswap Foundation, said in a post that lengthening the first period would allow the community to properly formulate opinions and provide better suggestions.



Another change would rename the second-phase “consensus check” in favor of an amended “temperature check,” which would dramatically raise the quorum threshold from 50,000 UNI ($300,000) to 10 million UNI ($59.4 million).&nbsp;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="665" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png" alt="" class="wp-image-42042" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=396 396w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=402 402w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=337 337w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/12/2caa9a2014409ca04e50731493c1b0b5d6157294-1024x665.png?w=1297 1297w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">The Uniswap Foundation provided this handy governance chart (<a href="https://gov.uniswap.org/t/rfc-update-community-governance-process-changes/19718" target="_blank" rel="noreferrer noopener">source</a>).</figcaption></figure>



There are 37 Uniswap delegates who wield more than 2.5 million UNI to vote, Walsh said in the proposal. This means proposers only need to gather support from just two of those delegates to move their proposals along to the final stage. The Uniswap Foundation hopes to change that.



“Increasing quorum to [10 million] UNI increases the effectiveness of this phase as a signal of community support,” Walsh said. An earlier <a href="https://gov.uniswap.org/t/proposed-simplifications-to-the-uniswap-governance-process/15906" target="_blank" rel="noreferrer noopener">version</a> of the Foundation’s proposal sought a lower limit, at 5 million UNI ($29.7 million).



Walsh believes increasing the minimum quorum can drastically reduce the chances of lower quality proposals moving to the final phase. The final “governance proposal” phase would remain unchanged, including its 40 million UNI quorum threshold.



Uniswap&#8217;s native token, which DAO participants must hold to have their say, has lost 65% of its value this year, about the same as bitcoin and ether.



<h3>Uniswap Foundation is meant to make governance smoother</h3>



Uniswap, which runs on Ethereum, is a cornerstone of the DeFi landscape and the largest decentralized exchange by trade volume. 



While its volume has <a href="https://dune.com/queries/7867/15678" target="_blank" rel="noreferrer noopener">dropped</a> about 80% since the start of the year, it still handles about $900 million per day — more than three times second-place Curve, which is <a href="https://www.coingecko.com/en/exchanges/decentralized" target="_blank" rel="noreferrer noopener">processing</a> around $200 million. For scale, leading centralized exchange Binance <a href="https://messari.io/exchanges" target="_blank" rel="noreferrer noopener">currently</a> sees more than $7 billion in trade each day.



DAO members voted to create the Uniswap Foundation in August to <a href="https://blockworks.co/news/uniswap-to-create-foundation" target="_blank" rel="noreferrer noopener">reduce governance friction at Uniswap</a>, especially around the creation of high-impact and high-value projects.&nbsp;It was designed to improve ecosystem navigation and provide $60 million in grants to community initiatives over the next few years.



An estimated <a href="https://mirror.xyz/devi731.eth/Dy705L0V2MufftJ-x4zgAhfILw2yE18RY0lNsVN3mEA" target="_blank" rel="noreferrer noopener">$1.8 million worth of grants</a> have already been awarded to 14 different projects, spread across three categories: Protocol growth, community growth and governance stewardship.



“One of the Uniswap Foundation’s mandates is to enable better decision making by the DAO, and a pain point has been the community governance process,” Walsh told Blockworks.



Voting for its governance shakeup went <a href="https://snapshot.org/#/uniswap/proposal/0x387b5e811e9673359b98729af5c7f14a50b7d0ea9b4dcf9278686b238932e25d" target="_blank" rel="noreferrer noopener">live on Snapshot</a> on Wednesday and will last a total of seven days, ending on Dec. 21. At press time, 34 <a href="https://snapshot.org/#/uniswap/proposal/0x387b5e811e9673359b98729af5c7f14a50b7d0ea9b4dcf9278686b238932e25d" target="_blank" rel="noreferrer noopener">million UNI</a> ($202 million) has been allocated to voting in favor of the Foundation’s proposal, with only 33 UNI ($200) voting against.



“We are pleased that this proposal has received so much feedback from delegates, and are excited for these changes, if approved, to both increase the process&#8217;s effectiveness as well as reduce its operational overhead,” Walsh said.



David Canellis contributed reporting.



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