Uniswap and Participatory Equity

Nov, 22 2020
4 Minutes

This week, I returned to Uniswap for the first time in over a year and was met by a very pleasant surprise - a reward of 400 UNI tokens!

400 token Uniswap rewards

At the time of writing, each UNI token is worth about $3, so this was an "airdrop" of about $1,200.

Every user of Uniswap (someone who attempted to make a transaction on the platform) from before the September 16th announcement was eligible for tokens. Other more engaged users were awarded more (for example, those who bought the Uni-socks "SOCKS" were given 1,000 UNI).

Rewards for SOCKS holders

In addition to the warm fuzzies, this was the first time I had felt - as a user - that I was being brought into a community via a financial stake.

For a while now, companies have been offering equity based compensation to employees, but now, we've arrived at equity based participation.


Historically, equity has been something that founders get to determine and investors get to buy into.

Founders then set aside some small number of shares for future employees, as compensation for their labor and time.

And together, these founders, investors, and employees get to enjoy the upside of the company. The users are left with a good product, but their upside is capped to the benefits of the product. All of the data that they produce, all of the "learning" that they contribute to the company - at best they'll get an Amazon gift card for their focus group participation. Most of the time, they get nothing.

When I worked at Uber, I received UBER shares for my work. Uber drivers, even though they were awarded a one time bonus at the time of the IPO, did not recieve UBER shares.

That's unfair.


Our system is fundamentally flawed.

I'm not going to get into morality, geopolitical conflict, racism, oppression, and other issues that come up when we talk about our financial system. Those are all serious and important. However, for now, let's focus on inequality.

Profits in our society are an emergent property of monopoly and oligopoly. In a world of perfect competition, there are no profits. In a world of perfect competition, the "users" benefit the most because all value is passed on to the consumers in the form of cheaper, better goods.

Where there are profits, there is wealth accumulation in the hands of a few. This is not necessarily zero sum, and in fact, it's often additive. In an ideal circumstance, if a company builds a tool that provides everyone with a lot of value at a very affordable price, and it captures some profit, then everyone might be better off because of this.

But the issue is profits tend towards inequality. Those with equity in the system benefit from unbounded upside. On the other hand, users benefit (if they benefit at all) from a product that has a bounded positive impact on their life.

And what's crazy is that users play a massive role in the success of the company. Users provide feedback, which informs the company on what to do. Users generate data, which the company analyzes and funnels through statistical models to make more decisions.

Viewed this way, the YC mantra of "talk to users" is extractive. Cynically, they might as well say "perform highly one sided informational extractions with people who you want to transform into addicts".

So if users are contributing to the decisions of the company, doesn't it make sense that they should see some of the financial upside?

There's no reason we can't be creating "community" options pools alongside our employee options pools. If only we, as a society, did that - perhaps we'd be able to combat the specter of inequality.

Well... Uniswap already did that.


Crypto has been experimenting with different ways to promote broader community equity and participation for some time now. ICOs were one wave, but it's questionable if that model really works. Airdrops were another attempt, but randomly gifting wallets felt a bit weird as it didn't align incentives.

Uniswap's token distribution is different.

For starters, it's the most successful dApp. Unlike the vast majority of crypto products, it's already extremely useful as it allows people to move their crypto from one token to another in a completely decentralized manner.

Second, the distribution was tied to behavior that aligned with the project's goals. Uniswap didn't reward any random person, it rewarded users.

Third, the distribution was significant. They didn't just airdrop the equivalent of a Starbucks gift card. This was approximately $1,200 worth of tokens. But most interestingly, these tokens allow users to have a voice and vote on governance decisions. This is what ownership looks like.

And then, what I love most about it all, is the manner in which Uniswap did it. This is from their official blog post:

400 UNI are claimable by each address that has ever called the Uniswap v1 or v2 contracts. This includes ~12,000 addresses that have only ever submitted failed transactions — love you guys.

"Love you guys" - has a company ever distributed $1,200 worth of equity to its users and told them that they're loved?

The Uniswap team really made it feel like this is a project that is meant to be owned by the community. It's like the Green Bay Packers of crypto projects (the Green Bay Packers are an NFL team, but unlike other teams, they're structured as a non profit that is publicly owned by fans).

Uniswap and the Green Bay Packers


The pace of innovation in crypto is amazing.

The open source nature of projects means copying happens instantly. Bad actors get heavily penalized as the community swarms against them. Failed projects teach everyone what not to do. Every success is shared and copied by all.

And now, users can get small ownership stakes even if they just tried a product.

It's a hive mind that's creating a truly participatory financial system.

Incredible to watch.