TheBRRR’s Thoughts

Crypto assets are ripping higher this morning as markets digest some key news from late last week.

Specifically, the foundation behind the decentralized crypto exchange Uniswap made major waves on Friday.

The US-based team announced a proposal (read: plan) to start sharing the protocol’s massive trading fees directly with holders of the UNI token.

The change arrives after nearly four years of rejection and unwillingness to implement any value-accrual mechanisms despite generating billions in revenue and an underperforming token.

The main question: why now?

The speculation is that the SEC has thrown in the towel (or will imminently lose) its ongoing legal battles with Coinbase and Ripple. A second-order effect is that Uniswap’s legal and leadership feels comfortable that sharing revenue with token holders will no qualify the token as a security.

The legality of token issuance and value accrual has long been a risk/overhang for decentralized finance, so a legal win of this magnitude would unlock billions of incremental investment capital and boost developer mindshare.

On cue, we also saw the key lawyer spearheading the SEC’s anti-crypto efforts leave the agency for a law firm that regularly defends crypto firms.

These are our two stories today.

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Uniswap’s Token Surges on Fee Distribution Proposal

WHAT HAPPENED:

• Announcement Pump: Decentralized exchange Uniswap’s governance token, UNI, experienced a significant price surge, nearly 62%, following the Uniswap Foundation's proposal to introduce a fee mechanism benefiting UNI holders. This mechanism aims to distribute protocol fees pro-rata to holders who have staked and delegated their votes, potentially generating substantial annual revenue based on current fee generation rates.

• Fee Revenue: Over the past 180 days, Uniswap has generated approximately $305.8 million in fees from trading activity. If the proposal is implemented, it could distribute anywhere from $61 million to $153 million annually to UNI holders, depending on the fee percentage taken.

• Announced Logic: The initiative seeks to address issues of free-riding and apathy within the governance system, highlighting a lack of active participation among UNI holders.

WHY IT MATTERS:

• Market Impact: The immediate market reaction underscores the crypto community's positive reception towards proposals that aim to provide direct financial benefits to token holders, reflecting broader interest in mechanisms that align governance participation with financial incentives.

• Regulatory Landscape: The initiative might be navigating through a positively-changing US regulatory environment, suggesting a shift in how DeFi protocols approach governance and profit distribution without crossing regulatory boundaries.

• DeFi Evolution: This proposal could set a precedent for other DeFi platforms, indicating a trend towards integrating more traditional financial mechanisms into the governance structures of decentralized networks, potentially enhancing their sustainability and attractiveness to investors.

Blockworks

SEC Lawyer Joins Crypto-Friendly Law Firm After Leading SEC’s Anti-Crypto Unit

WHAT HAPPENED:

• Ladan Stewart, a key figure in the SEC’s enforcement division focused on crypto and cyber litigation, has left the agency to become a partner at the international law firm White & Case.

• "Crypto is here to stay—that’s become very clear with the launch of a slew of Bitcoin exchange-traded funds," Stewart remarked, highlighting her intention to cultivate a crypto and cyber defense practice at White & Case.

• During her tenure at the SEC, Stewart spearheaded significant actions including a lawsuit against Coinbase for operating as an unregistered securities exchange and was involved in the ongoing legal battle with Ripple over its XRP token.

WHY IT MATTERS:

• Regulatory Scrutiny: Her role in high-profile SEC actions reflects the agency's aggressive stance on crypto regulation under Gary Gensler’s leadership. Stewart's transition to a defense role in the private sector may offer insights into evolving regulatory strategies and defense mechanisms for crypto entities.

• Crypto's Legal Horizon: Stewart's assertion that "crypto is here to stay" and her plans to develop a crypto and cyber defense practice highlight the enduring nature and growing legitimacy of crypto as an asset class. Her move to White & Case, a firm with significant global reach and a diverse client base, indicates the increasing need for specialized legal services in the crypto space amidst a turbulent regulatory environment.

Decrypt

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll