It is rare that a governance proposal gets a lot of media attention, but the last one from the Uniswap Foundation did (e.g. here, here, and here). Last Friday, they submitted a proposal to activate the so-called “fee switch” in the Uniswap protocol. If the proposal passes – and most observers expect it will – Uniswap token holders who stake and delegate their UNI tokens will receive a part of the fees that users of the protocol pay when swapping tokens on the decentralized exchange.

For anyone who has been following Uniswap, this should not come as a surprise: Uniswap’s fee-switch has been long debated, and its activation was, in my personal opinion, long overdue.

So, what’s all the fuss about?

The first thing that caught people’s attention was the price reaction of the UNI token: Right after the proposal was published, its price started to climb, increasing by as much as 78% in a matter of an hour and adding a whopping 3bn USD to UNI’s market cap. These kinds of numbers get people excited. Who wouldn’t want the value of their favorite protocol increase by more than 50% in a day? But as the dust settles, many people are asking themselves which broader lessons can be learnt from the Uniswap case.

Here are the two aspects which I think every builder, operator or investor in the crypto space should understand:

Governance matters

If you had any doubts before whether or not governance is important, the Uniswap case should settle that question once and for all: the price reaction of the UNI token, which was purely based on a single governance proposal, speaks for itself. But beyond the price, the proposal has led to much debate in the crypto community. Governance frameworks, regulatory implications, protocol design – these and many more topics are now being discussed in the community and crypto media as a result of the Uniswap Foundation’s governance proposal. Suddenly, governance is front-page news – and rightly so.

Value accrual is king

While fundamentals tend to fade into the background in every bull market, with memes and narratives driving price movements, UNI’s reaction is a stark reminder that the market does care about value accrual. This is not to say that other factors do not matter, especially in the short term. But prices cannot sustain irrationally high levels forever without anything behind them. It is reassuring to see that the market does value sound fundamentals.

So much for Uniswap. But since you are reading this in the Q Blog, you might ask yourself: What are the implications for Q?

In short: None. At least, not directly.

I am saying this not because I don’t like what Uniswap is going to (most likely) implement. Quite the opposite: While I think that some of the details of the proposal can surely be debated, it is clearly a strong move in the right direction.

But: the Q community, including its initiators and early developers, have taken care of both topics highlighted above from the very beginning: Governance and value accrual mechanisms are at the very heart of the Q Protocol, and I believe Q’s design is best-in-class in both respects. I know that this may sound terribly immodest, but, as the saying goes: “It ain’t braggin’ if you’ve really done it”. And those who have been part of the Q community for a while will confirm that these are things we deeply care about.

Q’s governance system is unique in that it combines what we call the “trinity of governance” within one protocol: Rrule setting, enforcement and dispute resolution. Furthermore, Q allows other applications to “opt in” to its governance features, thereby creating “shared governance security”. People and protocols using Q do not need to engage in guesswork on how protocol decisions are made – Q’s governance is both transparent and secure.


With regards to value accrual, Q introduces the novel concept of governance fees that arebased on the value of applications supported by Q. This makes the protocol independent from both transaction fees and inflation subsidies, an ailment of many protocols. Fees are distributed to key stakeholders of the system: Q token holders, validator nodes and root nodes. This aligns economic incentives and ensures that those who contribute to Q’s security are adequately rewarded. In other words,

value accrues where value is created.

Technically, the distribution mechanism is based on an elegant claiming function that can be triggered by any Q token holder. While the details of the smart contract design are beyond the scope of this blog post, it is important to note that the mechanism is highly gas-efficient and avoids unnecessary steps to be taken by Q token holders.

Let me close with this: I encourage everyone to study governance frameworks and tokenomics design of Q and of other projects. The recent developments in Uniswap should prove that it’s worth it.