Analysis of Uniswap Delegation
0xb730
September 13th, 2022

INTRODUCTION

This post explores Uniswap delegation data to assess whether delegation is a contributing factor to the levels of concentration/decentralization observed in on-/off-chain voting on Uniswap governance proposals.

BALANCE CATEGORY CLASSIFICATION

The following categorical definitions are used in this post to describe addresses with different UNI balances. For example, Whales are defined as those addresses with one million or greater UNI, Dolphins as those with balances between 100k – 1M, etc.

KEY FINDINGS

Data as of September 10, 2022.

  1. A super majority (95%) of addresses self-delegate. Yet, the vast majority (91%) of balances are delegated to other addresses. See Table 1.

  2. Self-delegation percentages segmented by balance category demonstrate that large UNI holders (e.g. dolphins, whales) often delegate to others while lower UNI holders typically self-delegate. See Table 2.

  3. An evaluation of balance category mix pre- and post-delegation shows that although large UNI holders delegated to others, it is to other large UNI holders. See Tables 3-4.

  4. Delegation has no material impact on the balance proportion of lower UNI holders.

    1. Delegation does impact the relative share between dolphins and whales, with whales increasing from 89% of the total balance pre-delegation to 95% post-delegation. See Table 4.

    2. There is a corresponding drop in dolphins’ share from 10% pre-delegation to 4.4% post-delegation.

  5. In our prior analysis, delegation was hypothesized to be a potential significant factor in calculating metrics such as Nakomoto coefficient, Herfindahl-Hirschman Index (HHI), and the Gini coefficient for assessing the level of concentration/decentralization in Uniswap’s on-/chain governance voting.

    1. Based on the findings of this post and scores depicted in Table 5, delegation is deemed to only have a moderate impact on observed decentralization metrics.

    2. Depending on the metric analyzed, the primary contributing factors to the observed decentralized scores in on-/off-chain voting is due to the base underlying distribution and/or relatively low governance participation, not delegation.

  6. The post-delegation scores in Table 5 show an opportunity to improve on-/off-chain voting decentralization scores even if assuming the existing distribution of addresses that have entered the governance process by either delegating or self-delegating remains constant.

    1. While there are over 10,000 addresses with a positive balance post-delegation, the highest vote participant count in on-chain governance has been the recently successful Proposal 2.24: Create the Uniswap Foundation with 2,450 unique addresses.

    2. The relatively high engagement in Proposal 2.24 is encouraging, but there is an opportunity for even further engagement which would be expected to further improve the Nakamoto coefficient and HHI scores.

  7. Technical improvements in the delegation process such as fractional delegation (e.g. Franchiser) could also have a significant positive impact. This would open new opportunities for higher UNI holders to not have to solely delegate to other dolphins and whales; allowing flexibility to allocate a mix to a greater variety of interested persons across the spectrum of UNI holdings.

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