Uniswap Censors Itself
Uniswap took a big step on Friday and self-censored certain tokens from its platform. A large number of the censored tokens are “synthetic” tokens. Many of these synthetic tokens are “synthetic stocks”. Essentially, they mirror the exact price movements of stock prices. It is a roundabout way of trading stocks on the blockchain. Trading stocks requires securities trading approval and these blockchain platforms do not have that. Uniswap removed the tokens from their platform/UI because they fear regulatory crackdown for letting unregistered securities trade on their platform.
Decentralized?
This is big news because Uniswap is supposed to be a decentralized, permissionless platform. And yet, Uniswap took the executive decision to remove tokens. Furthermore, Uniswap has a governance token (Uni). There was no governance proposal to remove these tokens. The developers simply decided they needed to go, so they went ahead and removed them.
This proves a couple things. Firstly, Uniswap governance is a sham ( most governance currently is). The idea of having decentralized governance is pretty meaningless when at the end of the day the developers can do whatever they want. Furthermore, Uniswap is not decentralized. The argument Uniswap made is that these tokens were simply removed from the UI. Users can always interact with the contracts directly and swap whatever token they like. However, no one is going to do that. At the end of the day, the developers made their own executive decision and eliminated the trading of these tokens on their platform.
Many people like to believe DeFi is decentralized but that is obviously not the case. If Hayden Adams were to be handcuffed and threatened with jail time, I can guarantee you he would accept any deal regulators offered him, including taking down any tokens they don’t like. It is becoming apparent that true decentralization means a totally anonymous dev team. The regulators can’t arrest someone if they do not know who to arrest. But then users are being asked to connect their wallets and interact with a platform created by anonymous devs. Which means if there is an outright rug pull/scam there is no one to pursue legally. It is like being stuck between a rock and a hard place.
This, ultimately, is what gives Bitcoin its edge. It is pristine. There is no one person synonymous with the project. Someone like Blockstream can try and hijack Bitcoin for themselves, but it will never work. Bitcoin does not have to face these regulatory problems. It will continue producing blocks and marching forward whether regulators like it or not. They can cut off the fiat onramps like Coinbase if they like, but they can’t stop peer to peer trading on a local basis.
Whenever someone calls Bitcoin prehistoric or outdated, remember this story. I have no proof of this but I would bet that Uniswap, Aave, Synthetix, maybe even Chainlink, etc. will all be getting phone calls from the SEC in the coming months. Bitcoin will not. There is no one to call. I do not know how this plays out, but the power struggle between DeFi and regulators is going to come to a head at some point in the near future.