The DeFi Education Fund (DEF), an organization funded by Uniswap to spearhead lobbying and educational initiatives in support of the decentralized finance sector, has defended its sudden move to liquidate half of its UNI treasury earlier this week.
The organization said it needed to convert the funds into stable assets to weather crypto market volatility.
In May, the DEF was conceived in a Uniswap governance proposal from the Harvard Law Blockchain and Fintech Initiative, with the entity being formed earlier this month after the vote passed with a treasury of 1 million UNI tokens, worth more than $18 million at current prices.
Despite indicating the UNI would be sold over the course of years, on July 12, the fund suddenly announced it had organized for half of its war chest to be liquidated into USDC by market maker, Genesis Trading.
Adding to community concerns DEF committee member, Larry Sukernik liquidated Larry Sukernik liquidated 2,612 UNI (worth approximately $50,000) around the time of the fund’s $10 million sale.
Responding to widespread backlash from the crypto community, DEF published a blog on July 14 seeking to justify its large sell-off.
The organization said “the vast majority of DEF’s expenses will be dollar-denominated,” and that diversifying half of the funds into a stable asset “provides the DEF with a sustainable budget to weather any market downturns.”
Claiming that time is against the industry as regulators circle, DEF states it sold the UNI fund to “begin its work and fund future operations.”
The post also emphasizes the discretion over fund management afforded to DEF, quoting the Uniswap proposal as saying:
“Due to the dynamic and somewhat unpredictable state of global policy proposals, we believe the grant-making committee should have considerable discretion to allow for flexibility and speed.”
The foundation also rejects claims the sale had a significant impact on the UNI markets, asserting the sale represented less than 5% of daily UNI trade volume, and that UNI’s subsequent drawdown after the sale was in line with the broader crypto meta-trend.
In reference to concerns over Larrk Sukernik’s liquidation of UNI, a new policy means that DEF members will no longer be allowed to make UNI transactions within a seven-day window of DEF treasury activity in future. The post also emphasizes that Sukernik’s transaction occurred after the sale had already been completed.
Further, the DEF will hire a full-time policy director tasked with managing the organization’s annual budget, which is set to be published within the next 90 days. The organization also plans to use the Tally Failsafe tool, which will allow Uniswap governance to block transactions and revoke funds from the DEF. Failsafe is currently being audited.
The blog failed to placat DeFi Watch founder, Chris Blec, who responded on Twitter with a lengthy list of lingering concerns, including how the fund’s committee member were chosen and how UNI token holders can be assured funds will be appropriately disbursed in future.
What assurances do UNI tokenholders have that members of the proposed committee will not pay funds to themselves or to other organizations that they have a vested interest in?
— Chris Blec (@ChrisBlec) July 14, 2021
Medium blogger ChainCatcher also emphasized the concentration of votes supporting the fund’s creation among Uniswap’s top backer, also noting it strange that only UNI holders should bear the expense of political lobbying for the broader political sector.