A16z deploys all its UNI bags to vote against bringing Uniswap on BNB Chain

The move, which is widely seen as a bridge war between two crypto VC behemoths, Andreessen Horowitz (a16z) and Jump Crypto, brings up the old question of the flaws of token governance.

On February 5, venture capital firm Andreessen Horowitz (a16z) used its 15 million UNI holding to vote against the final community proposal to deploy the latest Uniswap iteration on BNB Chain, sparking a furious debate about the influence of the so-called “whales” — big token holders in crypto speak — over the protocol’s governance.

At the press time, a16z represents the largest voting block among 39.5 million votes cast (3.9% participation rate). Still, the firm’s “against” votes were not enough to sink the proposal, as its current tally is at 62% for and 38% against, due to a number of other whales — Compound Labs’ Robert Leshner (5.76m UNI), GFX Labs (4.92m UNI), Blockchain at Michigan (3.5m UNI), and argentHQ (3.24m UNI) — voting in favor.

Community proposal to deploy Uniswap V3 on BNB Chain via Wormhole
Community proposal to deploy Uniswap V3 on BNB Chain via Wormhole. Image: Tally.xyz

Uniswap’s UNI token grants its holders the right to vote on proposals that might further the protocol’s development and improve its ecosystem. The token was designed with the idea that Uniswap would be owned and operated by its users — but now it seems to be largely dominated by whale accounts.

The great battle for the bridge

So, what is all the fuss about Uniswap on BNB Chain? Doesn’t a16z want the protocol it backed to expand its user base? Well, the real source of disagreement, in this case, is not the actual deployment on BNB Chain, but the choice of a bridge to facilitate it.

In a January 31 off-chain community vote, the majority of UNI holders (62%) voted to select Wormhole as a bridge provider, while LayerZero, its leading competitor, came in second with 37%. The remaining two options — Celer and deBridge — received a negligible number of votes.

Read also: Uniswap Price Prediction 2023. Should I buy UNI?

“To be totally unambiguous, we at a16z would have voted 15m tokens toward LayerZero if we were technically able to. And we will be able in future Snapshot votes. So, for the purposes of a ‘temperature check’, please count us this way,” Eddy Lazzarin, head of engineering at a16z, commented on a forum.

A16z was unable to participate in the bridge selection poll because its tokens are custodied with Fireblocks, which prevents them from voting on off-chain proposals, Abdullah Umar, the head of governance at Blockchain at Michigan, explained in a Twitter thread.

Wormhole is currently backed by Jump Crypto, a major VC firm that also bailed out the bridge when it was exploited for $320 million in February 2022. Meanwhile, LayerZero is backed by a16z and Sequoia Capital, another crypto VC firm that heavily invested in FTX. At the time of publication, Jump Crypto hasn’t voted yet on the final proposal. The voting period will last until February 10, so there’s still enough time for the tides to turn.

“When the forums aren’t enough to persuade delegates, conversations commence on Telegram and private calls. Since our governance team Blockchain at Michigan has 3.5M Uni votes, we were contacted by Jump, LayerZero, and a host of other stakeholders,” Abdullah Umar revealed on Twitter.

“It quickly became a lobbying effort,” he added.

And to spice things up, a16z could potentially control not just 15 million UNI but 41.5 million, split across eleven different wallets, the blockchain analytics firm Bubblemaps said on Twitter. Altogether, these wallets hold 4.15% of the UNI supply, while 4% is enough to pass any proposal.

“In summary, those wallets can collectively change the outcome of any governance vote,” Bubblemaps concluded.