Does Binance vote on Uniswap with users’ UNI?

DEX founder Uniswap accused the CEX Binance of using the UNI tokens of users to vote in the DAO, but in reality this would not have happened.

Yesterday @binance delegated 13M UNI from its books, making it one of the largest UNI delegates (this is only 1.3% of current delegated UNI so governance voting power remains quite distributed)

Very unique situation, as the UNI technically belongs to its users. pic.twitter.com/bwsVb1IwKR

— hayden.eth 🦄 (@haydenzadams) October 19, 2022

But first things first.

Adams accuses Binance

According to Hayden Adams, as noted in the tweet, he publicly stated that the centralized exchange had delegated 13 million UNI tokens to vote, but that these tokens technically belonged to Binance users and not to the company itself, so the UNI were used without the users’ knowledge.

Not only that, Binance in this way becomes the second largest proxy holding UNI, although Adams reassures by saying that it is only 1.3%, thus the governance remains well distributed in any case.

Binance’s response to the allegations

Of course, the response of Binance CEO CZ was not long in coming, writing on Twitter that the exchange did not use any user tokens but that it would be Uniswap’s own token delegation mode and therefore that Adams would misinterpret the situation.

Here is CZ’s tweet:

UNI transferred between internal Binance wallets, causing the UNI to be automatically delegated. This is part of their protocol, not “we intended”. Binance don’t vote with user’s tokens. Uniswap misunderstood the situation. Tokens come to popular platforms. #Binance https://t.co/KYPqFx5GrW

— CZ 🔶 Binance (@cz_binance) October 20, 2022

“UNI transferred between internal Binance wallets, causing the UNI to be automatically delegated. This is part of their protocol, not “we intended”. Binance don’t vote with user’s tokens. Uniswap misunderstood the situation. Tokens come to popular platforms.”

In turn, Adams then responded by admitting the mistake, or rather that it would only be a question and not an accusation. Furthermore, the Uniswap founder in his post explained that indeed this happens when Uniswap tokens are sent to an address that is already delegating UNI, as in the case of Binance.

I said delegated not voted…

UNI is only automatically delegated when it is sent to an address that is already delegating.

It is true we had no way of knowing if this was intentional or unintentional which is why I asked!

— hayden.eth 🦄 (@haydenzadams) October 20, 2022

Binance vs Uniswap: a war between a DEX and a CEX?

The main goal of Uniswap and reason why it was created by Adams in 2018 is precisely to be decentralized, both as an exchange and as governance. In fact, Uniswap is controlled by a DAO, Decentralized Autonomous Organization, through the UNI token. 

Those who own these tokens, as is often the case in organizations of this type, have voting rights in proportion to the number of tokens in their possession.

As much as one could open a debate on whether votes in this sense can practically be bought, the concept of decentralization lies in the notion of not having a company making decisions independently, but that the users themselves can decide the future of the platform.

In contrast, this is certainly not what happens on Binance or other centralized exchanges, where an actual company manages all the dynamics of the platform as well as the information (KYC, passwords, etc…).

This opens to the problem of security (like hacker attacks), privacy (like new regulations forcing companies to report all citizens’ data to the authorities) and so on.

What has therefore happened on Twitter is not so much a squabble between exchange founders, but a debate about platform security. One question remains and will probably always remain open: is it better to use a CEX or a DEX?