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DEF responds to the selling of 500,000 UNI: it has discretion in terms of funding and will publish its annual budget within 90 days

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DEF said the sales represented only 5 per cent of UNI's daily trading volume and were unlikely to have a negative impact on UNI market prices.

Defi Education Fund (DEF) today issued a statement in response to market queries regarding the sale of 500,000 UNI tokens it holds. The DEF says the fund has discretion in how it operates, that the board can handle the grants it receives, and that the selling is open and transparent. The sold UNI was converted into USDC for future operations.

Rhythmic Blockbeats translates DEF's full post as follows:

When the Uniswap token holders approved the creation of the DEFI Education Fund (DEF), they authorized the DEF to deploy 1 million UNI over the next few years. Due to the unpredictable and rapidly changing regulatory environment, the DEF has also been given considerable discretion in its operations, as stated in the proposals: "Given the dynamic and somewhat unpredictable state of global policy proposals, we believe that the funding committee should have considerable discretion to allow flexibility and speed."

On Monday afternoon (12 July), DEF sold half of its 1 million UNI quota (500,000 pieces) in exchange for the USDC to start work and to fund future operations.

Why this deal?

Because the team anticipated that the vast majority of DEF fees would be denominated in US dollars, UNI's funds had to be diversified into US dollars. Diversifying half of the total grant of $1m provides the DEF with a sustainable budget to weather any market downturn and allows the DEF to start work quickly.

Time is important. Regulators and policymakers around the world are now taking a close look at DEFI. While some of them understand the benefits of DEFI, many others are suspicious of a decentralised financial system without the intermediaries they normally oversee. Last week, Senator Elizabeth Warren sent a letter to Securities and Exchange Commission (SEC) Chairman Gary Gensler asking for regulatory action that would directly affect existing decentralized trading protocols and applications. European regulators are exploring rules that could seriously hamper innovation.

In short, DEF sees regulatory risk as the biggest threat to DEFI's services and freedoms, which society has become accustomed to over the past few years. DEF seeks to protect these through a pragmatic approach, by funding advocacy by legislators and regulators representing the DEF industry.

How and why do we sell

While it would be preferable to use Uniswap for balance sheet diversification, there is not enough liquidity today to support a sale of this size.

Instead, Genesis was chosen as a market maker because

(I) reputation as a top market maker,

(ii) a competitive charging system,

(iii) Quick and easy to use.

None of the sales mechanisms are private or hidden, and all transactions are open to public audit. We asked Genesis to sell 500,000 UNI on July 10, and by around 3 p.m. EDT on July 12, Genesis had completed the sale of UNI at an average price of $20.40. Later on Monday, we sent 500,000 UNI from our Multisig to Genesis and they sent us about $10.2 million at USDC. In the future, we hope to use the UNISWAP Protocol to achieve any diversification. (We expect that, barring any unforeseen events, the volume of future sales will be lower and the liquidity of the Uniswap agreement is expected to grow).

Finally, we note that this sale represents only 5% of UNI's daily trading volume and is unlikely to have a negative impact on UNI market prices. Tuesday's price drop at UNI is in line with a broader decline in cryptocurrency assets.

Ensure transparency and manage potential conflicts of interest

We are committed to transparency in the deployment of funds in accordance with the approved recommendations and are taking a number of steps to ensure this.

We will announce our annual budget in the next 90 days. Financial activities will be transparent. The DEF Policy Director, who will determine and manage the annual budget, will work full-time on the Commission's approved market competition rates. The recruitment process for DEF's policy director is still ongoing. We encourage more applicants to apply.

Use Tally Failsafe Tools, Uniswap's governance will be able to block transactions and withdraw funds. Fail-safe is currently under review and will be introduced as soon as it is safe for use in production. Over a period of four to five years, we hope to deploy the capital in a pre-loaded manner and put half of it into Failsafe.

The authors of the DEF proposal do not belong to the commission, nor do they participate in the use of the commission's funds. Harvard Law School's Blockchain and Fintech Initiative is the author of the DEF proposal. The seven members elected to the board -- six of whom are respected lawyers -- have been advocating for innovative technology and consulting technology start-ups for decades.

The DEF committee members are in line with the success of DEFI, but most are not compensated for sacrificing a lot of time to do related work. The DEF Steering Committee includes some of the strongest and most dedicated legal and organizational minds in DEF. Four of the seven members of the committee hold senior legal positions at top DEFI software development companies and have been working independently and on their own time for years to educate DEFI to make better use of the DEFI ecosystem.

Committee member Larry Sukernik is the founder of the DAO-focused company Reverie. The last two commission members, Sheila Warren and Katie Biber, have publicly supported the development of DEFI and have extensive experience dealing with regulators around the world. Most members volunteer their time and are recognized by other highly respected industry representatives, including Jerry Brito of Coin Center and ConsenSys' Matt Corva.

The voting representative is independent of the team that has already been authorized. Multiple student groups received proxy votes from token holders, who sought to distribute voting influence and encourage participation from a wider range of retail users. The student groups voted entirely independently. Two representative groups -- Berkeley's Blockchain and Michigan's Blockchain -- voted against the DEFI Education Fund proposal; Two others -- the MIT Bitcoin Club and the UCLA Blockchain -- abstained; Those who voted yes submitted lengthy postings explaining why they voted yes.

Members of the Committee are not allowed to have any financial activities at DEF during the seven-day window during which UNI transactions are conducted. In a completely unrelated transaction, the DEF committee member sold UNI for $50,000 on behalf of a donee group of which he was a member, at about the same time that DEF sold UNI. The $50,000 deal follows the sale of UNI by DEF. In future, we will prohibit Committee members from participating in UNI transactions for a period of seven days in order to avoid any perceived conflict or confusion.

About the future

We are confident that the DEFI Education Fund will contribute to the success of DEFI, as well as the growth and success of its programs and participants. Legislators and regulators are becoming increasingly aware of DEFI, but much more needs to be done to ensure that the value proposition and potential of DEFI is communicated and understood. Anyone who wants to build the DEFI project or on top of it will benefit from legal clarity and an informed regulatory environment. This is a critical time to ensure that their actions are effective and allow for future innovation. Finally, to ensure continued transparency, DEF will issue monthly community updates on progress, grants, and strategies.