In our continued commitment to driving innovation in decentralized governance, Uniswap Foundation is excited to announce a grant allocation of $200,000.00 to Butter. This blog post dives into the significance of this initiative for Uniswap Protocol Governance and the broader DAO landscape.

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A goal of Uniswap Foundation’s Governance vertical is to build an effective delegate stakeholder group whose actions and votes will support the long term sustainability of the Uniswap Protocol (Protocol). To that end, we are constantly in search of tools that can help to align decision-making processes with the collective goals of the Protocol. With that in mind, we’re excited to fund a grant of $200,000.00 to Butter to research and develop the first iteration of ‘Conditional Funding Markets,’ a mechanism designed to autonomously distribute funding to teams building on top of the Protocol. This novel approach to Protocol Governance uses mechanism design principles to enhance the effectiveness of governance decisions.

Butter’s Conditional Funding Markets will streamline and optimize Uniswap Governance’s funding models by integrating mechanism design—a branch of economics rooted in game theory. By working backward from the desired outcomes of the Protocol, Butter aims to build a grant funding model that reduces biases and focuses on achieving desirable results for the Protocol.

Conditional Funding Markets aim to predict the impact of proposed funding requests on key performance metrics critical to the Protocol's success. For instance, they will assess potential effects on important factors like the increase in order flow attributable to a specific Protocol integrator. While future iterations of this mechanism could autonomously distribute funds based on these predictions, the initial version will serve an advisory role, with funds being distributed manually.

If successful, Butter’s Conditional Funding Markets will introduce prediction markets as an option for Uniswap Governance to make funding decisions.  Their deliverables are scheduled over a 6-month timeline, structured in four phases:

1. Development and Integration: Building the first version of the smart contract funding mechanism and the infrastructure required to measure its results.

2. Testing: Butter, with administrative help from the Uniswap Foundation, will decide on a target metric and using Conditional Funding Markets, allocate 200k OP remaining from Optimism Grants Season 1, Cycle 1, Phase 0 amongst teams who apply with a plan to positively impact it.

3. Deployment: Running markets to aggregate information about each applicant’s chance of success into a prediction on where to allocate the funds so as to maximize their impact.

4. Observation: Because Conditional Funding Markets pay projects before they contribute, carefully observing the output of the teams that are funded by the mechanism will be vital to determining the mechanism’s success.

Butter is led by a team with a deep understanding of both blockchain technology and economic theory. At the helm is the CEO and co-founder, Vaughn, a former crypto founder whose insights into mechanism design have shaped Butter’s innovative approach to governance.

"Our goal is to reduce the noise in governance and focus on the signals," says Vaughn. "By applying mechanism design, we can transform how decisions are made in the DeFi space, making them more predictable and aligned with the overall goals of the community."

Butter's co-founder Alex Lajarre is a mathematician, who brings rigor to the initiative. “We’re partnering with Uniswap Foundation to change how we govern protocols—from listless token voting to market-driven decision-making” says Alex.

Uniswap Foundation is thrilled to work with Butter to revolutionize permissionless market-driven decision-making. This initiative is part of a broader strategy to reduce barriers to effective governance and ensure that Uniswap remains at the forefront of the decentralized finance revolution. By integrating Butter’s predictive funding models, we are taking a significant step towards a more stable, efficient, and community-focused governance.

*Special thanks to Kristen Stone, who is a Strategic Advisor to the UF. She has been instrumental in scoping this grant, and will be managing its delivery. *

As part of Uniswap Foundation's commitment to transparency and metrics-driven funding, updates on Butter’s project will be shared with the Uniswap Protocol Governance community in the coming quarters.