In the letter
- The total value stuck in Uniswap contracts has climbed to nearly $ 1.6 billion, doubling in two days.
- The increase was precipitated by Uniswap’s publication of distributed governance using the UNI token.
- SushiSwap, a cloned exchange competitor, saw TVL drop 30% over the same two-day period.
Uniswap is back on top of the DeFi world.
The extremely popular decentralized exchange based on Ethereum, which has shown tremendous growth in transaction volume in recent months, has seen a huge increase in the amount of money flowing through its platform after just launching its own governance token, UNI.
Previous booming decentralized financing protocols such as Aave and Curve Finance had knocked it off the top of the ‘total value locked in’ charts on DeFi Pulse, a metrics site that tracks the industry. Now, just 48 hours from the launch of UNI, Uniswap has almost doubled the amount of Ethereum locked in during the last day. That figure now stands at around $ 1.6 billion in ETH.
Total Locked Value (TVL) is a commonly used metric to compare the relative popularity of different DeFi protocols, with more locked values approximately translating to where the attention of the DeFi community is focused at any given time. DeFi is a catch-all term used to describe an emerging set of decentralized applications built on blockchains such as Ethereum. DeFi allows users to take out loans using digital assets as collateral and earn interest and other rewards by locking cryptocurrencies into smart contracts that make it easier to trade between different tokens and other financial transactions.
Just two days ago, TVL on Uniswap totaled less than $ 750 million. It has more than doubled since then, much of the increase likely driven by the introduction of liquidity incentives, allowing users to receive UNI tokens in exchange for liquidity to designated pools on the decentralized exchange. The return to the top of the TVL charts is proof that if imitators like SushiSwap can clone protocols and offer their own reward programs, there is little substitute for established brand recognition, first-mover benefit and perhaps more importantly, a legion of loyal users .
A growing number of DeFi projects have released governance tokens in recent months, including Compound crypto lending platform and Token Exchange and Indexing Protocol Balancer. Governance tokens are a key part of decentralized or distributed governance, where the community of users and supporters of a given blockchain-based application uses the tokens to vote on the direction and decisions of the project, including the adding new features or paying community grants to fund additional research and development.
Governance tokens can be traded in the open market and are often assigned a value based on the earnings (in Uniswap’s case, via trading fees) of the protocols they control.
The distribution of governance tokens has taken various forms, with the UNI version of Uniswap being the most recent. This release saw tokens with an initial value of over $ 1,200 distributed to any wallet address that had interacted with Uniswap prior to September 1 (now worth over $ 2,500), as well as additional rewards for them. users who had previously provided digital assets used to facilitate the exchange between different tokens on the Platform.
The post also included allocations of 40% of UNI governance tokens to the investors, advisors and team members who helped build Uniswap, which was to be acquired over four years. The remaining 60% of governance tokens will be distributed to liquidity providers over the same four-year period.
SushiSwap, a Uniswap clone made possible by the public nature of smart contracts on the Ethereum blockchain, saw the locked-in value rise to more than $ 1.4 billion after the release of a governance token scheme, intended to attract the volume of transactions and the liquidity of users away from Uniswap and on their own platform. At the time, Uniswap had not yet released its own governance token or liquidity mining rewards. After UNI launched on Tuesday, the stuck value in the SushiSwap imitation exchange fell almost 30% in just two days. That figure is now less than $ 525 million.
The UNI version of Uniswap has been widely applauded by the DeFi community who have long been waiting for the distributed governance trend to find its way into the world’s most popular decentralized exchange by volume. Now it’s up to the Uniswap community to decide what to do next.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.