Hype of the Week : Uniswap
DeFi, the place where sushi chefs ‘vampire mine’ unicorns and where unicorns rise from the dead — only to devour the sushi that buried them six feet under to begin with…
Thus begins the tale of Uniswap, a project seemingly dead in the water after its patricidal kin Sushiswap drained 80%($1.27 billion) of its liquidity pool (LP) within 3 days. Now, a mere two weeks after Sushiswap’s collapse and migration of $830 million from Uniswap, Uniswap launched its own token “UNI” on Wednesday. At the time of writing, UNI has doubled in value in the space of 48 hours, already been listed on Coinbase and has seen its tokens valued at over $5 billion just this morning.
On Unicorns and Sushi
Born at the backend of 2018, Uniswap allows users to trade without an order book, ensuring the absence of third-party interference and a high degree of autonomy and anonymity. On Uniswap, LP’s are held, which can be repleted by liquidity providers. However, earnings for liquidity providers were only possible through the LP’s trading fees — if liquidity is actively being provided. Once liquidity providers exit the pool, earnings will no longer be made.
Conversely, Sushiswap allows liquidity to enter a pool, with rewards being earned via the SUSHI token. With the SUSHI token, liquidity providers are still able to make use of the pools protocol fees even when exiting the pool and no longer provide liquidity. Additionally, the SUSHI token has bestowed token holders with governance rights — effectively granting users ownership of the protocol. Such governance rights where absent in Uniswap…until this week.
On Wednesday, the 16th of September, Uniswap introduced UNI to the world stating, “1 billion UNI have been minted […] and will become accessible over the course of 4 years.” With UNI, holders are set to partake in the communal ownership not just of Uniswap’s governance, but the community treasury, protocol fee switch’, eth ENS and Uniswap’s Default list.
Naturally, aiming to enter the market with a bang, Uniswap airdropped 400 UNI to anyone who had traded using Uniswap before the 1st of September 2020. The statement made by Uniswap notes “15% of UNI [150,000,000] can immediately be claimed by historical liquidity providers, “users and SOCKS redeemers/holders based on a snapshot ending September 1, 2020”. The initial 400 UNI were valued at roughly $1,400, however, it is now believed that the value of those UNI is roughly $2000.
The release of UNI at this point in time was undoubtedly inspired by the whole Sushiswap affair. However, behind the creation may lie other motives. With Ethereums ETH 2.0 potentially ready to be launched in November, it is plausible that Uniswap, who had already released their version 2 in May, were planning on releasing the token and a Uniswap v3 alongside ETH 2.0.
If you wish to read more about UNI and Uniswap, follow the links below:
Author: Stephan Eduard Pàl Roth