Uniswap is approaching $1 trillion in trading volumes of $1 trillion per year, but Uni Token owners are still watching from the sidelines.
Uniswap, the second largest distributed crypto exchange (DEX) by trading volume, is approaching $1 trillion a year, but platform token holders say success is not shared with them. UNI owners used X this week to call for UNISWAP’s rising metrics to not provide payments, revenue shares or other structural benefits.
X’s fuss has been published by UnisWap founder Hayden Adams on Sunday, September 21, boasting about the platform’s metrics, saying, “It’s always fun to see people take on Uniswap,” adding that the volume of the protocol is “always high,” and for the first time it will exceed $1 trillion.
Token Terminal data shows Uniswap is approaching its annual volume of $1 trillion.
Adams’ post sparked an immediate response in the Crypto community, which was unhappy with how things were unfolding for UNI owners. ARCA Chief Investment Officer Jeff Dorman fought back against the founders of UNISWAP, saying in an X-post Uni has become “a complete nonsense token and a changing regulatory environment in today’s market.”
“Everything about you and your VCS is irrelevant. Turn on revenue and buybacks or don’t mind tokens,” Dorman added to the X-Post.
Crypto Investor Mike Dudas also responded to an Adams post yesterday, saying, “It would be reasonable to ask why Uni Token is not worth it, five years from now, five years later[.] Almost every other major primitive primitive ever understood this[.]”
As of the time of reporting, UNISWAP (UNI) has declined 81.7% from May 2021 and 81.7% from May 2021, according to Defiant’s price tracking page.
The argument that Dex’s mass and revenues do not directly benefit UNI holders has been repeated by several prominent commentators, but some have pointed out issues with the volume itself.
Pseudonym Defi Analyst JPN Memelord wrote in Monday’s X Post that around 5% of UnisWap trading volume across all chains in the third quarter came from the “Honeypot Network.”
“The bot doesn’t even pay front-end fees to Uniswap Labs. This is volume (or potentially money laundering) for the volume,” the analyst added.
Third parties get it all
Launched in September 2020, UNI tokens act primarily as governance tools and allow holders to vote for fee structures, but so far these mechanisms have not brought true economic benefits to token holders.
In a rebellious comment from Torres Legal’s managing partner Hector Torres, Uniswap explained that for regulatory reasons, it “deliberately holds Uni as a governance token.” Torres said to the rebel:
“To activate revenue sharing will almost certainly bring it under US securities regulations, which will open the door to enforcement risk. For now, the protocol appears to be intended to keep that risk at arm length…
Analysts at Defi Report noted in a research note earlier this year that over 99% of the value created by UnisWap went to third parties such as liquidity providers, MEV bots and Ethereum Balliters. Since May 2020, UNISWAP has paid liquidity providers more than $4.5 billion in transaction fees, token terminal data shows.
However, UnisWap Labs, the developer of the UNISWAP protocol, was not left behind. The Defi report points out that the team has activated fees for users trading on UNISWAP via the web interface
The report says interface fees generated Uniswap Labs for $50 million in the first six months of its activation.
In total, the thorough fees acquired by UnisWap Labs exceeded $127 million per press time, token device data shows. Analysts at Defi Report also said UNI holders and investors “have not received previous fee income.”
Alexander Cutler, co-founder of Aerodrome Finance, suggested in the rebel commentary that one of Uniswap’s options is to “redirect some of the front-end fees that we currently go to Uniswap Labs.”
Cutler argued that the current complaints between UNI owners are due to the fact that the platform is not designed around native tokens.
Now, with Uniswap understanding what to do with Uni, Cutler believes the protocol risks its reputation as one of its main Dexs.
“Yes. Redirecting value to token holders is the risk of funding or liquidity driving from the system. The only real correction of this kind of inconsistency is to send 100% of the protocol revenue to the token holders, but Uniswap is not designed to do that.”
Uniswap did not immediately respond to Defiant’s request for comments on the platform’s plan for UNI Toconomies.
Focus on Unicane
Technically, the UNISWAP Foundation attempted to address this issue in early 2024 by allowing UNI holders to wager tokens to win protocol fees.
The March snapshot vote showed support, but plans were put on hold after the Securities and Exchange Commission (SEC) issued a Wells notice to UNISWAP Lab. The SEC dropped the charges this February, but the initiative has stagnated due to regulatory uncertainty.
Analysts at Defi Report suggested that the launch of UniChain, Uniswap’s Layer 2 protocol on optimistic superchains, ultimately UNI holders can capture the economic upside-down of the protocol by acquiring tokens to earn settlement costs and MEV revenues without receiving fees from the settlement provider.
However, like in the press time, that possibility has not been realized. Data from Defilama shows that Unisike’s total value (TVL) has been steadily decreasing since late July, and is currently at an April level of around $360 million.
Disclaimer: This article has been updated to include comments from Hector Torres and Alexander Cutler in UNI’s Toconemics. It has also been fixed that 5% of all Q3 UNISWAP trading volumes (as well as base UNISWAP volumes) can be attributed to the honeypot network.