Uniswap Token – The Token That Broke Ethereum

Uniswap Token – The Token That Broke Ethereum

By Violet64 | cryptochat | 17 Sep 2020


Over the DeFi boom that has occurred on Ethereum a common theme with new platforms was giving out a governance token. COMP, YFI, CRV and many others are examples of this where tokens were bought or farmed by users in order to be able to vote on the future of the platform. Users could create proposals such as increasing or decreasing token emissions, adding new tokens to a platform, or changing fees on a platform and vote on them. The idea of governance tokens is nothing new as Maker has been around for ages as the governance token for DAI vaults. But perhaps the sole giant of the DeFi space left without a governance token was Uniswap, the incredibly popular Decentralised Exchange on the Ethereum Blockchain.

 

The UNI token

A surprise announcement was made around 20 hours prior to this article from the Uniswap team that their governance token was launching called UNI. It was finally joining all the other big DeFi players in the governance token space. Some speculate that the token was a response to the also incredibly popular sushiswap that attempted to create its own fork of uniswap governed by the sushi token, however this has not been confirmed. Following this announcement was perhaps one of the craziest launched in DeFi ever as 400 UNI tokens were given to every single address that has ever interacted with the Uniswap contract, as well as millions of UNI given to all previous liquidity providers based on their size and time in Uniswap. At the launch the price of UNI was around $1, this meant that the majority of DeFi users who have surely used Uniswap (maybe even on multiple addresses) now just found themselves with $400 out of thin air. Many people rushed to sell this and get their free money, while others waited (or slept).

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Currently the token is around $3.5, this means that anyone who has used Uniswap just received around $1.4k from nothing (even more if you had multiple addresses). However, one would think that because of all this free money the price would quickly fall. It has, however, shown great growth since the launch and amazing stability despite all the selling. This is likely from massive players and exchanges wanting a piece of the pie of the largest DEX in all of crypto.

The tokenomics

I suggest you read all about the token from the official post from Uniswap here. However, the simple breakdown is UNI has a maximum supply of 1 billion tokens to be released over the next 4 years. 40% is given to the team and investors over a 4-year vesting period. While the other 60% is being handed out to the community. 150 million UNI was given out to Uniswap users, any liquidity providers (going back since the launch of V1) shared 49.2 million UNI. 100.6 million UNI was given out equally to every single address that has ever interacted with Uniswap as 400 tokens each. The small amount remaining was given to SOCKS token holders. Additionally, 20 million UNI are allocated to 3 ETH/stablecoin pools and the ETH/WBTC pool equally to be handed to liquidity providers in those pools over the next 2 months. Future allocations will be decided by the community through voting in governance.

The value of UNI

Unsurprisingly, an announcement this big from such a major player in DeFi set everyone into a mania, and immediately Ethereum gas fees started to skyrocket to insanely high levels. People who were claiming their free airdrop were glad to waste some money in fees for the massive gains and whales willing to buy a lot of UNI barely felt the fees. The combination of both of those brought the Ethereum network to its limits with Uniswap and its token using up nearly 50% of the network’s entire fees for a few hours. Clearly this token must posses some incredible value in order to have such an effect.

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And there lies the value of the UNI token. It is very valuable for large players in the market to have a stake and say in the biggest DEX out there. It has over 1 billion dollars in liquidity and attracts no less than $400 million in volume every single day. This means the value of Uniswap is absolutely massive and controlling even a small part of it could potentially make these players very rich (and incredibly powerful). As such it is no surprise that whales and exchanges are rushing to buy UNI in order to have some control over the future of the platform. Whether that is a good or bad thing remains to be seen, however. In the meantime, if you needed some extra money and have ever used Uniswap then congrats, go pay your bills or buy a new game (or 10). If you wish to actively vote in the future of Uniswap it might be worth it to hold onto your tokens (and even buy up some more).

 

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