Uniswap doesn't know what to do with the protocol after November 17th. UNI and Ethereum face a global sell-off

By World Crypto | World Crypto | 15 Nov 2020

The liquidity reward program is ending on the Uniswap platform, and the project team did not comment on its further fate.

Next week, November 17, the popular decentralized exchange Uniswap will end its liquidity reward program. The crypto community is eagerly awaiting news in which direction the project will develop after this event - but so far it has not received any answers.

Farming season closes

In recent months, the DeFi segment and the topic of profitable farming have undoubtedly remained the hottest topic in the crypto space. One of the most successful DeFi projects has been the Uniswap platform. At the same time, staking opportunities have always been among the most attractive characteristics of the project. Investors were attracted by the opportunity to receive passive income, simply by blocking a certain amount of funds in the protocol.

In this regard, the Uniswap project community was called to a conference. As expected, its results should have shed light on the future prospects for mining liquidity on the platform. In addition, such serious issues as the mechanism of corporate governance and the further direction of development of this largest decentralized exchange in the world were subject to discussion.

"No comments"

Participants in the crypto community had high hopes for the conference, as lack of clarity on such issues is potentially fraught with nervousness and volatility. The “phoning” lasted for an hour and a half, but its results disappointed most of the participants in the meeting.

It is not surprising that the most burning topic very quickly became the focus of the discussion: how to prevent a massive exodus of collateral from the protocol. Many were worried about how the project intends to proceed after the "farming season" closes and UNI farmers start looking to the side in search of profitability. Some feared repeating stories like the SushiSwap attack.

However, the person in charge of the project's strategy, Matteo Liebowitz, disappointed everyone, saying:

“Unfortunately, I cannot comment on this topic. Any decisions regarding liquidity mining should be made by community members, not the team. "

In this regard, Robert Leschner, founder of Compound Finance, noted in this regard, there are only a few days before the termination of awards, and this program will expire before the management of Uniswap can take any action.

He added that this could lead to an outflow of liquidity from $DAI, $USDC, $USDT and $WBTC, which will be bad news for traders who are fans of Uniswap as the number one decentralized exchange.

$1.2 billion ETH will break free

It seems that at the moment there is no question of extending the program or alternative pools. This means that a huge amount of UNI tokens could flood the market, and their owners will be deprived of both the four current pools of liquidity and the ability to find a replacement for them. Accordingly, this is fraught with a fall in the UNI rate, especially if the farmers decide to take profits.

Also raises questions and the impact of this event on the Ethereum rate. Currently, more than $1.2 billion of ETH is blocked in four Uniswap pools. On November 17, all this collateral will be released.

In mid-September, when Uniswap launched its pools, the ETH rate rallied, then peaking at $390. It is now trading 18% higher, so a possible profit taking cannot be ruled out.

Some of these funds can be redirected to other DeFi protocols, or even to the ETH 2.0 smart deposit contract, which launched on November 4. One thing is clear: the Uniswap protocol faces a massive exodus of users if it cannot keep them with any incentive.


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