Decentralized exchange Uniswap has locked up a staggering $1.79 billion in total assets just two days after the launch of UNI, its native governance token.
Uniswap shows who is boss
As per data on DeFi Pulse, Uniswap liquidity pools now lock up over 2.4 million ETH alone, with other assets combining to make a total of $1.79 billion. The figures are over thrice than the first week of September—when investors moved to Uniswap fork SushiSwap to lock their assets up.
Image: DeFi Pulse
For the uninitiated, Uniswap is a fully decentralized on-chain protocol for a token exchange on Ethereum that uses liquidity pools instead of order books. Any users, regardless of nationality or KYC status, can quickly swap between ETH and any ERC20 token and earn fees by supplying liquidity.
The protocol also allows users to create their own market by supplying an equal value of ETH and an ERC20 token: The market creator can then set the exchange rate, which shifts through trading due to Uniswap’s “constant product market maker” mechanism.
UNI token 101
So far, the platform served as a pure-play DEX without a token. But competition from the likes of SushiSwap — and DEXs on other blockchains like Binance Smart Chain — spurred Uniswap to release its token last week.
The token briefly traded at under a dollar, as per data on CoinGecko, but surged shortly after to $2.4. Investors then piled into the token over the next two days, with UNI briefly trading at over $8.40 on Friday night — a rise of over 500%. It trades at $6.32 at press time.
Much of the buying pressure could be explained by the lure of taking part in community proposals, discussions, and governance on Uniswap. As per its token prospectus, a total of 1 billion UNI tokens will ever be available, of which 60.00% belongs to Uniswap community members, 21.51% to team members, and future employees with 4-year vesting, 17.80% to investors with similar vesting, and 0.069% to advisors.
Over 110 million UNI are in circulation at press time. A perpetual inflation rate of 2% per year will start after 4 years, ensuring continued participation and contribution to Uniswap at the expense of passive UNI holders, the prospectus said.