Uniswap may be suspended for a long time. Who will be the biggest beneficiary?

"The rewards are over!"

At 8 o'clock this morning, the countdown for Uniswap liquidity mining reached 0, and was replaced by this sentence, announcing the end of the two-month liquidity mining.

Source: Uniswap

Two hours later, Uniswap's locked value was reduced to US$2.1 billion, and liquidity decreased by more than 40% in the past 24 hours.

However, the idea of ​​continuing liquidity mining has not stopped. Five hours before the end of liquidity mining, Uniswap founder Hayden Adams called on everyone to vote for the liquidity mining proposal through Twitter. The initiator of the proposal, Coopathtroopa, said: "Calling all Uniswap 'politicians', the time has come.

Source: Twitter

Uniswap may be suspended for a long time

The Uniswap community’s attempt to extend the liquidity mining time began on November 13.

At 1 a.m. Beijing time on the 13th, under the organization of monet, a core member of the Uniswap community, members of the Uniswap community discussed the follow-up plan of Uniswap liquidity mining through an online meeting.

During the one and a half hour discussion, community members expressed their opinions. Some supported extending the liquidity mining time by reducing rewards, while others supported stopping mining directly.

Robert Leshner, founder of Compound, is a supporter of liquidity mining. He suggested that the community maintain incentives for the ETH/USDC and ETH/WBTC liquidity pools, narrow the rewards to the two most important liquidity pools, and reduce the rewards by half, but it will not hinder the trader experience.

Many community members agree to stop mining. Zack Fincher believes that liquidity mining has caused token dumping to a certain extent. Some Uniswap holders even believe that liquidity mining should be stopped and all remaining UNIs should be destroyed.

But in the end, the discussion did not reach a definite result, and Uniswap stopped liquidity mining as originally planned.

The reason behind this is that UNI’s asset governance mechanism seems to be able to tell us the answer.

The total issuance of UNI is 1 billion, and according to the UNI governance parameters, only 1% of the total supply (10 million UNI) can submit a governance proposal, and 4% of the total supply (40 million UNI) must vote in favor to reach the legal number of people. In addition, a Uniswap user "Snuffy" reported that he locked a large amount of UNI in the liquidity pool, so he had no way to participate in the community governance vote.

Furthermore, even if the proposal is finalized at the meeting on November 13 and enters the voting process, it cannot be executed on November 17. According to the initial governance parameters of UNI, the Uniswap voting period is 7 days, plus a 2-day execution delay, it will take at least 9 days from proposal to execution.

The official also did not give any guiding opinions. According to SushiSwap leader 0xMaki, the Uniswap team participated in the meeting in a passive manner, and Matteo (Uniswap strategy leader) did not answer any questions. As Austim Capital said, "Don't think of UNI tokens as a bet on the Uniswap team. This is decided by the community."

Source: Twitter

After 4 days of waiting, the proposal jointly drafted by Coopathtroopa and monet entered the "TempCheck" stage. The proposal suggested retaining the original liquidity pool, reducing all liquidity pool rewards by 50%, and continuing liquidity mining for 2 months. The total reward is 10 million UNI, that is, 5 million UNI rewards are released every month. This means that the pool reward is reduced from 2.5 million UNI per month to 1.25 million UNI, and the block reward is reduced from 13.5 UNI to 6.75 UNI.

Source: Twitter

However, it is difficult to put this proposal into practice. At present, it is in the first step "Temp Check", which requires at least 25,000 UNI support to enter the next step of voting "Consensus Check", and at this step, at least 50,000 UNI support is required to enter the on-chain voting stage. If everything goes well, the proposal will be implemented on December 4.

As of 16:30 Beijing time today, 48,300 UNIs supported the proposal in the "Temp Check" vote, while 37,300 UNIs opposed it, with a support rate of 56.16%. The vote will last until November 20. If the current voting status is maintained, the proposal will be able to enter the second round of voting. However, it can also be seen that there are also many users among UNI holders who support stopping liquidity mining, which brings considerable uncertainty to the passage of the proposal.

The next stop for liquidity — SushiSwap?

Uniswap stopped liquidity mining, and the liquidity of the four staking pool currencies (DAI, USDT, USDC and WBTC) and Ethereum changed dramatically. Among them, USDC liquidity dropped the most, with more than half of the liquidity lost within 24 hours. Ethereum locked-in volume fell below $800 million, a 40% decrease within 24 hours.

Where did the liquidity go? SushiSwap may be the biggest recipient.

Etherscan transaction data shows that in the last 24 hours, the amount of Ethereum received by SushiSwap surpassed Binance, becoming the largest Ethereum recipient during this period. It is worth noting that the amount of Ethereum received by SushiSwap in the last 24 hours is about 4 times the total amount in the previous 6 days.

At the same time, SushiSwap's locked-in volume has increased rapidly, with the highest increase among the top 20 DeFi locked-in projects. As of 6 p.m. Beijing time, SushiSwap's locked-in volume was US$574 million, an increase of 76.5% in the last 24 hours.

Lin Ming, co-founder of FirstPool, said: "Uniswap is about to enter a chaotic period, which is the biggest benefit for Sushi. The uncertainty of Uniswap is precisely the certainty of Sushi. What is certain is that funds will migrate from Uniswap to Sushi. The greater the uncertainty of Uniswap, the higher the amount of funds migrated, and the more friendly the transaction slippage of Sushi will be, which in turn promotes trading volume. The appreciation of Sushi prices promotes the increase of locked-up amounts, thus entering a positive cycle."

In order to compete for the liquidity released by Uniswap, SushiSwap redistributed the liquidity mining rewards of trading pairs, increasing the liquidity mining rewards of USDT/ETH, USDC/ETH, DAI/ETH and WBTC/ETH, which happened to coincide with the Uniswap liquidity pool. The liquidity mining rewards of USDT/ETH increased from 1918SUSHI to 2718SUSHI, and WBTC/ETH increased from 200SUSHI to 3140SUSHI.

SushiSwap Liquidity Mining Rewards Adjustment

SushiSwap has increased the rewards for these four liquidity pools, and it is just short of directly advertising "Uniswap users, come and mine with me". 0xMaki even expressed its support for liquidity mining through Twitter: "Make sure everyone produces their assets, not just holds them. Wouldn't it be fun to make the entire ecosystem more liquid? Use SUSHI to encourage developers to build what they love."

Source: Twitter

It is undeniable that SushiSwap has a huge advantage in attracting users from Uniswap. A large part of SushiSwap's users come from Uniswap. The frequent interactions between the two exchanges and the almost copied trading interfaces make users think of SushiSwap immediately after leaving with liquidity. In addition, SushiSwap's reward support for "idle" mining pools is quite attractive to Uniswap users.

As a large amount of funds poured into SushiSwap, the price of SUSHI continued to rise from noon, with the highest increase reaching 11.3% within 2 hours.

“SushiSwap just started incentivizing the exact same pool as Uniswap on the day Uniswap subsidies ended,” said Hasu, a cryptocurrency researcher. “This feels like a (smaller) vampire attack 2.0, except that SushiSwap now has more outstanding work and is no longer just a clone of Uniswap.”

Source: Twitter

Uniswap is discontinued, is V3 version on the way?

The end of Uniswap liquidity mining means that UniswapV3 is getting closer, and people are beginning to speculate what UniswapV3 will bring.

According to Twitter user "Merkle Tree", Uniswap V3 is already under development. He listed four updates for V3: order limits, ZK Rollup upgrades, zk-SNARKs integration and front-end protection, fee allocation, and UNI holder reimbursement. He also kept it a secret, saying, "NDA (non-disclosure agreement) has stopped me from talking about more incredible improvements, so stay tuned!"

However, according to comments from Twitter users, it is unknown whether Uniswap V3 will have these upgrades. Based on the confidentiality agreement, Uniswap’s core developers will reveal very few specific details before the launch of V3.

According to previous reports by Vernacular Blockchain, Uniswap has officially launched a test version called Unipig, which does not incur any fees, has a TPS range of 200-2000, is scalable, secure and reliable, and uses the Optimistic Rollup L2 architecture.

It is not known whether the technology used in this test version will appear in the UniswapV3 version, but combined with various "rumors" about UniswapV3 on Twitter and test version news, the UniswapV3 version is likely to run on Layer2.

According to GitHub, Uniswap will use IPFS in version V3. This has already been achieved. The IPFS interface can be seen in the UniswapSnapshot voting. Clicking on the interface can query proposal-related information.

Regarding whether liquidity mining will continue in the V3 version, Twitter user Vault Research believes that when the Uniswap V3 version is released, liquidity mining is likely to resume. He believes that the ideal long-term solution is to announce other use cases for UNI at the protocol level and integrate rewards into the use cases.

Looking back at Uniswap's roadmap, UNI was originally scheduled to be released when Uniswap V3 was updated, but the "sense of crisis" brought by SushiSwap forced it to release UNI two months in advance. When the coin was issued, the focus of the Uniswap team was not on issuing coins, but on developing V3.

This brings two highlights: Uniswap V3 will be the result of the long-term efforts of the development team, and UNI may become an important part of the V3 version. It is conceivable that in addition to liquidity mining, there will be more creative applications around UNI.

Hayden Adams once said: "To be conservative, UniswapV3 will be a 'spoiler'." As the overlord of DEX, whether Uniswap can "explode" the industry again after being suspended, time will tell everything.