The yield farming incentive that Uniswap created back in September has finally ended today, but will the DEX resume the rewards? Now, founder Hayden Adams hints at the possibility of resuming the UNI incentive but at a reduced rate. So far, the proposal for renewal is at a ‘temperature check’ stage. As such, it will only check the community’s sentiment regarding the proposal.
A yield farming initiative that launched together with UNI has managed to collect $2 billion in liquidity since September. Today, the initiative has finally ended and users have received their now unlocked tokens. The DEX released $1 billion worth of ETH and $1 billion worth of WBTC to the market.
Ethereum did not take a hard hit since the official release of the tokens earlier this morning. However, UNI managed to fall from $3.8 to $3.5, marking an 8% dump. While the token itself did not suffer much from the event, the DEX itself has almost collapsed.
Based on data from DeFi Pulse, around 46% of Uniswap’s total collateral left the exchange. The TVL (Total Value Locked) metric plunged from an ATH of $3.06 billion to $1.52 billion on November 17. Uniswap now faces levels of collateral that were last seen in September this year. Some argue that the situation is not that extreme, given that the liquidity loss will only last temporarily.
On the DeFi Pulse leaderboard, we can see that the exact same situation from September is repeating again. The ‘vampire protocol’ SushiSwap strikes again as it decided to introduce similar yield farming rewards compared to what Uniswap has discontinued. Just as liquidity leaves Uniswap, it becomes obvious that it is flowing to SushiSwap. In the past 24 hours, the TVL increased from $332 million to $585 million.
Uniswap founder Hayden Adams proposes to resume rewards
To prevent even more liquidity from leaving the DEX, Uniswap founder Hayden Adams decided to hold a community vote. On November 16, a day before the original initiative ended, Adams made a tweet in which he proposed to resume the initiative.
Uniswap then held a ‘temperature check’ governance proposal. At this stage, the proposal will check if the community approves the idea. Called ‘Should Uniswap Distribute UNI to Liquidity Providers,’ the vote began on November 16 and is set to end on November 19. At the time of writing, 53.6% of users have approved the proposal while 45.96% stand against the proposal.
If successful, the vote should be able to return at least some of the liquidity that left the exchange. However, it is still uncertain as to what direction the governance proposal will take in the end. While one part of the community agrees with resuming the initiative, others believe that the UNI should not be a ‘reward’ token.
Whatever the case may be, it is certain that higher APR liquidity pools will prevail in the next months. Such an environment may lead to more competition between individual projects, which was last seen during the DeFi craze this summer. After all, Bitcoin has made big moves in recent weeks and it is finally time for the money to flow into alts.