Uniswap passed the “fee switch” proposal and what are the implications?

The Uniswap community passed the “fee switch” proposal, what impact will it have?

Uniswap is the almost undisputed DEX overlord in the Ethereum ecosystem. They hold most of the trading volume and users, and have 5-10 times more tokens listed than their competitors.

They are also rapidly expanding to the new L2 and EVM L1 and growing rapidly. For example, Uniswap, which had a 30% market share in Polygon within a week , now controls most of the Polygon chain’s trading volume:

image

However, since its inception, all of Uniswap’s transaction fees have gone to liquidity providers (LPs). UNI tokens can only be used for governance, but the smart contract contains a “fee switch” that token holders can flip to accumulate a portion of the revenue. In this way, the coin acts like a call option.

Many governance proposals have attempted to flip the fee switch and work on it, but have failed, including one proposed earlier this year.

It must be mentioned that Uniswap has more volume/TVL than other DEXs. This means that the “organic, sustainable” APY is higher than any other DEX.

image

So, flipping the fee switch may cause some LPs to close the platform, but even the top fee (25%) still makes organic APY more attractive than other DEXs.

Due to its branding, liquidity depth and number of listed tokens, Uniswap has more users and also sees more volume from aggregators.

My friends and I modeled the potential impact of fee switches and shared some of our findings on the Uniswap community forum.

  • These findings are for experimental purposes;
  • This experiment should test data points from non-core pools that map to other Uniswap trading pairs; alternatives like WBTC/USDC, DAI /ETH, USDC/ETH, etc.
  • The first fee switch worth testing could be the production of non-UNI assets for the treasury; these funds should be used to incentivize ecosystem growth for other Uni stakeholders

The optimal pool should satisfy the following conditions:

  • Relatively high trading volume/TVL(APY), making it still profitable to provide liquidity
  • Liquidity is relatively deep and does not drain significant liquidity
  • Ideally, assets of relatively similar value to avoid potential investment increases

Below is part of our analysis. DAI/ETH (0.3%) and USDC/ETH (1%) are our recommended test pools.

image

Finally, as one of the market leaders in DeFi and all cryptocurrencies, Uniswap flipping the fee switch this time around may be one of the biggest events in its history.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/uniswap-passed-the-fee-switch-proposal-and-what-are-the-implications/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-07-28 11:16
Next 2022-07-28 11:18

Related articles