The fundamentals of Uniswap are still far ahead in the DEX field, and the value of UNI capture fees is only a matter of time.
Recommended reading: ” Revisiting the moat of the DeFi agreement when DeFi is cold: How do they create and capture value? 》
Original title: “The Possibility of UNI”
Author: Blue Fox Notes
The price of Uniswap’s token, UNI, has not performed well recently, and many people are pessimistic about the future of UNI. Interestingly, the fundamentals of the Uniswap agreement itself continue to be good, forming a sharp contrast.
So, how to understand UNI?
The subtle relationship between tokens and protocols
The fundamentals of the current Uniswap agreement are far ahead in the DEX field. Regardless of the transaction volume, the liquidity provided, the number of transaction users, or the amount of fee capture, they are all in a clear leading position.
Compared with other projects, Uniswap has a crushing advantage in liquidity and transaction volume. Uniswap
Uniswap’s locked assets exceed the sum of all other DEX agreements, DeFiPulse
Uniswap occupies close to 70% of the market share, DuneAnalytics
Uniswap’s trading users far exceed other DEX, DuneAnalytics
What’s more interesting is that Uniswap’s current fee capture is second only to Ethereum and Bitcoin in the encryption field, and even surpassed Bitcoin’s fee capture some time ago. As can be seen from the figure below, as of the writing of Blue Fox Notes, Uniswap’s annualized capture cost can be as high as US$325.5 million.
Uniswap’s current annual expenses capture more than 300 million US dollars, second only to Ethereum and Bitcoin, tokenterminal
So why is the performance of UNI still not satisfactory?
This is related to the fact that UNI does not directly capture the value of the agreement under the current circumstances. UNI currently only has a governance role, which is to govern tokens. All transaction fees generated on Uniswap are not used to destroy UNI and are not given to UNI token holders.
Or should we think the other way around is more appropriate? Why did UNI not directly capture Uniswap’s fees, while its liquid market value still has USD 488 million, and its diluted total market value still has USD 2.288 billion?
The reason why people believe that UNI has value is essentially because of Uniswap’s leading position in the DEX field. Although UNI is the governance token of the protocol, it has potential future possibilities. Just like someone holding ETH, the holder is optimistic about Ethereum’s current leading position in the public chain track and optimistic about its potential, even if ETH has not captured any protocol fees so far. Of course, the future Ethereum EIP-1559 will change this situation.
From this perspective, people hold UNI because the Uniswap protocol itself has the fundamentals of a leading position, and it is also an expectation of possible iterations in the future. This expectation supports people’s holding and buying. There are also people who are not optimistic about UNI in the market. In order to realize profits, they will choose to sell UNI. Under liquid mining and current market sentiment, it is not easy for UNI to support it.
Possibility of UNI value capture
The temporary inability of the protocol itself to capture value is the status quo of most crypto projects and the current dilemma of these projects. But for Uniswap, this problem does not exist. As mentioned above, according to the current situation, Uniswap can capture an annualized fee of up to 325.5 million U.S. dollars, second only to Ethereum and Bitcoin. Therefore, compared with other tokens, from the perspective of capturing fees, UNI is only one step away from the final fee capture. It is not a question of whether there is or not, but a question of whether to give or not.
The UNI itself is the governance token of the protocol, which will determine whether to give or not to give in the future and when to give it. From this perspective, the value of UNI’s capture cost is only a matter of time.
So, who has taken the current Uniswap fees? Mainly liquidity providers. At present, the liquidity provider not only captures all transaction fees, but also obtains UNI token incentives for liquidity mining of the four main trading pairs. From the perspective of competition, this is understandable, and it is also to prevent other DEX agreements from causing a big impact on Uniswap.
However, from the perspective of long-term sustainable development, there will be a balance. Liquidity providers have indeed contributed a lot, and risked impermanence. However, if UNI continues to fall, it will not benefit the Uniswap agreement itself. Therefore, in the end, the Uniswap community will recognize this problem, gradually form a consensus, and seek a balanced solution.
In this balanced solution, both the benefits of liquidity providers and the interests of currency holders must be considered. Therefore, in the future Uniswap community governance, the following situations are most likely to occur:
In the short term, part of the Uniswap protocol fee will be allocated to UNI, allowing UNI to capture part of the cost value, thereby stabilizing its price support.
In the long run, the integration of the interests of liquidity providers and currency holders will be realized. UNI can capture all the cost value, and the liquidity provider’s income is realized through UNI itself. This is a win-win situation for liquidity providers, UNI token holders, project parties, and ecological partners. However, the formation of this situation requires the joint efforts of the community and needs to be advanced from all aspects, which is difficult to achieve in the short term. What can be achieved as soon as possible in the short term is to give part of the transaction fees to UNI token holders.
Possibility of UNI
From the above analysis, the future of UNI ultimately depends on two aspects:
- The position of the Uniswap protocol in the DEX field
For now, Uniswap’s market share is about 70%. From the previous Sushiswap attacks, from Balancer to launch a more powerful Uniswap-like product, etc., different projects have impacted Uniswap from different angles. So far, these projects have not been able to replace Uniswap, but have promoted Uniswap’s continuous evolution. And iteration to further strengthen its network effect.
Assuming that Uniswap can continue its current leading position, this means that the Uniswap agreement will continue to capture greater value. This is the foundation of UNI’s value support. Of course, if this is lost, the foundation of UNI will be lost.
- What percentage of the value of the Uniswap agreement can be captured by UNI itself
The value of UNI depends not only on the robustness and leading position of the Uniswap agreement itself, but also on the governance of the community and how it integrates the value of the agreement with the value of UNI. If only part of the value is captured, then the value of UNI will have a corresponding space; if it has the opportunity to capture all the value and unify the interests of liquidity providers, developers, currency holders, and ecological partners, then In addition to capturing all the value, it will also have a higher premium, thus opening a huge upward path.
The Uniswap community discusses whether to reward UNI holders, Uniswap
Risk points of UNI
The market is always changing. The number one today is not necessarily the number one forever. Only change is constant. Perhaps Uniswap will encounter strong opponents in the future, and it is not impossible to surpass it, especially considering that the entire encryption field is very early. This is the biggest uncertainty and risk point in the value of UNI. Although everything looks unbreakable at present. The moat of DEX is not as high as expected.
At the same time, for UNI, we also need to consider the release of mining tokens and the long-term continuous issuance. The token releases of investors and teams are continuous. There will be continuous selling pressure. Only when Uniswap’s basic The continued growth of the surface and the continuous capture of costs can enhance the confidence of holders and support the value of UNI.
UNI’s four-year release plan
Finally, due to various reasons (although the probability is small) UNI cannot capture the cost of the agreement, which will also make it unable to sustain greater value in the long term. Therefore, from the current point of view, this is also one of the risks of UNI. Future community governance will determine its direction.
If you compare UNI with the top 20 project tokens by market capitalization
We can look at the top 20 projects in the crypto sector by market capitalization. What is their valuation? How much value did they capture? How many users are using them? How many ecological implementations do they have? How much value does Ripple capture with a valuation of more than 10 billion US dollars, and how many users does it have? How much ecology is there? Apart from Ripple, what other projects are the same? How much better than Uniswap?
From this perspective, let’s look back at Uniswap and look at the DeFi project, which may give us some inspiration for the future.
Source link: mp.weixin.qq.com
