Can the unbeatable Uniswap hold the banner of DeFi?


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The story of SushiSwap, known as the evolution of Uniswap, is over, and Uniswap has once again become the focus of DeFi. Is Uniswap with only 500 lines of code really unbeatable? Is DeFi in its infancy or is it coming to an end? Is liquidity mining really fair?

Looking at SushiSwap now, it is far from the glamour when it first appeared.

In the beginning, comments such as Uniswap’s evolution and community plundering of VCs once praised SushiSwap to the altar. After the founder was exploded to control the US$27 million worth of SUSHI tokens and cashed out, there were double-spending loopholes in governance, and control was suddenly transferred. After giving SBF and other magical scenes, the story of SushiSwap began to decline gradually.

However, the ensuing various Swap imitations and the various meme tokens issued have also made the view that “Uniswap must be issued” has taken root. Many people believe that the lack of platform currency is Uniswap’s biggest weakness.

Putting aside the bubbles and emotions in the market, just looking at the track of DEX and AMM, we have a question, does Uniswap really need to issue coins?

At present, Uniswap has far more important things than issuing coins.

Is Uniswap no match for “people”?

Uniswap, which has only 500 lines of code, has long become an indispensable part of the DeFi field.

At the beginning, Uniswap attracted attention because of the speed of listing. The project team’s financing was carried out at the same time as the listing. The project team divided the total amount of coins into several shares, of which part was kept on Uniswap, and assets were injected into the two pools. , Which is equivalent to setting a price yourself, and then you can trade. It can be completed in “10 minutes as fast as possible”, “The cost is about 0.3 ETH.”

This method directly impacted the original operation mode of blockchain projects. The cost of launching new projects is getting lower and lower, and a large number of projects are falling apart.

From the birthplace of the initial potential project to the present, Uniswap’s status has also quietly changed. Uniswap has become an important part of liquid mining: whether new or old projects want to do liquid mining, they will first go to Uniswap to list trading pairs, attract users to inject funds into the pool, and then start mining after obtaining the corresponding tokens .

Providing liquidity for the fund pool to obtain the platform’s commission share has long been insufficient to meet the needs of investors. When the DeFi project’s issuance of tokens/governance tokens became popular, and the upgraded version of SushiSwap of Uniswap announced the introduction of token incentives, many people began to flock to it.

When the migration was just completed, SushiSwap’s total lock-up amount once rose to 1.5 billion US dollars, while Uniswap was reduced to 400 million US dollars. People mistakenly thought that SushiSwap “robbed” the liquidity of the latter. Some people even asserted: Distribute coins quickly to “save” Uniswap.

In fact, before the emergence of SushiSwap, Uniswap’s lock-up volume has reached 400 million. After the SushiSwap migration is completed, Uniswap’s lock-up volume is still 400 million U.S. dollars. SushiSwap did not steal Uniswap’s liquidity, and the extra nearly 1 billion. The liquidity of US dollars was originally brought by SushiSwap, which can only show that the issuance of coins has indeed triggered a surge in lock-up volume in the short term.

Looking at the current SushiSwap’s lock-up volume and currency prices are no longer at their peaks, the issuing of currency does not seem to make this DEX have a brighter future than Uniswap.

In the eyes of the earliest practitioners who paid attention to Uniswap’s great migration trend, the issuance of coins is not actually the most important thing in front of Uniswap.

Why Uniswap does not need to rush to issue coins

When SushiSwap relied on issuing coins to attract LP migration on Uniswap, everyone was wondering whether Uniswap V3 would also rely on issuing coins to grab traffic. On the day that SushiSwap officially migrated to LP, Uniswap founder Hayden Adams posted a picture of Uniswap’s new Logo. Many people suspected that V3 would be accompanied by the announcement of the platform currency.

But does Uniswap really need to issue coins? In other words, is issuing currency a necessary condition for DEX to become top-tier?

“Issuing coins is not something Uniswap has to do at present.” said Li Ming, founder of Tops, a decentralized asset screening platform.

In the case that currency issuance has become standard for many DeFi projects, SushiSwap’s “trend” approach has indeed been sought after by the market. After SushiSwap, many similar imitation disks have been launched soon, creating a currency-issued approach. The project can replace the Uniswap scenario, but the actual situation is not the case.

In Li Ming’s view, only from the efficiency and transaction methods of Uniswap’s Swap itself, it is far from reaching the point where it can be compared with CeFi. There is still a lot of room for improvement and optimization. “The most prominent problem is Impermanence loss. Some project parties have begun to “harvest” users through market making, but users have not yet noticed this behavior.”

Swap is the default practice of centralized trading platforms, and now, this kind of gameplay has also begun to spread to DEX.

First-line practitioner Wang Jia also told Rhythm BlockBeats that more and more market makers specializing in liquidity pool transactions have appeared in Uniswap. In order to attract users’ attention and make the data look better, the project team began to realize the trading pairs on Uniswap. Also need to brush.

“The same as CEX, but the whole process is more transparent.”

Since all the operations of traders are recorded on the chain, the cost and risk of market making by the project party are also higher than before. “Before trading is a bunch of data in the background, but now the gas handling fee is also not Ignored expenses”, “Previously, market makers only needed to obtain operating rights and could not control funds. However, after DEX, market makers need to hold assets to operate. This leads to the fact that the current project party is still operating with small amounts and dare not play easily Large amount.”

The identification method only needs to see whether there are multiple back and forth transactions in the same address in the transaction record. This means that in the face of many projects that have created a myth of tens of times or hundreds of times of growth just after they are launched, investors need to be more discerning, because this is likely to be self-directed and performed by the project party to attract users to take over.

In addition to the transaction efficiency that can be improved, there are still many problems surrounding Uniswap, such as whether the liquidity pool set on Uniswap is the larger the amount of funds, the better, and the slippage of setting multiple pools will be lower, LP Will the revenue of the Uniswap be better, whether there is room for optimization of the pricing and transaction methods of the token, etc., these still require the Uniswap team to spend more energy to think and solve.

“Now users can only see basic data such as liquidity and transaction volume on Uniswap, but in fact, data such as the number of liquidity pools and changes in the number of transactions may have a greater impact on prices, or even more Obvious rise and fall signals.” These sectors are not yet perfect in Uniswap, and it is precisely because there are still gaps in the market that there are “nearly 20” teams on the market that specialize in Uniswap trading experience.

In addition to the optimization of the trading experience, Li Ming also mentioned that from the perspective of developers, Uniswap is not friendly enough to the teams that develop corresponding derivatives or functions based on it: “Sometimes the data provided by Uniswap is not timely, or Omissions, errors, or even no corresponding data.”

Choosing a trading platform, the ultimate goal of investors is to discover good assets and obtain high returns, but if they simply copy the Uniswap code, only add a token incentive model instead of optimizing and improving the business itself, even if it succeeds in a short time It’s hard to stay green.

We can think about a simple question. Do you choose Uniswap if you send a coin? Or use other imitation disk swaps?

“Uniswap still has a brand.” Liu Jie, founder of the decentralized derivatives trading platform MCDEX, can represent a large number of people.

The various Swap imitations once made investors think that they were given the qualifications to be on an equal footing with the VC or project team, but in fact, liquid mining is not fair.

Liquidity mining is not fair

The current DeFi liquid mining, under the spirit of community-driven, under the banner of no pre-mining, no private placement, and no VC, creates the concept of “fairness” and conveys this kind of “no one will cut you”. signal of. Many people believe that they are just mining and be a seller in the secondary market and will not take orders in the secondary market. The risk is small and the return will far exceed expectations.

But really? Is liquidity mining really fair? Are those projects that issue coins really not making money?

It must not be. They have at least three ways to make money.

Harvest LP

The first is to harvest the liquidity provider (LP). More precisely, the project party has taken a fancy to the ETH in the hands of LP.

In the AMM mechanism, LP market making needs to add the same amount of assets in the two pools. For example, in the ETH/USDT pool, 1 ETH is added to the ETH pool, and 360 USDT equivalent to 1 ETH is added to the USDT. To become an LP. If ETH falls by 20%, the ETH in the hands of LP will increase, while USDT will decrease to achieve a 1:1 equivalent and the liquidity product of the pool equals a constant, which will cause impermanence losses.

But in the extreme case, when the price of one type of asset in the pool plummets, the more corresponding coins in the hands of LP, and the fewer coins in the other pool. For example, in the KIMCHI Kimchi project, the LP that makes the market in the KIMCHI/ETH pool belongs to the party being harvested.


The price of KIMCHI plummeted in a short period of time. There are more and more KIMCHI in the hands of LP in the pool, and less and less ETH. At the same time, the price of KIMCHI is getting lower and lower, and LP’s ETH is harvested. This is a kind of impermanence loss, but when an extreme situation occurs in the tokens in the pool, the impermanence loss has been upgraded to be harvested.

Of course, this situation will only appear in the pools that provide the liquidity of mining tokens, such as SUSHI/ETH, KIMCHI/ETH. If LP chooses other pools, this risk can be avoided with a high probability, but the project party Won’t let you do this.

In the mining design, the project team will design this type of pool reward far beyond other pools, such as up to 5 times the reward. The mining efficiency of LP in this pool is 5 times that of other pools. Users who do not understand the risk, It is easy to be attracted to the market by high returns.

In addition, the project party will even add a number of pools containing such mining tokens, giving the annual revenue hundreds of times. For example, in the YUNO project, among the 8 mining pools, 6 pools require YUNO to mine. In this case, the probability of LP being harvested is 75%.


Private goods entrained by project parties generally refer to niche currencies. Generally, liquidity mining will use mainstream currencies, but some projects will use small currencies for mining to increase the demand for small currencies. the goal of. For example, KIMCHI, which was on fire some time ago.


What’s interesting is that KIMCHI’s farm only chooses three mainstream tokens, YFI, BAND, and ETH. In addition, it also secretly carries private goods, which not only increases the percentage of KIMCHI token revenue, but also one that is not popular. TEND tokens also entered the token pool, which caused the TEND token to rise from 1.2 US dollars to 2.7 US dollars, a short-term increase of up to 125%. Mining

Mine tax

Another implicit gameplay is that the project party earns profits by collecting a portion of mining rewards. In many DeFi projects, generally 10% of the mining reward will be collected by the project party, which is equivalent to paying seigniorage. Lu Yaoyuan, the product manager of Maizi Wallet, defines this behavior as a “collection tax” model. A typical example is SUSHI, which is also the source of funds for Nomi Chef, the founder of SushiSwap, to cash out 18,000 ETH. Since SushiSwap is already the focus of the market, the community will always monitor the every move of the founding team, but more project parties are likely to cash out step by step after collecting mineral taxes. It’s the same question just now. If you are a project party, if your tokens want to go online for liquid mining, would you go to Uniswap or SushiSwap? Through the pre-issuance of coins, SushiSwap and other Fork projects have indeed gained widespread market attention in a short period of time, but this free-riding behavior does not seem to allow these projects to establish a solid moat. “The behavior of issuing coins in a short period of time may indeed excite many investors.” Li Ming believes that if Uniswap wants to play a role as an industry benchmark, it still has to continuously optimize its own efficiency and products in order to truly engage itself with Similar products have widened the gap and made themselves the makers of the entire DEX standard. Go faster, it is better to go further. Nowadays, SushiSwap, which has completed the cold start by issuing coins, is also in the quagmire of how to make the tokens rise. Perhaps, the Uniswap team, who saw this early, did not consider issuing coins as a top priority.

At the request of the interviewee, Wang Jia appeared in the article as a pseudonym.