It was hoped that a recent call from the Uniswap community would shed some light on what will happen when the liquidity incentives end next week. Without a clear conclusion, volatility appears to be the likely outcome.
Currently, Uniswap has four ETH-based liquidity pools of over $ 2.4 billion. These pools have allowed users to earn UNI tokens for the past two months, but these incentives will end on November 17th.
A call was recently launched from the Uniswap community to determine which direction the protocol and all of its securities will go in this case. Most of the participants were disappointed as there was still no clear direction for the world’s largest decentralized exchange or its governance mechanism.
Thanks to everyone who took the @UniswapProtocol community call today!
For those who missed it, here are the video and chat logs of the event:
If someone is interested in a transcript, please get in touch!
– monetsupply.eth (@MonetSupply) November 13, 2020
Uniswap Strategy Head: ‘No Comment’
The community appeal, which lasted an hour and a half, quickly addressed the burning issue of running out of cash and how to prevent an exodus of collateral from the log.
Many concerned members wanted to know what the plans were when the UNI farms ceased production and the billions of dollars currently locked in them were released into the wild. There was also a risk of a SushiSwap-style vampire attack.
When Uniswap’s head of strategy, Matteo Liebowitz, was asked about it, he gave no confirmation.
“Yes, unfortunately I can’t really comment on this and any decision related to liquidity mining must be made by community members, not the team.”
Compound Finance founder Robert Leshner pointed out that farm incentives will expire before Uniswap governance can act.
Uniswap liquidity incentives expire in five days before $ UNI Governance can act.
When the incentives expire, the liquidity in USD DAI, USDC, USDT and WBTC decreases and the decrease (the cost of trading) increases. This is bad for traders who love & , the # 1 DEX
– – Leshner (@rleshner) November 13, 2020
This means that the program or the replacement pools will not expand immediately. The impact could be huge as UNI could flood markets without the ability to replace these four pools.
UNI prices are back above $ 3, but this is likely to be a short-lived rally, especially if farmers decide to sell their crops and take advantage of their two-month mining spree.
1.2 billion US dollars in ETH “Into the Wild”
The question of the Ethereum value on the platform is an even bigger problem. At the current level of collateralisation, ETH is spread over 1.2 billion US dollars, spread over the four pools. All of this will be released en masse on November 17th.
ETH prices rebounded when Uniswap first launched the pools in mid-September, peaking at $ 390 at the time. Today prices are 18% higher, so profit-taking can be expected.
Some of these funds may be diverted to other DeFi protocols or even the ETH 2.0 stake out contract, but the majority will likely leave Uniswap if the protocol doesn’t encourage users to stay.
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