Uniswap Votes to Give Away $50M in UNI Tokens to Boost Adoption of New Version and Unichain

The cooperative behind top decentralised exchange Uniswap voted on Wednesday to give out some $50 million of the protocol's UNI token to boost adoption.

The cooperative behind top decentralised exchange Uniswap has voted to give out some $50 million of the protocol’s UNI token to boost adoption.

The vote, which passed on Wednesday with 83% of voters in favour, will see 7.5 million UNI tokens, currently valued at $6.60 and now at $5.80, being allocated to incentivise use of Uniswap’s new fourth version, as well as Unichain, Uniswap’s answer to the growing trend of Ethereum layer 2s.

“It just made sense from a competitive point of view,” BP, the pseudonymous founder of liquidity management protocol Gamma, a Uniswap DAO delegate, told DL News. “Other decentralised exchange competitors on Base and Arbitrum are offering incentives, and it will take a while for the liquidity on Uniswap V4 to gain traction.” Gamma voted in favour of the proposal.

Uniswap is the biggest decentralized exchange with over $3.9 billion of deposits. It is most successful on Ethereum, but is losing out to newer competitors like Aerodrome on Coinbase’s Base.

Despite launching over a month ago, users have only deposited some $13 million to Unichain — a paltry sum compared to other new blockchains like Berachain that drew in billions when they launched.

The incentives could help Uniswap and Unichain compete. But such methods are not without controversy.

While giving out tokens to incentivise users is a popular tactic to draw in users and liquidity at DeFi protocols, some criticise the practice as inefficient. They say it attracts mercenary capital that comes to collect the free tokens then moves elsewhere once the incentives end.

An analysis of previous incentives programmes run by other chains from crypto market maker and Uniswap DAO delegate Keyrock paints a damning picture.

Keyrock found that deposits of 10 new chains, including Scroll, Zksync, and Sei plummeted after they ended token incentive programs.

“We must move beyond inflating numbers with massive incentives and focus on funding sustainable solutions that drive real, long-term engagement,” Keyrock said. Keyrock voted against the incentives proposal.

Devin Walsh, executive director of the Uniswap Foundation assured delegates that Uniswap’s incentives program will play out differently.

Walsh said the incentives will adjust to market conditions and support other efforts to attract users and liquidity to ensure they don’t follow previous “wasteful” programs run by other projects.

It’s a promise that’s rung true with many delegates.

“We’ve been assured that tighter monitoring and management of this program will, if not avoid, at the very least improve on the performance and result compared to the ‘basic’, general incentive programs,” Erik Brinde, head of DAO governance at Avantgarde, a Uniswap DAO delegate, said on the Uniswap governance forums.

Avantgarde voted in favour of the proposal.

The incentives program was executed onchain on Friday morning, depositing the UNI tokens to a blockchain contract ready for future distribution.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.