Uniswap Liquidity Plunges After UNI Rewards End

Uniswap’s total liquidity has almost halved after the decentralized exchange ended its token rewards program on Monday afternoon.

Down to $1.8B from a peak of $3.3B just 24 hours earlier, the drop in liquidity goes to show how powerful UNI rewards were for attracting capital, good for the #1 spot on DeFi Pulse’s TVL leaderboard since rewards started on September 18th.

Volume Rises

Despite the drop in liquidity, the DeFi exchange’s volume is up by more than $370M, or 47%, over the past 24 hours as yield farmers shift capital around to new opportunities.

New Menu of the Week

Other projects are now looking to siphon off yield-hungry traders by offering incentives of their own, best highlighted by SushiSwap boosting SUSHI rewards and Bancor’s BNT liquidity mining released yesterday.

SushiSwap modified its Menu of the Week, or the rotating SUSHI rewards in exchange for providing assets to different liquidity pools across DeFi, to increase incentives on the four pools Uniswap was incentivizing.

The project tweeted the following table:

BNT Rewards

With Bancor, 100k-200k worth of BNT is now allocated to 6 ‘high-cap’ pools on the protocol, including WBTC, DAI, USDT and USDC – the same pools incentivized by Uniswap on its own platform prior to UNI rewards ending.

While 70% of the rewards are allocated to the BNT side of the pool, Bancor is encouraging LPs to stick around by offering a Bonus Reward Multiplier for up to 2x rewards to those who keep liquidity locked for longer periods of time.

TVL Surges

At the time of writing, SushiSwap’s TVL is up 62% while Bancor’s is up 41% according to DeFi Pulse, many times higher than increases on Curve and Balancer.

Not the End

But this may not be the end for UNI rewards. Community governance is now discussing a plan to continue UNI rewards at a reduced rate of 5M in monthly UNI rewards as opposed to 10M per month from the genesis program.

Calling all @UniswapProtocol politicians – the time is now!@monetsupply and I put forth a plan to continue liquidity rewards with reduced incentives ?

This would change the monthly allocation from 10M $UNI to 5M $UNI, split across the same four pools.https://t.co/JvCPIUgKI2

— Coopahtroopa ?_? (@Cooopahtroopa) November 16, 2020

UNI holders can now vote on a Temperature Check Snapshot proposal to signal whether or not they would like to see the plan pushed to a Consensus Check.

Over-Incentivized

The release of UNI solidified Uniswap’s dominance in the DEX landscape, with TVL spiking from $518M following the SushiSwap vampire attack to a peak of $3.3B over the course of two months. The increased liquidity improved pricing even when compared with centralized exchanges.

Still, even Uniswap CEO Hayden Adams commented that “while it was cool seeing Uniswap have lower slippage on ETH/USD than Binance and Coinbase, $3B was (probably) a bit excessive over-incentivized at this stage.”