Uniswap Token Launch Has Set the Standard for DeFi

The increasingly popular Ethereum-based exchange Uniswap just launched its highly anticipated governance token last night, and it's already had a massive impact on the booming DeFi industry.

Uniswap, a decentralized exchange (DEX) for swapping Ethereum-based tokens, launched its governance token UNI a few minutes after 8:00pm ET on Wednesday, automatically allocating 400 UNI tokens to any wallet address that had interacted with the protocol before September 1. 

A governance token is essentially a digital asset that allows its holders to vote on decisions that affect the future of the protocol to which it corresponds. Holders can also use governance tokens to earn interest through an immensely popular liquidity mining scheme known as “yield farming,” the fruits of which have helped propel the decentralized finance (DeFi) sector to a $9 billion industry within a matter of months.

That batch of 400 tokens that Uniswap distributed to its users are now worth more than $1,200, offering thousands of users around the world a sizable windfall just for being early adopters of the popular token exchange platform. It’s a pivotal moment in the still short saga of decentralized governance, as the industry’s leading DEX makes a bold move to solidify its position as the beating heart of DeFi.

Over 66 million UNI tokens allocated for simply using the protocol have been claimed in under 24 hours, from a distribution of about 100 million UNI tokens in all and about 10% of the total supply. Already, Uniswap’s token is one of the most widely held digital assets in DeFi.

All told, 1 billion UNI tokens have been minted in total; 60% of tokens will be gradually distributed to the community (including those available now for early adopters), while the remaining 40% will be vested to team members, investors, and advisors of the project over four years.

Support for the release has been widespread on Twitter, with Axie Infinity COO Aleksander Larsen noting how impactful the distribution could be for users in lower income countries such as the Philippines, where the crypto-collectible trading game has gained popularity and introduced several users to Uniswap.

Uniswap also announced liquidity mining rewards for liquidity providers in pools of Wrapped Bitcoin (WBTC) and three dollar-pegged stablecoins—USDC, USDT, and DAI—against ETH. Users who contribute those tokens to Uniswap liquidity pools will be rewarded with UNI governance tokens. Community governance will activate on October 17 after a one month grace period, after which pools containing different tokens can be nominated to receive UNI rewards as well.

The UNI token launch brings distributed governance to the undisputed leader in decentralized exchanges; Uniswap has already processed nearly $10 billion in token swap volume this month, and captured more than 60% of DEX volume over the past seven days, according to figures from data firm Dune Analytics.

The greater impact of the UNI launch, though, may be in helping set the standard for governance token releases in the increasingly fractured DeFi marketplace. 

The allocations seemingly acknowledge the work of an experienced team, which put their heads down to build through the 2018-2019 bear market, and have now been rewarded with stunning growth in 2020. It also now ensures that the future of Uniswap is in the hands of its users and liquidity providers who helped make it what it is today. 

If the launch of Compound’s COMP token, which kicked off the governance token craze, set crypto down the path toward a world of truly decentralized control over public goods, then Uniswap has now shown us how to live in it.