The world of cryptocurrency is confusing enough to scare most people away from giving it a try. Usually, they cite volatility or lack of central bank backing.
Throw in central crypto exchanges and DeFi exchanges and AMMs like Uniswap, and many people are ready to throw in the towel. But should you worry about decentralization? Who controls them anyway?
For a lot of cryptocurrencies, it means the people with power are people with governance tokens. What is a governance token?
Get ready because you’re about to find out about the premier DeFi exchange, Uniswap, and why its governance token is a game-changer.
Keep reading to find out!
What Is Uniswap’s Governance Token?
UNI is the Uniswap Protocol token, and it went live on Uniswap V2 on September 16.
A governance token could have any number of conditions, as a smart contract. Still, the basic idea of a governance token is similar to shares for shareholders in a traditional company. Still, the basic idea of a governance token is similar to shares for shareholders in a traditional company.
Imagine that you have a piece of a company, a share of its authority. There are only a limited amount of positions of authority – and you can own as many as you can get your hands on.
In the case of Uniswap, if you have enough UNI tokens, you can sway decisions made on the platform – and even raise votes for certain conditions to be ratified.
To start, you can get UNI by adding liquidity to four of its many liquidity mining pools:
- ETH/DAI
- ETH/ESDC
- ETH/ESDT
- ETH/WBTC
5,000,000 UNI is given to each pool to distribute to liquidity providers proportionally with what liquidity they add to the pool. After a 30-day governance grace period, depending on the community, they could add more pools.
With this governance token, you have voting power equal to the number of your tokens divided by the tokens held by the rest of the community. They’ve already distributed 15% to previous users.
The contract address for UNI is: 0x1f9840a85d5aF5bf1D1762F925BDADdC4201F984
If you checked out the link, you could see that only one billion UNI is available, which will take four years to complete distribution.
Uniswap launched UNI ahead of schedule but complete in design. There are reasons for that premature launch, which we should probably talk about now.
Uniswap & the DeFi War
Uniswap, as a concept, was born out of a perfect storm. It almost sounds like the beginning of a joke.
“What do you get when a mechanical engineer is fired from his day job and urged to learn enough programming to get a job writing smart contracts for Ethereum?” Apparently, you get a unicorn!
Uniswap started as a project for building Hayden Adams’ (the developer) skillset. It was urged by Karl Floersch to make an automated market maker and inspired by Vitalik Buturin’s blog (the inventor and head developer of Ethereum) about x*y=k formula.
A little over a year, several programming languages, a few meetings with Vitalik, and an impromptu Edcon talk later, Uniswap was launched on the last day of Devcon 4, Nov 2, 2018.
Betting on the Community
What makes Uniswap’s development and launch so wondrous was the amount of networking Hayden Adams did to bring Uniswap (named by Vitalik) into the real world.
Adams did a ton of work, to be sure, but from the very start, he was listening to what the crypto community required. Adams believes in Vitalik and Ethereum’s core values – which he says are based on just a few things.
Those things are:
- Censorship resistance
- Decentralization
- Permissionless nature
- Security through transparency
Even with the recent upgrade to Uniswap V2 and the release of the governance token $UNI on September 16, a plan to roll out V3 even though V2 had just launched was already in development. The Uniswap has a solid and promising roadmap for the protocol.
SushiSwap’s Not-So-Crippling Blow
Sushiswap launched on Aug 27, Uniswap grew by massive amounts, culminating in Sushiswap leaving with the migration to $SUSHI tokens on September 9, with over $800M in liquidity.
Many thought that Uniswap would stumble and die, but as we’ll see, that isn’t quite the case. While SushiSwap promised to be even more community-focused, taking some of the power back from devs into the community’s hands, it may not have been the case.
Chef Nomi’s $14M Potential Exit Scam Foiled
On September 5, anonymous Chef Nomi, the former head of SushiSwap handed over control of the SushiSwap project to Sam Bankman-Fried. This, because of taking about $14 million from a $27 million development fund for the project.
Going back to September 1st, people digging deeper into the $SUSHI token contract found that money was funneling into the unverified and unprotected developer account Chef Nomi ran off with. While Chef Nomi gave the money back and handed the project over to SMB_Alameda, SushiSwap lost face, credibility, and momentum.
Uniswap’s Status Since the Vampire Mining Attack
Four days after Chef Nomi changed hands and gave back the money he took, SushiSwap committed to a “Vampire Mining Attack,” stealing most of Uniswap’s wealth.
By September 16, Uniswap minted a total of 1 billion UNI to be distributed over four years as a kind of “growth coin” and show that its heart was with the people. It was unexpected for them to distribute 400 UNI to everyone who had ever traded on the platform, successfully or not.
They even went so far as thanking them for using it.
Since the launch, roles have reversed between SushiSwap and Uniswap. Uniswap grew from under $800 million to over $2.7 billion total value locked. SushiSwap, on the other hand, has dropped from a high of $1.42 billion to less than $260 million and only downward movement since September 30.
All signs point to a hastily thrown together, non-vetted, bootstrapped, unethical hijack attempt by Chef Nomi — and SushiSwap, in general.
Prove It — How Uniswap Shows It Believes in Community
By issuing the UNI token, Uniswap assures the community that they believe in genuinely decentralized ideals as developers. They don’t just talk the talk; they walk the walk.
Uniswap will distribute the governance tokens in this ratio:
- 67.19% to community members.
- 32.81% to team members, advisors, and investors.
Team members, including future Uniswap employees, will only hold a 21.51% share of power over the protocol. This means that they willingly give up their power to the point that the community has the overwhelming power to make critical decisions, as well as proposing them.
The dev team has enough power to propose a change but relies on the community to decide since they don’t have enough UNI on their own.
The 10+ year inflation and UNI allocation chart show that they will only have a 17.65% role by that time. Investors will likewise have a diminishing role, at only 14.60%.
The community has its hands on the wheel now.
Swapfolio’s Role
Introducing the Uniswap portfolio manager and trading terminal, and the SWFL token – all you need to navigate the crypto and Defi markets confidently.
The SWFL token unlocks full trading potential on Uniswap, such as stop-loss, limit, and take-profit orders. Exportable trade history and trading tools make it easy to manage your assets professionally – without a lot of experience.
What makes Swapfolio different? And how does Swapfolio reward long-term staking and community engagement, which is one of Uniswaps’ shared ideals?
- The 2.5% fee for staking and unstaking helps incentivize long term community engagement to win back your fee amount.
- 100% of the fees for staking and unstaking are redistributed to the staking pool(with random interval rewards for fees that are airdropped, once per day).
- As long as you are a staker, you will receive 50% of all generated revenue from in-app ads.
Swapfolio continues to listen and engage with the Uniswap community and promises to continue on this course. We wish to keep DeFi democratic, but it takes you.
Community: The Heart of Uniswap Governance
Uniswap believes so strongly in transparency and the power of community that they’ve taken their hands (mostly) off the wheel. Like Uniswap, Swapfolio believes in giving back to the community and listening to its needs and wants.
Your needs and wants.
Swapfolio is here to make it easy. Don’t throw in the towel on Ethereum and Uniswap. We’re here with you every step of the way.
Want to know more? Join our Uniswap community, and learn more about being a stakeholder today! Shape the future of DeFi!