In an evaluation, Anders Helseth, Vice President at K33 Analysis, has mounted a robust case in opposition to the viability of the Uniswap (UNI) token. His analysis pivots on the intriguing dynamics of the decentralized finance (DeFi) market, basically difficult the present valuation and future potential of UNI.
Helseth begins his argument with a seemingly simple query: “The Uniswap protocol generates vital buying and selling charges, however will the UNI token ever seize its (honest) share?” His conclusion is emphatically detrimental.
Is The Uniswap (UNI) Token Nugatory?
For context, UNI is a governance token for the Uniswap protocol, a decentralized change that earns a 0.3% price on trades. Nonetheless, as Helseth factors out, your complete buying and selling price at present goes to liquidity suppliers, with UNI holders standing to achieve provided that governance votes allow price dividends to UNI holders.
Even in a gradual DeFi market, the totally diluted worth of the UNI token is 15 occasions the annualized buying and selling charges paid when utilizing the protocol, at present round $6 billion. If the UNI token may seize all buying and selling charges, it might arguably current an irresistible purchase. Nonetheless, Helseth makes a compelling argument on the contrary.
“The UNI token at present captures 0% of the 0.3% buying and selling price, which totally goes to liquidity suppliers,” Helseth says, emphasizing the token’s present lack of intrinsic worth.
The crux of his argument revolves round three gamers within the DeFi area: the customers, the protocol (and therefore UNI token), and the liquidity suppliers. In response to Helseth, the interaction between these actors is detrimental to the UNI token’s potential for income technology. Helseth explains:
The whole protocol will be precisely copied inside minutes at nearly no price. This argument implies that each one the facility lies with the liquidity suppliers within the combat for buying and selling charges.
The first concern for customers is liquidity and cost-effectiveness. If the identical protocol will be replicated at a whim, customers would inevitably gravitate in direction of the model with essentially the most liquidity – to attenuate slippage when executing trades. This dynamic considerably empowers liquidity suppliers who, not like UNI holders, maintain actual, beneficial tokens.
As well as, although switching to a different good contract might entail some prices, these are comparatively low, reinforcing the bargaining energy of liquidity suppliers.
Concluding, Helseth states: “Given this comparatively low price of switching from the customers’ perspective, we can not conclude with anything than that the facility lies with the liquidity suppliers. Therefore, although the Uniswap protocol generates vital buying and selling charges, we consider the potential for the UNI token to seize any of this income to be nearly non-existent.”
At press time, the UNI value stood at $6.19 after being rejected on the 200-day EMA yesterday.
Featured picture from Guarda Pockets, chart from TradingView.com
