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Breaking News: Tether Targets $500 Billion Valuation In New Equity Offering Amid US Expansion Plans

Why The Uniswap (UNI) Token Is Almost Worthless: Researcher

Jake Simmons
Jake Simmons
1 year ago
2 mins read
Uniswap UNI

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In an analysis, Anders Helseth, Vice President at K33 Research, has mounted a strong case against the viability of the Uniswap (UNI) token. His analysis pivots on the intriguing dynamics of the decentralized finance (DeFi) market, fundamentally challenging the current valuation and future potential of UNI.

Helseth begins his argument with a seemingly straightforward question: “The Uniswap protocol generates significant trading fees, but will the UNI token ever capture its (fair) share?” His conclusion is emphatically negative.

Is The Uniswap (UNI) Token Worthless?

For context, UNI is a governance token for the Uniswap protocol, a decentralized exchange that earns a 0.3% fee on trades. However, as Helseth points out, the entire trading fee currently goes to liquidity providers, with UNI holders standing to gain only if governance votes permit fee dividends to UNI holders.

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Even in a slow DeFi market, the fully diluted value of the UNI token is 15 times the annualized trading fees paid when using the protocol, currently around $6 billion. If the UNI token could capture all trading fees, it would arguably present an irresistible buy. However, Helseth makes a compelling argument to the contrary.

“The UNI token currently captures 0% of the 0.3% trading fee, which entirely goes to liquidity providers,” Helseth says, emphasizing the token’s current lack of intrinsic value.

The crux of his argument revolves around three players in the DeFi space: the users, the protocol (and hence UNI token), and the liquidity providers. According to Helseth, the interplay between these actors is detrimental to the UNI token’s potential for revenue generation. Helseth explains:

The entire protocol can be exactly copied within minutes at virtually no cost. This argument implies that all the power lies with the liquidity providers in the fight for trading fees.

The primary concern for users is liquidity and cost-effectiveness. If the same protocol can be replicated at a whim, users would inevitably gravitate towards the version with the most liquidity – to minimize slippage when executing trades. This dynamic significantly empowers liquidity providers who, unlike UNI holders, hold real, valuable tokens.

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In addition, even though switching to another smart contract may entail some costs, these are relatively low, reinforcing the bargaining power of liquidity providers.

Concluding, Helseth states: “Given this relatively low cost of switching from the users’ perspective, we cannot conclude with anything else than that the power lies with the liquidity providers. Hence, even though the Uniswap protocol generates significant trading fees, we believe the potential for the UNI token to capture any of this revenue to be almost non-existent.”

At press time, the UNI price stood at $6.19 after being rejected at the 200-day EMA yesterday.

Uniswap UNI price
UNI rejected at 200-day EMA, 1-day chart | Source UNIUSD on TradingView.com
Featured image from Guarda Wallet, chart from TradingView.com
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Jake Simmons
Jake Simmons

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

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His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

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