Recently, the price of Uniswap’s token UNI has been underperforming, and many investors are pessimistic about its future. However, the fundamentals of the Uniswap protocol itself remain strong, forming a stark contrast. So, how to understand the current situation and future of UNI?
The subtle relationship between tokens and protocols
At present, the Uniswap protocol is undoubtedly leading in the field of decentralized exchanges (DEX). Whether it is trading volume, liquidity provision, or the number of users and fee capture, Uniswap has a clear advantage. According to statistics:
Uniswap has more locked assets than all other DEX protocols combined (DeFiPulse).
Uniswap occupies nearly 70% of the market share (DuneAnalytics).
Its trading user volume far exceeds that of other DEX (DuneAnalytics).
What’s even more noteworthy is that Uniswap’s fee capture currently ranks second only to Ethereum and Bitcoin in the entire crypto space, even surpassing Bitcoin’s fee capture during certain periods. As of this writing, Uniswap’s annualized fee capture is a whopping $325.5 million (TokenTerminal).
Reasons for UNI’s poor performance
So, why is UNI's performance unsatisfactory? This is closely related to the failure of the UNI token to directly capture the protocol value in the current situation. UNI is currently only used as a governance token. All transaction fees generated on Uniswap are not used to destroy UNI, nor are they given to UNI currency holders.
Thinking about it in reverse, why does UNI's current market value remain at US$488 million, and its total diluted market value reaches US$2.288 billion? This shows that the market still values UNI’s potential value, especially Uniswap’s leading position in the DEX field. Investors holding UNI are just like those holding ETH, optimistic about its future possibilities.
Possibility of UNI value capture
The current dilemma facing most crypto projects is that the protocol itself cannot capture value, but for Uniswap, this problem does not exist. Uniswap can capture annualized fees of up to $325.5 million, just one step away from final fee capture.
However, fees are currently primarily captured by liquidity providers, who not only receive full transaction fees, but also receive UNI token incentives through liquidity mining. This arrangement is to prevent other DEX protocols from impacting Uniswap in the short term, but from the perspective of long-term sustainable development, the Uniswap community needs to find a balanced solution.
possible solutions
In the future Uniswap community governance, the following situation may arise: allocating part of the transaction fees to UNI holders in the short term: This will help UNI capture part of the fee value, thereby stabilizing its price.
Achieve long-term integration of the interests of liquidity providers and currency holders: realize the benefits of liquidity providers through UNI itself and ensure the unity of the interests of all parties.
This win-win situation requires the community to work together, and what can be achieved in the short term is to allocate part of the transaction fees to UNI holders.
UNI’s future possibilities
Judging from the above analysis, the future of UNI will depend on two main factors:
The position of Uniswap protocol in the DEX field: Currently, Uniswap’s market share is approximately 70%. Despite facing challenges from projects such as Sushiswap and Balancer, Uniswap still maintains its lead. This constant competition drives its continuous evolution and further strengthens the network effect.
How much protocol value can UNI itself capture: The value of UNI not only depends on the strength and leadership of the Uniswap protocol, but also depends on how community governance combines the value of the protocol with the value of UNI. If UNI can capture all value and unify the interests of liquidity providers, developers, currency holders and ecological partners, its value will be greatly increased.
Risk points of UNI
The market is always changing, and the number one position today may not always be the number one position. Uniswap may encounter powerful opponents in the future, especially when the encryption field is still in its early stages. This is the biggest uncertainty and risk for UNI's value.
In addition, UNI’s token release plan and long-term additional issuance may also bring continued selling pressure. Only when Uniswap's fundamentals continue to grow and fees continue to be captured can investor confidence be enhanced and the value of UNI be supported.
Conclusion
When discussing the future of UNI, we can also compare it to the top 20 projects in the crypto space by market capitalization. There is a huge gap between the valuation of many projects and the actual value captured. Through such a comparison, we can more clearly see the uniqueness of Uniswap and its potential in the DeFi field.
Overall, UNI's future is full of possibilities, but it also comes with risks. Future community governance will determine its direction and value capture path. With the continuous development and optimization of the Uniswap protocol, UNI may usher in new opportunities.