- Leading decentralized Uniswap released its own UNI token with a focus on making the protocol community-owned.
- UNI was distributed to almost all historical users, with many receiving an airdrop now worth in excess of $2,000 at current prices, CoinGecko data shows.
- Ethereum’s gas cost — how transaction fees are calculated — saw an exponential increase to all-time high values.
- The extreme fees users were paying have concerned some analysts, who say that DeFi will lose steam and/or Ethereum will lose market dominance as the foremost smart contract blockchain.
- Top Ethereum protocol Yearn.finance released a number of product updates this week, which many think will push YFI higher.
- OKCoin listed three DeFi assets this week: COMP, DOT, and YFI.
- We are reviewing 15 other DeFi assets for upcoming listings.
DeFi continued its trend of growth this week, while much of the cryptocurrency market took a breather, impacted by cooling legacy markets — the S&P 500 and gold markets dropped three percent from recent highs.
In the past seven days, leading decentralized exchange Uniswap released its own token while other DeFi protocols such as Yearn.finance (YFI) also made serious developments. This has come at the cost of higher Ethereum transaction fees, which has made some fear ETH may begin to lose market share.
Uniswap Releases UNI
After months of anticipation, leading decentralized exchange Uniswap released its own this week called UNI. Uniswap is a decentralized exchange that uses an automated market maker model, whereas liquidity is priced on a curve and there are no order books.
UNI is a governance token that has the ability to govern the direction of the Ethereum exchange. Users expect it to accrue value over time when users activate a protocol fee, which will give UNI holders effectively a dividend derived from the fees the exchange collects. UNI holders can also use the protocol treasury, amongst other benefits.
“Inspired by Ethereum’s vision, we have long committed to the ideals of permissionless access, security, and immutability… A community-managed treasury opens up a world of infinite possibilities. We hope to see a variety of experimentation, including ecosystem grants and public goods funding.”
The big appeal of UNI to cryptocurrency users was that it was released retroactively; that’s to say, historical users of the exchange all got to claim free tokens.
Users that traded on the exchange got 400 UNI while liquidity providers — who deposit capital to be bought and sold by users in exchange for fees — were allowed to claim thousands, even hundreds of thousands of coins. Jeff Kirdeikis, CEO of TrustSwap, personally claimed 35,000 coins. This airdrop, dubbed the “Uniswap Stimulus Cheque,” is presently valued at over $2,000 for users while liquidity providers were granted instant access to coins worth much more.
Uniswap can also be mined through the liquidity mining system in place, where users get UNI pro-rata for their deposits of liquidity into four pools: the DAI-ETH, USDC-ETH, USDT-ETH, and WBTC-ETH liquidity pools. Governance will soon have the ability to add more pools.
Experiencing fast growth, UNI’s current valuation is around $7 per token. The coin has already become one of the top 30 cryptocurrencies in circulation by market capitalization despite its nascency.
Ethereum Gas Fees Spike
Responding to the deluge of transactions related to the launch of UNI, the Ethereum transaction fee market exploded. On the evening of the launch, the transaction fee tracker GasNow estimated that the average user was paying over 1,000 Gwei for gas.
To put this into context, here’s how much it costs for popular types of Ethereum transactions at 1,000 Gwei:
- Send ETH from wallet to wallet: $9
- Send ERC-20 tokens like Tether’s USDT from wallet to wallet: $16
- Deposit into a top Ethereum money-market like Aave or Compound: ~$50
- Make one Uniswap trade: ~$80
Even after the initial frenzy, gas remains around 400 Gwei as of this blog’s writing. This means that for many users that may only have a few hundred dollars worth of cryptocurrency in their wallet, transactions, especially on-chain trades, might be unreasonable to make.
Many in the space have expressed their concerns about the sustainability of DeFi if many new users basically cannot afford to use on-chain platforms.
Ryan Watkins, a crypto analyst at Messari, said that he fears high Ethereum transaction fees, which may be part of a wider user experience problem in the space, could be a big issue in this market cycle:
“Ethereum is damn near unusable right now. I can only imagine what retail will think if they eventually come into this market and face $50+ gas fees and 10+ minutes transaction confirmations. This has been my biggest anxiety about this bull market. The protocols are ready, the infrastructure is not.”
This was echoed by Jacob Franek of Coin Metrics. The co-founder of the blockchain analytics company commented earlier this year.
“Gas prices will put a hard cap on this DeFi bull run. To be expected and probably a good thing. Outstanding question is where will gas prices stabilize? Migrating any significant amount of activity to L2 or new chains will take 6–18 months. High gas likely new normal.”
Enter alternative smart contract blockchains such as Polkadot and Solana, which promise to offer cheaper and faster transactions than Ethereum, which has long suffered from bottleneck issues.
Both Polkadot and Solana have transaction throughputs that are around two orders of magnitude larger than that of Ethereum, along with short block times, thereby making them theoretically good platforms to facilitate decentralized finance.
OKCoin listed Polkadot’s DOT token this week and we are considering listing Solana’s SOL token in the future. DOT is a governance token that enables holders to change fees, add or remove Parachains, amongst other decisions. SOL is a token that allows users to use the Solana blockchain; SOL is also regularly bought back and burned, thereby making it a deflationary cryptocurrency.
Yearn.finance: a vote for supply restriction
This week also saw Yearn.finance — a decentralized finance protocol focused on allowing users to maximize their risk-adjusted returns on their cryptocurrency — release a series of updates while announcing new products.
A crucial vote is taking place right now that will forever restrict the supply of YFI — Yearn.finance’s native governance token that accrues value through dividends — to 30,000 coins. The vote currently has over 90% of votes “for” the proposal. Many say that much of YFI’s value is derived from a scarcity premium, similar to Bitcoin, which has built a similar image about having a limited number of tokens for many users.
Speaking of governance, a MakerDAO team member introduced a proposal that suggests onboarding YFI into Maker’s oracle system. This will allow YFI to be introduced as collateral for the MakerDAO ecosystem, increasing its usability and adoption by Ethereum users and by DeFi protocols.
On top of this, Andre Cronje, the main developer and founder of Yearn.finance, released basic breakdowns of two new products he is working on for the Yearn.finance ecosystem: Stable Credit and SyntheticRebaseDollar. There currently is no proper documentation on these products as they are still in development, but many see these products as a roadmap for Yearn.finance to also become a protocol for decentralized token exchange, on-chain derivatives, and a variety of other use cases.
OKCoin lists 3 DeFi assets
By now you know we’ve been reviewing 18 DeFi assets for listing, and yesterday we explored the ecosystem utility of those 18 assets. With COMP, DOT, and YFI, OKCoin is one of the first licensed exchanges to support these assets with USD pairings for US and global customers. And, unlike other exchanges, we have zero fees — visit your dashboard.
As the DeFi ecosystem continues to expand, so do our listed offerings on OKCoin. We look forward to adding support for more tokens soon. But our commitment to support decentralized finance (DeFi) doesn’t stop at providing tradable assets, watch for further announcements.
This is the first installment of our new “This Week in DeFi” series, where we will cover the latest trends in the decentralized finance ecosystems of Ethereum and other top blockchains. Read more about DeFi on our blog.