It was hoped that a recent Uniswap community call would shine some light on what will happen when its liquidity mining incentives end next week. With no clear conclusion, volatility seems to be the likely outcome.
There is currently over $2.4 billion sitting in four ETH based liquidity pools on Uniswap. These pools have allowed users to earn UNI tokens over the past two months, but these incentives come to a close on Nov 17.
A recent Uniswap community call was set up to try and ascertain what direction the protocol, and all of its collateral, will be taking when this happens. Most of the attendees left disappointed as there was still no clear direction from the world’s largest decentralized exchange or its governance mechanism.
Thank you everyone who attended the @UniswapProtocol community call today!
If anyone is interested in making a transcript, please get in touch!
— monetsupply.eth (@MonetSupply) November 13, 2020
Uniswap Strategy Head: ‘No Comment’
The community call, which went on for an hour and a half, was quickly directed to the burning issue of liquidity mining and how to prevent an exodus of collateral from the protocol.
Many concerned members wanted to know what the plans were when the UNI farms stopped producing and the billions of dollars that are currently locked in them are released into the wild. There was also the threat of a SushiSwap-esque vampire attack.
When asked about this, Uniswap head of strategy Matteo Liebowitz was not forthcoming with reassurance stating;
“Yeah, so unfortunately I can’t really comment on that and any decision related to liquidity mining has to be made by community members rather than the team.”
Compound Finance founder Robert Leshner pointed out that the farming incentives will expire before Uniswap governance can act.
🚨 Uniswap liquidity incentives are expiring in five days, sooner than $UNI Governance can act.
— 🤖 Leshner (@rleshner) November 13, 2020
This means that there will be no immediate extensions to the program or replacement pools. The impact on this could be huge as UNI could flood the markets with no earning opportunities to replace those four pools.
UNI prices have ticked up over $3 again but this is likely to be a short-lived rally, especially if farmers decide to sell their yields and take profits from their two-month mining sprees.
$1.2 Billion in ETH ‘Into the Wild’
The question of the Ethereum value on the platform is an even greater concern. At current collateralization levels, there is over $1.2 billion in ETH spread across the four pools. This will all be released en masse on Nov 17.
ETH prices rallied when Uniswap first launched the pools in mid-September, peaking at $390 at the time. Today prices are 18% higher, so some profit-taking might be expected.