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After Uniswap stopped mining, the transaction volume did not decrease. Is liquidity mining really necessary?

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Uniswap liquidity mining did not allow liquidity providers to increase their income.

Original title: "Chain News Observation｜Uniswap Doesn't Need to Rely on Liquidity Mining? If you lose the profit-seeking farmer, you will not lose the annualized SushiSwap"

Original source: Chain News ABMedia

Uniswap ended the first round of UNI liquidity mining, and the liquidity providers of the four liquidity pools are temporarily unable to receive UNI rewards. In the recent governance proposal, there is a plan for the next round of liquidity mining, but the Uniswap community is quite opposed. Nearly 90% of the votes do not want to "relaunch" or "launch" liquidity mining.

Does Uniswap really need liquidity mining? Observing the annualized remuneration currently available to Uniswap and SushiSwap liquidity providers, we found that Uniswap without liquidity mining does not seem to be bad.

Uniswap: Loss of liquidity, trading volume has not dropped sharply

Chain News Observation, Uniswap After stopping the mining (liquidity mining), the liquidity (liquidity) continued to decrease, but the transaction volume did not drop significantly; while the liquidity of the competitor SushiSwap increased significantly, almost returning to the level of Uniswap, which sucked blood in September, although Trading volume has grown, but is still less than one-third of Uniswap.

Observing the list of locked assets in DeFi, it is found that SushiSwap is sixth, while Uniswap has left the first place and has become fourth:

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Uniswap community: No liquid mining, it will not be worse

Community member govro pointed out that in fact UNI mining rewards caused Two negative effects:

First, compared with the past data of the four reward pools, under the blessing of UNI rewards, the total of the four pools Liquidity is much higher than trading volume, which makes liquidity provider (LP) income (UNI + 0.3% handling fee) lower than the previous income earned only by handling fee.

Second, the issuance of mining rewards also dilutes UNI holders (non-LPs). The only benefit of liquidity mining is the total lock-up of Uniswap The value has increased, but the transaction volume has not increased, and the transaction volume is the data that can represent the actual economic value of Uniswap.

For liquidity providers, what they expect is that the hot transactions will bring considerable profit sharing, and the extra rewards of liquidity mining are only auxiliary profit. According to the opinions of govro, a member of the Uniswap community, we counted the "trading volume/liquidity ratio" before and after Uniswap stopped liquidity mining. The higher the ratio, the more liquidity providers (LPs) can get. The more transaction fees.

From the results, after Uniswap lost its liquidity, it had little impact on the trading volume, so the ratio increased sharply instead, and there was less to divide the liquidity For profit-seeking farmers, liquidity providers can instead get more transaction fees. On the other hand, Sushiswap, with the sharp increase in liquidity, the trading volume did not bring much help to the ratio, and even slightly reduced the income of liquidity providers.

Comparison of four liquidity pools

In order to further estimate and verify, Chain News compared Four UNI mining liquidity pools (WBTC-ETH, ETH-USDT, DAI-ETH, USDC-ETH), after no mining rewards, how much difference is there in profit from SushiSwap.

Using the value of 1,000 US dollars as the unit, if the current situation (11/19 13:00) data is used, how much income can be obtained in Uniswap and Sushiswap respectively Pros: (Uniswap only has commission sharing, SushiSwap has commission + SUSHI rewards)

It can be seen from the above table that as a liquidity provider The mining Uniswap participates in the ETH-USDT and USDC-ETH pools, and its profit is still higher than that of the liquid mining SushiSwap. Therefore, it can be verified that under the current conditions (liquidity, transaction volume and price of governance tokens), Uniswap still has certain advantages even without liquidity mining.

In addition, it must be noted that SushiSwap’s SUSHI mining income, according to the current system, needs to lock two-thirds of the warehouse for up to half a year, which is affected by currency price fluctuations; The transaction fee income of the sex pool is 0.3%, which will be split into 0.25% for liquidity providers, and the other 0.05% will need to be obtained by staking SUSHI. Therefore, the actual benefits will vary according to user behavior.