In just one year’s time, Uniswap, an increasingly popular decentralized token exchange protocol on Ethereum, has racked up milestones and community accolades alike in becoming a keystone dApp in the early DeFi arena.
Accordingly, it comes as no surprise that Uniswap has earned its next adoption milestone, with the decentralized exchange’s liquidity providers (LPs) earning their first $1 million USD worth of fees being the latest cause for celebration among the project’s stakeholders.
Why is this feat significant, then?
Uniswap’s design eschews order books in favor of liquidity pools. This structure allows users to permissionlessly add as much liquidity as they like to any of the DEX’s trading pair pools, so long as they can provide equivalent liquidity to both the ETH side and token side of a given trading pair. As such, the upside for liquidity providers is getting the chance to earn trading fees from the pools they service.
Every Uniswap trade costs the trader a 0.3% fee, and as more trades roll in, LPs enjoy more fees being distributed equally among themselves.
This dynamic has made becoming a Uniswap LP one of the most popular activities in the fledgling Ethereum DeFi space, to the point that new apps like MyDeFi have added a Uniswap LP tracker so that users can readily eye their LP earnings alongside their other DeFi activities.
📈 As of yesterday, Uniswap LPs have earned $1M fees in 2019! https://t.co/JyJacAIrw4
— Uniswap 🦄 (@UniswapExchange) December 12, 2019
With all that said, the DEX’s LPs earning their first $1 million worth of fees is significant because it shows that Uniswap’s adoption is growing, that its ecosystem is becoming more robust, and that the DEX protocol is doing more than just working, it’s modestly thriving.
Of course, in the grand scheme of things $1 million in fees is not much. But the calculation is different insofar is Uniswap is an upstart dApp in the insurgent, youthful Ethereum ecosystem. For the DEX to come as far and as fast as it has in its circumstances is impressive.
Plus, $1 million in fees is not bad for an exchange that launched last fall and that earned its first $1 million in trading volume back in January 2019.
A Good Year for Uniswap
In the last 12 months, Uniswap has become a darling among Ethereum DeFi traders because of its sensible, straightforward design. This viral darling status has undoubtedly helped fuel the exchange’s rapid growth in kind.
Just days after celebrating its first birthday last month, Uniswap made waves in the tokenization sector for a “paradigm shift” when it opened its first liquidity pool for a tokenized security. The security in question was via the RealT fractional real estate investing project and represented fractional ownership in a Detroit-based property.
“Doing these things without having to sign a single paper or shake a single hand is immensely powerful,” noted cryptocurrency analyst Eric Wall said of Uniswap’s first security token.
Back in August, Uniswap also made headlines when the exchange crossed the 1 million ether (ETH) in total trading volume mark for the first time. For a rough ballpark idea of the amount exchanged, 1 million ETH is worth approximately $145 million at the time of this article’s writing.
In recent days, some around the cryptoeconomy have challenged the Uniswap team’s decision to remove certain sanctioned countries from being able to access their front end website. However, the underlying Uniswap smart contracts remain open to all and permissionless to use through various access points, so very little has changed and Uniswap remains a Teflon dApp.
“All smart contract functions are public and all upgrades are opt-in,” Uniswap creator Hayden Adams has previously explained.
In the mean time, Adams and the small Uniswap team have set their sights on helping the protocol reach new heights in 2020 and beyond.