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Uniswap growth fueled by risky DeFi tokens

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DappRadar

August 2020 Flash Report

Decentralized exchange Uniswap recently raised $11 million in a Series A funding round led by Andreessen Horowitz. Having been a major driving force in the decentralized finance movement Uniswap will use the money to develop its V3 trading platform.

As the well-established leader of the DEX category looks set to break trading volume records once again in August 2020 we ask what is driving Uniswap’s impressive growth.

Key takeaways

  • Uniswap surpassed $1 billion in trading volume two months in a row.
  • Price oracles and DeFi token listings fuel Uniswap activity.
  • AMPL generated more than $500 million in July or 30% of the total Uniswap trading volume.
  • YAM within 24 hours already generated more than $10 million in trading volume.

As already stated, Uniswap is the top protocol within the DEX category generating over $1.5 billion in trading volume in July. August results suggest there might be even better results by the end of the month.

Uniswap

Uniswap Price Oracles

One of the arguments for increased performance could be price oracles. As already mentioned, Ethereum is suffering from major network congestion. At the time of writing, gas prices surpassed 100 Gwei level. This results in around a $10-14 fee per transaction. 

Uniswap V2 has developed a novel functionality that allows for a highly decentralized and a manipulation-resistant on-chain price feed. This functionality helps to generate gas-efficient Uniswap prices.

Price oracles might be one of the reasons behind the surge of activity on Uniswap.

DeFi Projects fundraising on Uniswap

Another reason why Uniswap has been so successful is the ease of creating incentivized pools. This led to a new trend resulting in various new DeFi projects been listed on Uniswap. 

First is the AMPL token. A digital currency that adjusts supply daily based on market conditions. It was listed a while ago, although it had the most attention in July 2020.  

AMPL token fueled the growth of Uniswap by more than $500 million in trading volume in July 2020.

Secondly, yearn.finance with their token YFI. Yearn. finance is a decentralized ecosystem of aggregators that utilize lending services such as Aave, Compound, dYdX, and Fulcrum. The goal is to optimize token lending. YFI is not in the top trading pairs of Uniswap, while still generating impressive results of $4 million daily.

And the most recent one that has already caught plenty of attention is the YAM token. Still too early to say what cumulative result we might see by the end of the month, so far $10 million was traded within 24 hours.

UAW increase of almost 2,000 in 24hrs

The AMPL project

The AMPL is a digital currency that adjusts supply daily based on market conditions. AMPL aims to have the price stability and a peg to USD. The project started in mid-2019 with a value of $2.00 and today its worth is $0.72.

At the beginning of July 2020, the price of AMPL boomed to an all-time high reaching $3.83.

Uniswap AMPL has experienced tremendous growth month-on-month surpassing $500 million in trading volume in July 2020. Despite increased interest in the project, future development is not clear.

The YFI project

YFI is the governance token for Yearn.Finance. Yearn.Finance is a decentralized ecosystem of aggregators that utilize lending services such as Aave, Compound, dYdX, and Fulcrum to optimize token lending.  

YFI token was released on 18th July 2020 and the token carried an initial value of $34.53 and by the end of the 18th July, the price skyrocketed to $790.94. Over the time period, the token has reached an extraordinary value, and today its actual worth is more than $6,000.

Since July 18th, the token is listed in Uniswap V2 and generates around $5 million in trading volume daily. 

The YAM project

According to the Yam Finance report, it is an experimental protocol in fair farming, governance, and elasticity. The idea behind this project is to expand contracts supply with respect to the market condition. The project is similar to AMPL.

In a few hours of its implementation trading has resulted in more than $10 million in trading volume in less than 24 hours.

Going forward we will see how this project will function and generate value in the market.

High interest means high risk

Although the results of the projects look impressive now, there is a certain amount of risk. First of all, the projects are still in the experimental stage. YAM smart contracts are not even audited yet. This opens the opportunities for new hacks.

Secondly, the token is unpredictable, volatile, and co-dependent on each other. Collapse within one token might create a domino effect.

Conclusions

Uniswap has already made its mark in the blockchain industry and has become the leading DEX dapp in 2020.

Fascinating results are due to the fast development and adoption of new features. First of all, the price oracle seems to be the perfect competitive advantage in the event of the Ethereum gas price change. 

Secondly, the ease of creating incentivized pools. This resulted in a great amount of newly listed DeFi tokens. In July DeFi tokens accounted for more than 30% of total trading volume on Uniswap.

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