"Yao coin 'bomb' resurrects, Uniswap trading volume grows over 14 times due to UBOMB liquidity pool"

Uniswap's total daily trading volume has increased by over 14 times, with 90% of the trades coming from the ETH and UBOMB trading pairs.

By: Xiaomao Brother

According to DeBank data, the decentralized exchange protocol Uniswap saw its total daily trading volume increase by over 14 times to $103 million. The largest source of trades was the ETH and UBOMB trading pair, with a 24-hour trading volume surpassing $90 million. However, individual trade volumes were not significant, so the reason for such a large trading volume remains unknown. UBOMB is the token of the UniBOMB project, which, according to the official website, features a strong deflationary mechanism in its liquidity pool.

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To understand UBOMB, we need to start with the original BOMB project, which was a deflationary and self-destructive cryptocurrency project created in 2019, causing a brief craze. UBOMB is essentially a token pegged 1:1 to BOMB, also known as Wrapped BOMB. The project largely maintains the original project's transaction destruction rules but claims to change certain destruction parameters through governance while ensuring that sending to Uniswap does not destroy the token. The main difference with the UniBOMB project is that it has to some extent borrowed mechanisms from liquidity proof projects like Unipower, changing the project to a Uniswap-driven model in hopes of attracting more participants to the network.

In early June, BOMB released a blog post stating that the project had entered a new phase and had become a community-driven project. UBOMB was an idea proposed by community member BenjaminDLea. If you are a BOMB holder, you can choose to convert BOMB 1:1 to UBOMB on the official platform.

BOMB is the first self-destructing cryptocurrency project that emerged in 2019. Its unique feature lies in a deflationary and self-destructing model, with key design mechanisms including:

• Fixed Initial Supply: A constant initial supply of 1 million tokens
• Transaction Burn Model: Automatically burns 1% of the transaction volume with each transfer
• Tokenomic Model: Strong deflationary model with no token minting

Unlike the fixed total supply model represented by Bitcoin and the fixed inflation model represented by some PoS projects, BOMB aims to explore the feasibility of a total currency deflation model. The project utilizes smart contracts to enforce automatic token burning, operating mostly in a decentralized mechanism.

The cryptocurrency BOMB aims to achieve an ideal balance: by designing a strong deflation mechanism that automatically burns tokens, it aims to reduce the total supply, slow down circulation, and indirectly impact token price and market value. However, it seems that this ideal balance cannot be achieved when the project's trading liquidity dries up, which may be one of the reasons why BOMB is trying to pivot towards Uniswap to gain more liquidity.

Unipower is a liquidity proof mechanism introduced in combination with the Uniswap liquidity solution. The project sends the entire initial supply to the Uniswap pool for distribution through the market, and all earnings from Uniswap liquidity will enter a DAO for token buybacks managed by token holders.

According to the official website, the project's founder is MrBlobby / Hank, who previously developed projects like EtherGoo and Tron Goo. The project plans to develop DApps based on the liquidity proof mechanism to enhance the ecosystem.

UniBOMB, as the name suggests, is a Uniswap-based version of BOMB. It inherits the gameplay of BOMB and incorporates the liquidity proof mechanism from Unipower with some updates tailored for Uniswap.

• In terms of design, UniBOMB retains BOMB's token supply mechanism but allows tokens sent to Uniswap not to be burned. Additionally, a portion of the token supply is sent to the Uniswap liquidity pool, with a mechanism that burns 2% (to be changed to 3%) of the pool's liquidity daily;
• In terms of community governance, BOMB has established a community foundation and claims to have transitioned from an experimental token mechanism to a community-driven cryptocurrency project. Through this approach, the project states that transfers to Uniswap cannot be burned due to a whitelist established by the foundation, and more whitelists will be incorporated through a series of governance models in the future;

According to the UniBOMB official website, the project will undergo a smart contract update in 2 days, focusing on supporting Staking rewards, a more decentralized liquidity pool, and adjusting the burn ratio to automatically burn 3% of the liquidity pool daily.

UniBOMB aims to achieve an ideal state that includes:

• As more UBOMB tokens join the liquidity pool, the daily burn amount increases;
• With more UBOMB tokens trading, the total supply decreases faster;

The project hopes to achieve the same result through these two mechanisms: a decrease in token burn and total supply to drive token price upward during this process.

However, it is important to note that the ideal state mentioned above may occur within a certain time frame due to FOMO sentiment, but it is highly likely that economic model flaws could lead to a rapid price drop or other "explosive" scenarios. Despite the innovations brought by integrating Uniswap's liquidity pool, the actual decentralization of governance and potential flaws in token mechanisms remain uncertain.

We advise caution and highlight the risk, using the historical trend of the original BOMB token as an example. According to Coingecko data at the time of writing, the BOMB token is currently priced at $1.27, having surged from $0.99 on June 4 to $13.31 on June 19, only to experience a continuous decline in price and trading volume thereafter. From October 2019 to May this year, the price has dropped by over 90%, with daily trading volume plummeting from over $700,000 to $20,000-$30,000.

Although the specific reason for the significant increase in trading volume on Uniswap is not yet clear, it may be due to a large number of flash loan arbitrage activities. According to DeBank's analysis, one possible scenario leading to the surge in Uniswap trading volume could be arbitrage activities exploiting a vulnerability in Uniswap, leveraging UBOMB's deflation and Uniswap's sync balance mechanism to cause price delays. Several transactions revealed traders borrowing funds from dydx to buy out one side of the liquidity pool, utilizing UBOMB's deflation interface, buying the other side, and finally arbitraging with dydx funds.

(One of the large flash loan arbitrage transactions)

This article is reproduced with permission from ChainNews, source: ChainNews (ID: chainnewscom)