Twitter Battle: Uniswap Founder refers to the veToken model as a short-term money game, and is counter-questioned about the functionality of UNI.

The cryptocurrency research institution Bankless has released an analytical article introducing the veToken model. However, Uniswap believes that the token economy behind veToken is just a short-term money game, lacking long-term and sustainable economic benefits.

Zero-Function Governance Tokens

Bankless mentioned in the article that many DeFi protocols took off in 2020 with "valueless governance tokens," where holders only have governance rights and the tokens serve no other function.

DeFi giants like Uniswap and Compound boosted their protocol TVL to billions of dollars using governance tokens like COMP and UNI, which have no utility, and holders have no direct benefits from the protocol, such as cash flow or profit-sharing.

While this token model is not ideal, it enables protocols to avoid regulatory scrutiny and quickly issue tokens. However, if users can eventually participate in governance voting to allow token holders to receive protocol profits, measuring the protocol's profitability and revenue becomes crucial.

Currently, with no direct benefits from the protocol and many DeFi protocols releasing a large number of governance tokens as incentives for user interaction, token prices have collapsed. Although some protocol TVL continues to rise, mainstream DeFi 1.0 tokens have generally performed poorly.

Uniswap's UNI reached a historical high of $45 in May last year, but is currently around $10, a decline of over 70%.

veToken

veToken proposed by Curve Finance CRV creates economic benefits for token holders by locking tokens typically for 1-4 years, requiring users to make a long-term commitment to the protocol by not being able to sell the tokens. At the same time, they receive up to 2.5 times the CRV returns compared to holders who have not locked their tokens.

Despite the risks of liquidity and bribery, projects like Convex Finance CVX, Frax Share FXS, Ribbon Finance RBN, and Hundred Finance HND have achieved success in token prices by veTokenizing their token models.

Uniswap Founder's Rebuttal

Uniswap founder Hayden Adams responded to the Bankless article here:

veToken as an experiment is great, and there's nothing wrong with projects using this token model. We can learn a lot from it, but to me, it feels more like a short-term money game rather than offering long-term, sustainable economic benefits. The introduction of complex economic game theory often favors whales rather than others.

With the current situation of Uniswap's UNI, Hayden Adams' comments on this issue seem to have stirred up trouble, with users responding:

So please do something about the UNI token economy; what are the advantages of holding UNI long term?

Some have also urged Adams to adopt the veToken model, believing it would significantly increase the protocol's asset size.