Genesis mining ends, Uniswap liquidity plunges by $1 billion, new proposal won't go live until at least 12/4

The liquidity mining program of the decentralized exchange platform Uniswap has ended today at 08:00 (Taiwan time) without mining rewards, causing a drastic $1 billion drop in liquidity in the pools. Despite an official community governance meeting held on the 13th, consensus on how to amend the liquidity mining program has not been reached.

Liquidity Plummets

Uniswap launched its governance token UNI and liquidity mining program on September 16. According to previous reports, the initial mining rewards were set to continue until November 17 at 08:00 (Taiwan time) and were implemented for four pools, each providing 5 million UNI, roughly equivalent to 83,333.33 UNI per day.

• ETH/USDT
• ETH/USDC
• ETH/DAI
• ETH/WBTC

After the rewards stopped, a situation of capital outflow gradually emerged. Uniswap's liquidity instantly evaporated by nearly $1 billion, dropping from $3.36 billion on the 13th to $2.08 billion at the time of writing; trading volume also decreased from $270 million the previous day to the current $110 million. Liquidity drained, the once blood-sucking Uniswap was left dry while SushiSwap increased its liquidity by 64%.

Community Proposal Rewards Halved

Previously, Uniswap held a community governance meeting, but there wasn't much discussion on the direction after the liquidity mining ended on the 17th. As of now, the latestproposal is still in its early stages, suggesting a direct halving of mining rewards, reducing each pool to 2.5 million UNI, releasing an average of 41,666 UNI per day, and maintaining the original four pools without adding new ones.

This proposal will undergo a three-dayvoting process via the off-chain governance platform Snapshot, with block height 11,270,515 as the basis for votes, requiring a minimum of 25,000 UNI to pass. Currently, there is a 66.68% approval rate.

Another five-day voting is expected on November 20, requiring 50,000 UNI support. If all goes well, the proposal will pass on December 2, with an additional 2-day implementation lock-up period. The new liquidity mining version could start as early as December 4 and end on February 1.

The Dilemma of Liquidity Incentives

Overall, UNI rewards can continue to incentivize users to provide liquidity, with the liquidity in the aforementioned four pools being several times that of other pools, enabling the creation of trading pairs with close to zero spreads. Halving mining rewards can slow down the issuance speed of UNI, but a downside is that participants continue to exert selling pressure on UNI by following the principle of mining, withdrawing, and selling in fixed quantities.

As the mining rewards end, some point out that this is a major positive for the UNI token, believing that the selling pressure relief will allow UNI to soar again; others believe that around 1.1 billion ETH locked here, and after mining ends, some ETH will flow out, impacting the market.

However, from the 16th until now, Ethereum (in red) has actually seen a 1.11% increase, and UNI (in blue) has not shown signs of taking off, with approximately a 9% drop at the time of writing.