Author: Luke, Mars Finance

On March 20, 2025, the Uniswap community passed two governance proposals through on-chain votes, allocating a total of US$165.5 million UNI tokens to incentivize ecosystem development. The funding will be divided into two parts: $95.4 million for developer subsidies and $25.1 million for the two-year budget for operations, and $45 million for liquidity incentives to support Uniswap v4 and Unichain. This decision not only marks Uniswap's largest community funding ever, but also reveals its ambition to transform and break through in the highly competitive decentralized finance (DeFi) market. This article will deeply analyze the background, strategic goals, potential impact and challenges of the proposal, and look forward to the future development of the Uniswap ecosystem.

Background: Opportunities and Challenges Uniswap faces

Uniswap, as a pioneer in the DeFi field, has changed the landscape of digital asset trading since its launch in 2018. However, with the release of Uniswap v4 and Layer 2 network Unichain in 2025, the project did not quickly achieve expected success. Data shows that the total lock-in value of Uniswap v4 (TVL) is only $85 million, while Unichain is even lower, only $8.2 million. Meanwhile, competitors invest up to $50 million in native tokens per month to incentivize liquidity and grab market share. Against this backdrop, Uniswap urgently needs to revitalize its ecological vitality through large-scale investment.

In addition, the community's call for "fee switch" has never stopped. This mechanism aims to allocate part of the protocol revenue from liquidity providers (LPs) to UNI token holders to enhance the token's value capture capabilities. However, due to the complexity of technology and governance, this function has not been implemented for a long time and has become the focus of community controversy. This grant is seen as a key step in paving the way for the “duty switch”.

The core of the proposal: Four strategic priorities

The Uniswap Foundation has clarified the four strategic directions for the next two years in the proposal, and the $165.5 million fund will revolve around these goals:

1. Expand network supply: Improve capital efficiency

The goal is to provide the highest capital efficiency on all active EVM-compatible chains. To this end, Uniswap will leverage the innovative AMM capabilities of v4 and Unichain’s infrastructure to attract liquidity. The $45 million liquidity incentive program will be implemented in partnership with Gauntlet to increase TVL and market share in the short term. However, the foundation emphasizes that the long-term goal does not rely on continuous subsidies, but maintains liquidity through organic demand.

2. Expand network demand: Create a top developer platform

Uniswap v4 lowers the threshold for developers to build new market structures through hooks, while Unichain designs Layer for DeFi optimization 2 Environment. The $95.4 million subsidy budget will support the developer ecosystem, including education programs (such as Infinite Hackathon), infrastructure construction and global developer ambassador projects. Currently, more than 1,000 developers have participated in v4 hook development and created more than 150 prototypes. The key to success is to increase the proportion of hook transactions and the number of developers in Unichain.

3. Activate revenue: To understand the value of locking

Unichain has committed to allocating 65% of its on-chain net income to validators and stakeholders, while the Foundation is exploring the establishment of legal entities (such as DUNA) so that governance agencies sign contracts with external entities and potentially introduce agreement revenue distribution. This creates conditions for the implementation of the "fee switch". If successful, UNI token holders will benefit directly and the token economic model will usher in major changes.

4. Introducing core contributors: Ensure long-term innovation. To achieve long-term sustainability, the Foundation plans to launch a "Core Contributor" program to fund development teams to advance Uniswap infrastructure (such as non-EVM versions or new hook protocols). These teams will work directly with governance agencies and be paid in the form of UNI tokens. This move is intended to reduce the use of single entities (such as Uniswap) Labs’ dependence on promoting governance autonomy. Fund allocation and transparency commitment

Proposal plans detailed the use of funds:

Subsidy budget: USD 57.9 million and USD 41.5 million in 2025 and 2026, totaling USD 99.4 million (net $95.4 million). Funds will support the developer project and Unichain ecosystem and set clear performance goals (such as TVL, market share, etc.)./p>

Operational Budget: Two-year cash budget is $24.8 million, plus 1.5 million UNI (approximately $13.8 million) for employee compensation. The foundation plans to add 12 new employees to cover areas such as governance and developer support.

Transparency measures: The Foundation promises to improve transparency through regular reports and community meetings, and will work with the Uniswap Accountability Committee (UAC) by May 8, 2025 to establish a board of representative principals to monitor strategic implementation.

Potential Impact: Opportunities and Risks Coexist Opportunities

Eco-Growth: US$165.5 million in funding, if properly implemented, may significantly enhance the competitiveness of Uniswap v4 and Unichain, especially in terms of developer ecology and liquidity.

Token value enhancement: The potential implementation of the "fee switch" will give UNI actual earnings attributes and attract more investors.

Governance upgrade: The introduction of core contributors and legal entities will drive Uniswap toward a more decentralized governance model.

Risk

Fund size dispute: Some community members questioned the need for $165.5 million, pointing out that Uniswap Labs made $171 million through front-end expenses in two years, but did not share the profits with UNI holders. This centralized model may weaken trust.

Liquidity migration: $45 million incentive may pull funds away from Ethereum or other Layer 2 to create opportunities for competitors.

Governance efficiency: There is still uncertainty in the implementation of core contributor plans and conditional funding markets, and whether governance institutions can effectively manage them remains to be seen.

Market response and future outlook

After the proposal was approved, the UNI token price rose to $7.52 on March 19, a daily increase of 5.62%, showing the market's optimism about its growth plan. However, whether prices can continue to rise depends on the effectiveness of execution. In the short term, liquidity incentives and developer support may bring visible results; in the long term, the implementation of "fee switches" and governance upgrades will determine whether Uniswap can consolidate DeFi's leadership position.

The Uniswap community is standing at a crossroads. thisThe investment of US$165.5 million is not only an increase in technology and ecology, but also a profound attempt to transform its governance model. For investors and observers, the next execution details, market feedback and community consensus will be the key to judging the future trend of Uniswap. Whether the pioneers of DeFi can continue to lead the trend, 2025 will be a decisive year.