Uniswap Labs Unveils Unichain Amidst Community Backlash

Uniswap Labs recently launched Unichain, its Layer-2 (L2) network, without extensive consultation with the Uniswap DAO, sparking significant controversy within the DeFi community. Critics argue that this move raises serious concerns about transparency, centralization, and the broader impact on Uniswap’s ecosystem.

The launch of Unichain has highlighted governance concerns for the Uniswap ecosystem. Community members and delegates expressed frustration over the lack of input from UNI token holders. Notably, DeFi analyst Ignas pointed out that Uniswap Foundation recently approved a $165.5 million funding proposal to support Unichain’s development and incentivize liquidity migration. However, many believe this funding benefits Uniswap Labs and the Uniswap Foundation at the expense of UNI holders, who currently receive no revenue from the platform.

Uniswap Labs has generated an estimated $171 million in front-end fees over the past two years. Unlike competitors such as Aave, which shares protocol revenues with token holders through a fee switch mechanism, Uniswap has centralized all earnings, further fueling discontent among UNI investors. “In a shifting era where Aave proposes buying back $1M of AAVE per week and Maker $30/month buy-backs, UNI holders are a milking cow with now value accrual to the token…Aave and Maker have a more aligned relationship with token holders, and I don’t see why front-end fees couldn’t be shared with UNI holders,” Ignas expressed.

Duo Nine, a crypto analyst, criticized this strategy, suggesting that Uniswap should use its funds to buy back UNI tokens rather than investing heavily in Unichain. “They are better off buying UNI with that cash. Their flywheel won’t work if they don’t reward token holders. Creating an L2 seems like an unnecessary cost now,” the analyst remarked. In response to concerns about how the expansion would be funded, Ignas speculated that Uniswap would sell UNI tokens to cover the costs. However, such a move could lead to further dilution and dissatisfaction among holders.

Another key issue surrounding Unichain’s launch is the risk of liquidity fragmentation. Uniswap DAO has allocated $21 million to attract Total Value Locked (TVL) to Unichain, aiming to grow it from $8.2 million to $7