Uniswap's Big Year - The Daily Gwei #152

2020 was the year of DeFi and in particular, the year of Uniswap.

Before we jump into today’s newsletter I just wanted to note that yesterday on Twitter I announced that the entire Daily Gwei ecosystem - this newsletter, the YouTube channel and whatever else I launch in the future - will be free forever. That’s right - no ads, no sponsors, no subscription fees - just pure free Ethereum content coming to you every single week day. Though, if you do want to support me and my work, feel free to donate to my Gitcoin Grant or send some crypto to sassal.eth - all donations are greatly appreciated (but not required)!

So we all know that 2020 was an explosive year for DeFi on Ethereum but what’s really interesting to think about is which project benefited the most from this growth. Well I think the obvious answer is Uniswap - the most well known and most used product in all of DeFi (if not all of Ethereum).

Uniswap started off the year by doing just $63 million of volume in the month of January with a mere $30 million total value locked (on top of this, the protocol was still on v1). Fast forward a few months and Uniswap was seeing monthly volumes of $10 billion+ during DeFi summer on its new v2 protocol (with billions in total value locked). Since then, Uniswap has continued to dominate and retain market-share even after beginning to face competition and “vampire attacks” from other protocols. To top it all off, Uniswap’s native token, UNI, was released on September 16th and with it came an early Christmas present for every single Uniswap user and liquidity provider.

All of this growth is obviously impressive but for me the most exciting thing that happened in 2020 regarding Uniswap was that it was actually doing more volume than centralized exchanges such as Coinbase on certain days. Think about that for a second - even with all of Ethereum’s scalability woes and high gas fees, the protocol was still processing more volume than one of the most popular centralized exchanges that is a lot more scalable and cheaper to trade on. Some people were of course quick to call this out as a “one time thing” due to the insanity of DeFi summer but that hasn’t been true as Uniswap (and DEXs in general) are still doing similar volumes to what they did in September and October.

It might be a bit hard to believe given how wild 2020 has been for Uniswap but I think that 2021 will be even wilder as the Uniswap team and community gears up to release v3 of the protocol (rumored to be so amazing that it might even be able to cook you dinner). They’re also aiming to add improvements to their governance process (which are admittedly sorely needed) and of course, launch a layer 2 implementation of Uniswap which I believe will be a game-changer for the entire Ethereum space (I outlined some of my reasoning for that here).

In general, I think that 2021 will be the year that Ethereum scales via layer 2/sidechains and DeFi will obviously be the first major use-case to adopt this technology and benefit immensely from it. I can’t even begin to imagine how much volume Uniswap will be doing on a layer 2 implementation that offers near-zero fees and 100x the scalability of the Ethereum mainnet.

Have a great weekend everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.