Can the release of Uniswap v3 herald a new DeFi boom?

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With Uniswap’s TVL increasing from $13.7 million to $8.5 billion after the release of its v2 version, some observers suggest the DEX’s v3 launch could ignite the next DeFi rally.

With $89 billion in overall valuation trapped in decentralised finance on Ethereum, the market is waiting to see whether the arrival of UniSwap v3 would be the spark for DeFi’s next big bull run.

With its May 5 release date, Uniswap v3 promises advanced new capabilities and yield generation prospects.

Uniswap is highlighting three new liquidity provider features: customizable capital allocation across a market’s entire price curve in the form of concentrated liquidity, tiered market maker fees providing boosted returns for dynamic pairs vulnerable to impermanent failure, and cheaper access to oracles for increased data integrity.

The predicted decrease in Ethereum fees as a result of the EIP-1559 update in July would also improve v3’s value proposition, and the new iteration of Uniswap will also launch on Optimism after the layer-two rollups solution goes live.

With its new concentrated liquidity feature promising users’ unique and customizable yield products, a nascent DeFi sector specializing in tokenizing future yields appears poised to flourish.

Emerging ventures such as Alchemix have recently experienced meteoric development as a result of the prospect of tokenizing future yields, while Alchemist Coin is using Ampleforth’s V2 Geyser contracts to enable users to build nonfungible tokens reflecting claims to future Uniswap liquidity provider payments.

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Furthermore, modern decentralised markets are innovating to promote trading in tokenized future yields, with Pendle raising $3.5 million last month from major investors to create an electronic market maker investing in time-degrading securities.

Commenting on the completion of Pendle’s public LBP offering earlier this month, Cinneamhain Ventures Partner, Adam Cochrane, described the forthcoming exchange as creating “an entirely new category of market in the DeFi space.”

Uniswap v2 in history

On March 18, 2020, Uniswap v2 went live on Ethereum’s mainnet. At the time, the decentralised exchange had approximately $13.7 million in total value locked, or TVL, while the larger DeFi business had approximately $550 million in TVL.

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After drawing early criticism for the success of its open listing policies by scammers and impersonators, as well as its comparatively high trading fees compared to some consolidated sites, Uniswap’s TVL surpassed $100 million in August, with the sector’s TVL reaching $7.5 billion by September.

 

After being subjected to a series of vampire mining attacks by competitor yield farming DEXes in an attempt to drain the platform’s liquidity, Uniswap airdropped its native governance token to v2 protocol users in September and ended the month with a TVL of more than $2 billion.

Although DeFi stocks cooled in Q4 2020, while Bitcoin reached fresh all-time highs above $20,000, the sector’s TVL has skyrocketed since the beginning of 2021, with valuation locked in Uniswap rising from $2.15 billion to $8.53 billion, according to DeFi Llama.

 

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