On February 14, 2025, Devin Walsh, executive director and co-founder of the Uniswap Foundation, initiated a liquidity incentive proposal for Uniswap v4 and Unichain in the Uniswap government. After the proposal passed the Temp Check on Snapshot on March 3, it was finally officially completed on March 21 on tally, with a total of 53 million UNI and 468 addresses participating in the vote. The programs technical support Gauntlet announced that the first phase of the program will last for 2 weeks and will start on April 15.
Once the proposal was issued, it triggered heated discussions in the community. Some people expressed support, while others believed that the plan was meaningless and harmful to the interests of the DAO. This article will detail the main content of the plan, how to participate, and the communitys views.
Proposal Details
The proposal also includes plans for UniSwap v4 in the next six months and Unichain in the next year. The foundations goal for Uniswap v4 is to migrate the 30-day rolling transaction volume of $32.8 billion on v3 to v4 on the target chain in the next six months. A total budget of $24 million has been applied for the six-month plan.
Unichains activities are planned to be implemented for a whole year. The Uniswap Foundation plans to achieve a TVL of $750 million and a cumulative trading volume of $11 billion for Unichain in the next three months. To achieve the above goals, Unichain plans to request about $60 million in incentives in the first year, including the $21 million requested this time. It will operate in a similar way to Uniswap v4, but the rewards will take into account non-DEX DeFi activities to increase the organic demand for liquidity, which is mainly composed of the Uniswap Foundation and other projects built on Unichain.
The incentive campaigns on the two chains will differ slightly, with Uniswap v4’s campaigns focused on driving AMM volume on each chain, while Unichain’s campaigns will more strategically deploy AMM incentives to promote broader DeFi activity across the chain and within AMMs.
The first Unichain event will be launched on April 15, 2025, for a period of three months, with millions of dollars in incentive funds issued. $UNI incentives will be distributed in 12 different Unichain pools to reward LPs. In the first two weeks, the following 12 pools will receive $UNI rewards: $USDC / $ETH, $USDC / $USDT0, $ETH / $WBTC, $USDC / $WBTC, $UNI / $ETH, $ETH / $USDT0, $WBTC / $USDT0, $wstETH / $ETH, $weETH / $ETH, $rsETH / $ETH, $ezETH / $ETH, $COMP / $ETH.
Gauntlet and Merkl played a big role in this event. Gauntlet is a simulation platform for on-chain risk management, which uses agent-based simulation to adjust key parameters of the protocol to improve capital efficiency, fees, risks and incentives. Merkl was incubated by a16z and is a one-stop platform that integrates DeFi investment opportunities from multiple chains and protocols.
Gauntlet provided its Aera vault technology for this event. After the DAO voted to approve the funding application, it was stored in the safe. Gauntlet determined the liquidity pool with the highest transaction volume on each network and calculated the additional income required to make Uniswap v4 a more economically attractive option. Adjustments are made every two weeks, and the selection of which pools can receive how much incentives and receive rewards will be announced on the Merkl website .
Aggressive growth targets, old-fashioned growth strategies
Discussion on incentive effects and subsequent retention
Member UreNotInD was the first to oppose the proposal during the Dao voting discussion. The main reason was that when proposing the required funds in the proposal, he compared it to the funds spent by other projects on liquidity: Aerodrome spends 40-50 million US dollars per month, ZkSync Ignite spends 42 million US dollars in 9 months, and Arbitrum spends nearly 200 million US dollars since March last year. He believed that this was an old-fashioned strategy that many projects had tried with little success.
The strongest competitor, Fluid, is grabbing market share without providing any incentives. The most popular L2 network, Base, has successfully gained market share without user incentives. These measures do not solve the structural problems that can help Unichain grow, and the interoperability between super chains, the development of unique use cases for DeFi, and the improvement of the issuance of native assets on the chain (RWA, meme coins, AI tokens), the native assets are the most sticky, and the foundation should attract and fund more developers through the above methods.
Member 0x keyrock.eth has the same concerns. He believes that the Gauntlet report should be shared publicly in the forum. This report cost a lot of money, but the information presented in the forum is very superficial and insufficient to support the rationality of such a large-scale incentive.
He pointed out several unreasonable points in the report. For example, Aerodromes high incentives are because 100% of the fees are redistributed to veHolders, which cannot be compared with this type of liquidity incentives. Secondly, zkSyncs $5 million monthly token reward has increased TVL from $100 million to $266 million.
At this time, Unichain’s total TVL is only $10 million, which shows that there is insufficient intrinsic demand for Unichain in the market. Gauntlet’s claim that it can increase Unichain to a TVL of $750 million with a monthly incentive of $7 million seems to lack authenticity.
Even if the activity may be temporarily increased through incentive subsidy activities, how will the demand be sustained? Historical cases such as MODEs TVL dropped from 575 million to 19 million, Mantas 667 million to 46 million, and Blasts 2.27 billion to 233 million indicate that Unichain may face the same outcome.
On this basis, from the data of TVL growth per dollar available of UniSwaps incentives in various chains compared by Forse Analytics, it can be seen that in Base, which has the most complete infrastructure in L2, the best case is that every dollar can get 2,600 US dollars of TVL, while the worst performing Blast is about 500 US dollars. To achieve the goal of 750 million US dollars of TVL, a simple calculation shows that the former requires 300,000 US dollars per day and the latter requires 1.5 million US dollars.
Although the analog data is not perfect, it can represent a certain range of proportions. If you want to use $7 million to increase Unichains TVL to $750 million within three months, you need to improve the surrounding infrastructure and user level to be similar to base. Among them, the worst performing Blast chain currently has a TVL more than 10 times that of Unichain.
The member also shared the activity results of the incentive plan for Uniswap v3 when it was deployed on the new chain in 2024. The best result was Sei, which ranked 6th in the DEX TVL of the chain ecosystem, with a TVL of only $718,000. The worst result was Polygon zkEVM, which even had a TVL of only $2,600 and a DEX TVL of 13th in the chain ecosystem. None of these deployments had a TVL of more than $1 million, and almost none of them entered the top DEX of the chain. Most of these deployments have completely lost their vitality, and the only trading volume comes from arbitrageurs fixing outdated prices.
Table created by 0x keyrock.eth showing Uniswap’s TVL after deploying incentives on multiple chains and its ranking in DEX
However, these incentive pool deployments have almost no flywheel effect, and they have fallen off a cliff after the event. Uniswap spent $2.75 million on these deployments (excluding the matching amount in the protocol), and the annualized cost of these deployments is $310,000. Even if fee conversion is used to recover the fees (assuming a 15% share), the DAO can only earn about $46,500 per year, equivalent to a 1.7% return rate, and it will take 59 years to break even.
The area between the two dotted lines is the incentive activity period. It can be seen that almost all liquidity pools have experienced a cliff-like drop after the activity.
Of course, some members also said that although there is a general situation of a cliff-like drop in liquidity after the end of the incentive, this incentive plan is still the most effective strategy. Member alicecorsini used the data from Forse Analytics recent review of UNI incentives for Uniswap v3 on Base to show the difficulty of retaining users, liquidity, and trading volume after the end of the incentive.
In terms of base, Uniswap’s biggest competitor is Aerodrome, but the data presents a more complicated picture. 27.8% of Uniswap’s incentivized LPs provided liquidity to Aerodrome after the incentives ended, of which 84.5% left Uniswap completely, and about 64.8% of users who left Uniswap did not switch to Aerodrome, even though they had a better APR than the unincentivized Uniswap v3.
While some LPs turned to Aerodrome, a larger proportion of users simply exited rather than going to direct competitors. This indicates a broader structural challenge in retaining users and liquidity. He believes that brainstorming some ways to improve retention while deploying incentives is a worthwhile effort, but this incentive plan is still the most effective strategy for the first step of the traffic funnel.
Community skepticism about Gauntlets capabilities
Community member Pepo @0x PEPO expressed his concerns about Gauntlet on social media X, pointing out that the Uniswap Foundation had paid $1.2 million and $1.25 million to Aera and Gauntlet respectively for participation even before the proposal was approved. The Aera team lacks a track record of being able to complete such a project.
He mentioned that Gauntlet’s designated Uniswap growth manager Peteris Erins was previously the founder of Auditless and a member of the Aera team. This is despite Peteris having little public track record outside of his work at Aera. The only notable public achievement was that his protocol reached over $80 million in TVL in its first year.
However, he believes that this total locked value may not be a true performance performance. Every customer of Aera is also a customer of Gauntlet. When the performance of a business depends on its parent company, the growth data is questionable. He further cited the data of Aave and Gauntlet. The data shows that Gauntlet may have been suppressing growth. After Aave parted ways with Gauntlet, its TVL and profitability have increased significantly.
Devin Walsh, executive director and co-founder of the Uniswap Foundation, responded that Gauntlet had undergone more rigorous scrutiny than typical collaborators and had gone through two due diligence processes.
The first was in early 2023, when an advisor was being selected to conduct an incentive analysis. To select a vendor, we presented similar proposals to three potential collaborators, and we evaluated the final results based on the rigor and comprehensiveness of the analysis and the ability to drive execution after the analysis. At that time, Gauntlets results far exceeded those of other companies. The second was in the third quarter of 2024, when the Foundation evaluated a group of candidates to determine who would be best suited to collaborate on incentive activities for Uniswap v4 and Unichain. We evaluated the candidates past records, relevant experience, and ability to achieve the expected results. Based on the analysis, we believe that Gauntlet is the best fit for this task. At the same time, we also took this opportunity to renegotiate the contract and currently plan to pay per event and lock in the rate until 2027.
Security issues of USDT 0 underlying technology Layer 0 that have appeared many times
Before the event started, analyst Todd 0x_Todd pointed out the security risks of USDT 0 on social media X. USDT 0 is a cross-chain version of USDT. The parent asset USDT exists on ETH, and it becomes USDT 0 when it is cross-chained to other chains through Layer 0. Chains that support USDT 0 can also cross-chain with each other, such as ETH-Arb-Unichain-Bear Chain-megaETH, etc.
USDT 0 is led by Everdawn Labs, uses Layer 0s underlying technology, and is endorsed by Tether and INK. Todd expressed his trust in Layer 0, My trust in Layer 0 is limited, and there are many cases of top cross-chain bridges failing in the past, from multichain to thorchai. There is no threshold for cross-chain technology, its nothing more than multi-signature.
Because in the current situation, in addition to the two risks of Tether and Uniswap, there are four additional risks, namely the security of Everdawn, the security of Layer 0, the security of Unichain, and the security of other public chains that support USDT 0. If other public chains are hacked and USDT 0 is issued indefinitely, then Unichains USDT 0 will also be contaminated.
How can users get the benefits?
Enter Merkl to view the incentive pool. These incentive mechanisms may increase or decrease over time. If you want to mine $UNI efficiently, you need to keep an eye on the changes in rewards in the 12 pools.
Providing liquidity to these pools allows you to provide liquidity to the incentive pool from any interface and receive liquidity activity rewards.
Collect rewards in the Merkl personal interface. Users can collect rewards through the Merkl interface or any interface connected to the Merkl API.
In general, most community users are not optimistic about this proposal. They believe that it is harmful to the rights and interests of $UNI holders in all aspects. However, for retail investors who simply want to mine $UNI, they need to be careful of the possible risks and pay attention to the changes in liquidity pool rewards every two weeks. BlockBeats will continue to follow up and report on the possible risks in the future.
