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In an evaluation, Anders Helseth, Vice President at K33 Research, has mounted a robust case in opposition to the viability of the Uniswap (UNI) token. His analysis pivots on the intriguing dynamics of the decentralized finance (DeFi) market, basically difficult the present valuation and future potential of UNI.

Helseth begins his argument with a seemingly easy query: “The Uniswap protocol generates significant trading fees, but will the UNI token ever capture its (fair) share?” His conclusion is emphatically destructive.

Is The Uniswap (UNI) Token Worthless?

For context, UNI is a governance token for the Uniswap protocol, a decentralized trade that earns a 0.3% price on trades. However, as Helseth factors out, your complete buying and selling price presently goes to liquidity suppliers, with UNI holders standing to achieve provided that governance votes allow price dividends to UNI holders.

Even in a sluggish DeFi market, the absolutely diluted worth of the UNI token is 15 instances the annualized buying and selling charges paid when utilizing the protocol, presently round $6 billion. If the UNI token may seize all buying and selling charges, it might arguably current an irresistible purchase. However, Helseth makes a compelling argument on the contrary.

“The UNI token currently captures 0% of the 0.3% trading fee, which entirely goes to liquidity providers,” Helseth says, emphasizing the token’s present lack of intrinsic worth.

The crux of his argument revolves round three gamers within the DeFi area: the customers, the protocol (and therefore UNI token), and the liquidity suppliers. According to Helseth, the interaction between these actors is detrimental to the UNI token’s potential for income technology. Helseth explains:

The total protocol will be precisely copied inside minutes at just about no value. This argument implies that each one the facility lies with the liquidity suppliers within the struggle for buying and selling charges.

The main concern for customers is liquidity and cost-effectiveness. If the identical protocol will be replicated at a whim, customers would inevitably gravitate in direction of the model with essentially the most liquidity – to reduce slippage when executing trades. This dynamic considerably empowers liquidity suppliers who, not like UNI holders, maintain actual, beneficial tokens.

In addition, although switching to a different good contract could entail some prices, these are comparatively low, reinforcing the bargaining energy of liquidity suppliers.

Concluding, Helseth states: “Given this relatively low cost of switching from the users’ perspective, we cannot conclude with anything else than that the power lies with the liquidity providers. Hence, even though the Uniswap protocol generates significant trading fees, we believe the potential for the UNI token to capture any of this revenue to be almost non-existent.”

At press time, the UNI worth stood at $6.19 after being rejected on the 200-day EMA yesterday.

Featured picture from Guarda Wallet, chart from TradingView.com