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17 November 2020
update 18 August 2021
SushiSwap The Biggest Winner as UniSwap loses $1,5B (TVL) in 24hours
Decentralized finance (DeFi) platform Uniswap has experienced liquidation of enormous proportion in the last 24 hours. This comes after the protocol stopped providing rewards for liquidity providers, and rival protocol SushiSwap looks poised to take over.
Uniswap loses $1.5 billion in Liquidity
According to DeFi Pulse data, the drop in liquidity has been particularly sharp for UniSwap in recent days. On November 14, the project still boasted around $3 billion in total value locked (TVL), a DeFi record. However, these numbers have since evaporated as UnsiSwap lost $1.5 billion in TVL in 24 hours.
The cause of this massive exodus is the end of a program that rewarded liquidity providers in UNI. Since the UNI token does not pose any financial advantages outside the rewards program, Investors quickly liquidated their funds.
The fall in liquidity had been predicted by the Unisap community, who were alerted to this risk on the protocol. This was why some members wanted to have a new measure approved by the Uniswap governance system. The vote, which will end on November 19, intends to reinstate the reward program for liquidity providers but reduce them by half.
However, the governance process on Uniswap is complex, and it can be difficult to obtain enough votes to approve a decision. This is because it takes 40 million votes for a proposal to pass, and recent antecedents suggest that the new measure may not be approved.
SushiSwap Major Beneficiary
The massive exodus of funds from Uniswap has surprisingly made its way towards rival DeFi protocol SushiSwap. The Uniswap clone hit the headlines over the summer with its ambitious plans to drain Uniswap of its liquidity. By September, it had managed to capture $830 million in TVL before Uniswap announced its reward program that stopped its progress.
The protocol appears to be on the rise as it has gained $300 million in the past 24 hours. This is no coincidence as SushiSwap recently announced rewards for pairs that no longer receive rewards on Uniwsap. As expected, more investors trooped towards SushiSwap following the announcement.
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Will this latest move threaten the future of Uniswap? It is possible as the protocol is now ranked only third in the rankings of DeFi platforms based on total locked value. As always, for DeFi and the crypto markets in general, the lure of profit remains key for most investors. The return of rewards programs for liquidity providers on Uniswap is therefore crucial for the DeFi protocol.
