The crossroads of DeFi giants: Uniswap's $165 million proposal sparks controversy, is it an incentive or a waste?

DEX leader Uniswap recently sparked community discussion due to a funding proposal of up to 165.5 million US dollars from the Uniswap Foundation. Renowned Defi researcher Ignas posted multiple tweets on social media platform X, analyzing the dilemma of the underperformance of Uniswap v4 and Unichain, criticizing issues such as opaque fund utilization and lack of benefits for coin holders.

Uniswap v4 and Unichain failed, the foundation proposed to rescue the situation with 165.5 million US dollars

First of all, the performance of Uniswap v4 and Unichain is far below expectations, becoming the trigger for the foundation to propose a huge funding plan.

Uniswap Foundation votes on a massive $165.5m USD funding.

Why?

Uniswap v4 and Unichain launch is underwhelming.

In more than a month:

• Uni v4 TVL barely at $85M • Unichain TVL just $8.2M

To boost growth, UF’s proposed $165.5m funding will be split:

• $95.4M for grants… pic.twitter.com/shefUrTAPV

— Ignas | DeFi (@DefiIgnas) March 5, 2025

Ignas data shows that, after more than a month of launch of Uniswap v4, the total locked value (TVL) is only 8,500 million dollars, while Unichain's TVL is even lower at 820 million dollars:

Compared to the leader in the DeFi field, Uniswap, these data appear quite dim.

(On-chain new developments: Unichain and SP1-ZKVM test network go live, Arbitrum advances Fault Proofs)

To reverse the decline, the Uniswap Foundation proposes to use $165.5 million, with the following fund allocation:

Developer program, core contributors, and validators grants: $95.4 million

Business Expansion and Governance: $25.1 million

Liquidity Incentives: $45 million

Although this proposal has passed the preliminary check (Temp Check), there is still considerable controversy within the community over the legitimacy of the use of funds and the distribution method.

$45 million liquidity subsidy: Market boost or capital waste?

In the plan, the planned $45 million in liquidity incentives will mainly be used in two directions:

$24 million: will be used to migrate liquidity providers from (LP) to Uniswap v4 within 6 months

$21 million: will be used to increase Unichain's TVL from $8.2 million to $750 million within 3 months

However, Ignas raised questions, believing that the biggest highlight of Uniswap v4, the 'Hooks ( enable developers to customize applications )' feature, is the key to ecosystem development. Instead of subsidizing LP on a large scale, more focus should be placed on technological innovation and practical applications.

What really angers the community is that, despite Uniswap Labs making a profit of $171 million in front-end fees in two years, it has never activated the "fee switch(" to reward $UNI holders. In comparison, Aave buys back $1 million worth of $AAVE every week, and Maker buys back $30 million worth of $MKR every month; the relatively meager value return to token holders is also evident.

In addition, the community also expressed strong concerns about the following measures, fearing that they may further weaken the decentralization spirit of Uniswap:

High salaries for the core team

Commission Gauntlet executes incentive plan

Newly established centralized DAO legal structure )DUNA(

Unichain strategy mistake? Liquidity fragmentation risk emerges

Unichain, launched by Uniswap Labs, was supposed to be a new breakthrough in the DeFi market, but performed poorly due to poor market acceptance.

Worried that Uniswap rugs itself by incentivizing LPs to migrate from Ethereum/L2s to Unichain.

The DAO votes to allocate $21m to attract TVL to Unichain. However, most of this money will likely come from LPs already on Uniswap’s DEX.

In effect, Uniswap is pressuring its users… pic.twitter.com/xUW2J5W68Q

— Ignas | DeFi )@DefiIgnas( March 5, 2025

Ignas warned about this:

The foundation's plan to invest $21 million to attract TVL may lead Uniswap users to migrate from Ethereum to L2, thereby weakening Uniswap's market share on Ethereum, or even unintentionally boosting competitors.

With the continuous advancement of Uniswap in multi-chain layout, how to balance the development of the new ecosystem with the consolidation of the existing market has become a significant challenge that must be addressed in the future.

DAO voting becomes a turning point for Uniswap, where do UNI holders go from here?

The 165.5 million dollar proposal from the Uniswap Foundation, aiming to revive the poor performance of Uniswap v4 and Unichain, has sparked controversy due to liquidity incentive strategies, fund allocation issues, and organizational structure changes.

Ignas's article further reflects the community's high regard for issues such as the rights of coin holders and the transparency of foundation decisions.

)Is Uniswap governance an empty shell? DAO representatives accuse the launch of Unichain of being completely unaware(

However, if Uniswap can follow the market trend, actively explore new application scenarios, perhaps it can still regain its leading position. The final vote result of DAO will determine the next direction of Uniswap, and also affect the future development of the entire DeFi ecosystem.

This article DeFi giant's crossroads: Uniswap's $165 million controversial proposal, is it an incentive or a waste? First appeared in Chain News ABMedia.