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

The leading DEX Uniswap has recently sparked heated discussions in the community due to a proposal from the Uniswap Foundation to allocate a massive $165.5 million funding. Well-known DeFi researcher Ignas has posted multiple tweets on the social media platform X, analyzing the plight of Uniswap v4 and Unichain's underwhelming performance, and criticizing the lack of transparency in fund utilization and the failure to benefit token holders.

Uniswap v4 and Unichain's Failure, the Foundation Proposes $165.5 Million to Rescue the Downward Trend

First, the performance of Uniswap v4 and Unichain has fallen far short of expectations, becoming the trigger for the Foundation's massive 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 more than a month after the launch of Uniswap v4, its Total Value Locked (TVL) is only $85 million, while the TVL of Unichain is even lower at $8.2 million:

Compared to Uniswap's dominant position in the DeFi field, these data appear quite gloomy.

(On-chain Updates: Unichain and SP1-ZKVM Testnet Launch, Arbitrum Advances Fault Proofs)

To rescue the downward trend, the Uniswap Foundation has proposed to utilize $165.5 million, with the funds allocated as follows:

• Developer program, core contributors, and validator incentives: $95.4 million
• Operational expansion and governance: $25.1 million
• Liquidity incentives: $45 million

Although this proposal has passed the initial Temp Check, the legitimacy of the fund usage and the distribution method are still causing considerable controversy within the community.

$45 Million Liquidity Incentives: Boosting the Market or Wasting Funds?

Among the plans, the $45 million liquidity incentives will be used in two directions:

1. $24 million: To be used to attract liquidity providers (LPs) to migrate to Uniswap v4 within 6 months
2. $21 million: To be used to increase Unichain's TVL from $8.2 million to $750 million within 3 months

However, Ignas has raised questions, arguing that the key highlight of Uniswap v4, the "Hooks (allowing developers to customize applications)" feature, is the key to ecosystem development, and that it would be better to focus on technical innovation and actual applications rather than subsidizing LPs on a large scale.

What's more frustrating for the community is that although Uniswap Labs has generated $171 million in frontend fees over the past two years, it has never activated the "fee switch" to reward $UNI holders. In comparison, the neighboring Aave repurchases $100,000 $AAVE weekly, and Maker repurchases $30 million $MKR monthly; the value return to token holders is relatively meager.

Furthermore, the community has also expressed strong doubts about the following measures, fearing that they may further weaken the decentralized spirit of Uniswap:

• High salaries for the core team
• Entrusting Gauntlet to execute the incentive program
• The newly established centralized DAO legal structure (DUNA)

Unichain Strategy Misstep? Liquidity Fragmentation Risk Emerges

Unichain, launched by Uniswap Labs, was supposed to be a new breakthrough in the DeFi market, but its poor market acceptance has led to a dismal performance.

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 warns:

The Foundation's plan to invest $21 million to attract TVL may cause Uniswap users to migrate from Ethereum and L2, thereby weakening Uniswap's market share on Ethereum, and even inadvertently supporting competitors.

As Uniswap continues to expand its multi-chain layout, how to balance the development of the new ecosystem and the consolidation of the existing market has become a major challenge that must be solved in the future.

DAO voting becomes a turning point for Uniswap, where will UNI holders go?

The $165.5 million proposal from the Uniswap Foundation, which aims to rescue the sluggish performance of Uniswap v4 and Unichain, has sparked controversy due to issues such as liquidity incentive strategies, fund allocation, and organizational structure changes.

Ignas' article also reflects the community's high attention to issues such as token holder rights and the transparency of the Foundation's decision-making.

(Is Uniswap governance just a shell? DAO representatives accuse of launching Unichain without knowing)

However, if Uniswap can adapt to market trends and actively explore new application scenarios, it may still be able to regain its leading position. The final DAO voting result will determine Uniswap's next step, and will also affect the future development of the entire DeFi ecosystem.