The introduction of the UNI will allow it to promote the platform’s growth using a decentralized mechanism. Just as importantly, it lets Uniswap reward users with a token asset at a time when such rewards are becoming standard in DeFi.
At their core, governance tokens are like a loyalty program mixed with company shares: Users get credited for contributing to the platform as well as a vote on how the protocol is run.
Governance tokens have become a speculative investment as of late, with decentralized finance devotees flocking to platforms such as yearn.finance, which distributes YFI tokens, currently valued at $36,000.
Uniswap’s token, however, is more directly a response to SushiSwap, a clone of the protocol that added, you guessed it, a token that encouraged people to use it. It also tried to drain Uniswap of liquidity, in a direct challenge to the exchange. At the moment, according to DeFi Pulse, Uniswap and SushiSwap have the second- and third-most value locked in their protocols, respectively, a measure of how much they’re used.
Uniswap surely hopes that UNI can give it staying power. The decentralized exchange protocol plans to distribute a capped total of 1 billion UNI over the next four years. Sixty percent will go to Uniswap community members, 21.5% will go to Uniswap employees, and the remaining 18.5% will go to investors and advisors.
In fact, UNISWAP is making 150 million available now to people who have used the platform anytime up to September 1. After distributing 40% of tokens in the first year, it will taper down by 10 percentage points each subsequent year until all tokens have been allocated.
“Uniswap is now particularly well positioned for community-led growth, development, and self-sustainability,” the announcement reads. “The introduction of UNI (ERC-20) serves this purpose, enabling shared community ownership and a vibrant, diverse, and dedicated governance system, which will actively guide the protocol towards the future.”
(Decrypt has reached out to Uniswap Protocol founder Hayden Adams for comment.)