cryptopolitan.com 01 October 2024 10:19, UTC

Uniswap Labs showed the bottom line results of its new fee schedule. The increased fees from April onward boosted the DEX bottom line, showing Web3 could be sustainably monetized.

Uniswap Labs earned more than $51M for the past six months, after introducing a 0.25% fee for swapping directly on the Uniswap Interface. The convenience of using the Uniswap Labs interface is helping the organization finance its research and growth. The 0.25% fee follows the introduction of a 0.15% fee in Q4, 2023, which only affected selected trading pairs. Based on the lower fee, Uniswap’s annualized revenue would be around $13M.

The higher fee and the accrued reserves show positive demand for Uniswap in the past six months, as the market absorbed the introduction of the new front-end fees. Uniswap Labs still wants to differentiate itself from Uniswap Protocol, which is considered entirely decentralized. However, Uniswap Labs is still in charge of research and the launch of future protocols, such as V4.

Most of Uniswap’s earnings come from activity on Ethereum, despite having versions on 23 other chains. Uniswap is also extremely active on Base, though for small-scale trades. Ethereum volumes exceeded $680M in 24 hours, while Base accounts for $73M in daily trades.

Uniswap protocol fees are different from the Uniswap Labs fees structure, and bring in much higher inflows of up to $2M daily. However, Uniswap sometimes achieves negative earnings from its trading platform, due to expenses and token incentives.

Annualized fees from the trading platform reach more than $375M, based on a mix of concentrated and regular liquidity pools. Uniswap currently locks in $4.83B in value, similar or larger than entire L2 or L1 protocols.

In its VC rounds, Uniswap raised a total of $165M, tapping Polychain Capital and Andreessen Horowitz. The current fee schedule extends the project’s development opportunities, becoming one of the sustainable Web3 businesses.

Uniswap Labs is still considering some form of revenue-sharing in the future, though at this stage, the project aims for sustainability. The approach of Uniswap Labs is similar to that of Pump.fun, which uses the current activity levels to retain most of its fees.

Uniswap builds reserves for expenses and research

In total, the past six months brought $51.59M in earnings, though with disparate monthly results. Uniswap Labs retains those fees fully, as it has no profit-sharing program. The Uniswap Labs fee is separate from the earnings of liquidity providers, which range depending on pools. On V2 pools, LPs receive 0.3% of trades, while V3 fees range from 0.05% to 1% depending on the asset.

The third source of revenues for Uniswap Labs, known as the ‘fee switch’. The DEX redirects some of the LP earnings from trades, to store as a treasury or potentially redistribute to users. Uniswap has not yet decided on a user compensation program.

SushiSwap carries a similar fee structure, with 0.3% trading fees. The fee is split between liquidity providers and the DEX operator, who then uses the funds for buybacks. Uniswap has not mentioned buybacks as a way to boost the price of UNI or redistribute earnings.

Not all Uniswap ecosystem participants gain from liquidity pools. For some, impermanent loss and market volatility means the role of LP is a losing position.

UNI breaks out to one-month high

UNI tokens showed resilience in September, as the month proved more bullish compared to previous crypto cycles. UNI trades near a one-month high at $7.77 after the most recent breakout.

The token is yet to revisit this year’s peaks above $15, or its all-time high above $42. However, UNI is not that far from breaking out. The token also gains support from its 100% completed unlock in September.

In the past week, UNI open interest expanded from lows of $65M up to $80M, with around 50% of the liquidity concentrated on Binance. Long positions are 70% prevalent, but long liquidations also weigh down the market. In the past 24 hours, UNI caused $178K in long liquidations and $110K in short liquidations. Binance was again the biggest venue for liquidating longs, inviting caution around the UNI short-term price.

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Cryptopolitan reporting by Hristina Vasileva