UNI Fee Switch: A DeFi Legal Milestone?

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Good Morning.

Ethereum broke above $3,100. AI coins rallied as NVIDIA beta (thanks Jensen!), BRC-20 x Bitcoin ecosystem mania continues, and EigenLayer isn’t stopping anytime soon.

Maybe ETHDenver will give us some room to breathe (just kidding), and maybe also a slight pullback as that’s what conferences do. Cheers.

In Today's Email:

• What Matters: UNI fee switch 🦄 

• Products: New lending protocols 🤝

• Charts: Ethena’s ETH OI 📈

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WHAT MATTERS

UNI Fee Switch

State of play: $UNI surged 77% following a proposal to "strengthen and invigorate" Uniswap's governance and distributing fees to UNI holders who stake and delegate their tokens.

• The proposal was submitted by Uniswap Foundation's governance lead, Erin Koen.

• Last June, the Uniswap community rejected a proposal to activate fees for several liquidity pools and share revenue with token holders.

• If approved, the proposal would enable fee collection and pro-rata distribution to staked and delegated UNI token holders.

• UNI was trading at $12.68 on Saturday last week, up ~77% from the price on Friday (~$7.1), reaching its highest price since April 2022.

• Currently, UNI is trading at approximately $11, and the trading volume has also decreased by 58% over the past 24 hours.

AMM DEX like Uniswap uses liquidity pools for trading, rewarding Liquidity Providers (LPs) with fees. Uniswap v2 pools charge 0.3% in LP fees, while v3 pools vary from 0.05% to 1.00% of trading volume.

• In October, Uniswap implemented a 0.15% fee on swaps involving ETH, USDC, and other tokens initiated on the protocol's interface.

• Uniswap has not imposed protocol fees, directing all fees to LPs likely due to US regulatory concerns.

• However, Uniswap documentation suggests a future 0.05% trading fee.

What’s next: The entire DeFi sector is getting rerated as we speak; 2024 surely continues to be more exciting for the space.

Our take: For years, crypto investors have joked about worthless governance tokens because token holders are not actually obligated to receive any cut of the protocols' revenue.

• The governance proposal by Erin Koen is unlike prior efforts when unrelated third-party entities tried to argue for the fee switch.

• Speculation arises that Uniswap's confidence may stem from undisclosed legal insights, possibly linked to the ongoing Coinbase case.

For builders and investors: Ben Wee is sharing a table that estimates the fee sharing for UNI stakers:

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇

PRODUCTS OF THE WEEK

Recent Multi-Launch of New Lending Protocols

Last week, two new lending protocols were launched: Fluid on February 23 and Euler on February 22:

Fluid is an advanced DeFi lending and borrowing platform offering high loan-to-value ratios, innovative liquidation mechanisms, and features like smart debt and collateral.

• Fluid is developed by Instdapp, a dApp built on the Ethereum network that integrates DeFi protocols into one platform.

• Fluid also launched the Fluid Rewards Program: $3M in ETH, stablecoins, and $INST for early liquidity providers over three months.

• Fluid is audited by Statemind and currently managed by a 5/11 team Multisig, transitioning to the $INST DAO one week after confirming protocol integrity.

Euler launches as a modular lending platform with two key features: the Euler Vault Kit (EVK) for customizable lending vault creation, and the Ethereum Vault Connector (EVC), enabling vaults as collateral for others.

Euler’s features include:

• Customizable Vaults: Euler Vault Kit (EVK) offers developers the freedom to create ERC-4626 vaults without restrictions on governance, oracles, or upgrades.

• Core Vault Class: Create governed lending products for risk-managed, capital-efficient lending experiences.

• Edge Vault Class: Develop ungoverned, modular vaults for establishing permissionless lending markets.

• Escrow Vault Class: Enable any ERC20 token as collateral without earning yield.

Other cool products:

• RIDO Protocol, a data trading protocol.

• ApeSpace, a next-gen crypto analytics.

• Kudobox, a crypto payments and donations platform.

• Sequence, an all-in-one development platform for web3 games.

• TrueWallet, a provider of smart wallets and infrastructure services.

CHARTS OF THE WEEK

Ethena Captures 5% of Ether Perp Futures OI

State of play: Ethena now accounts for 5.11% of global ETH perpetual futures open interest (OI), as shown by the platform's data dashboard.

• Binance, Bybit, and OKEX are the top 3 on Ethena’s Perp OI with $3B, $2.7B, and $1.1B respectively.

• Deribit, OKEX, and Binance are the top 3 on Ethena’s Futures OI with $450M, $365M, and $171M respectively.

• In total, Ethena’s ETH OI is at $8.57B.

Our take: As Ethena scales, there will be an inflection point where its existence might threaten the entire perpetual and futures market. Counterparty risks and liquidity risks need to be managed meticulously.

TXs Surge on Avalanche After Major Outage

State of play: Avalanche suffered a 5-hour outage due to overloaded validator communication. The issue was resolved after validators updated their node software, followed by a surge in transactions for over 24 hours.

• Avalanche's transactions fell to ~2,700 from the usual ~20,000 per two hours during the outage.

• From February 23 to today, Avalanche’s transaction count has exceeded 9.5M.

• Normally, the total count for three days on Avalanche ranges from 600K to 750K.

Our take: It’s a reminder that many blockchain networks (not just Solana!) are relatively young in their age, especially when faced with a significantly higher magnitude of active users and transactions.

QUICK BITES

• Farcaster ships support for Solana's address.

• FTX approved to sell its $1B Anthropic share.

• Judge signs off on Binance’s $4.3B plea deal.

• Carson Group approved four spot Bitcoin ETFs.

• SBF and Mashinsky opt to keep the same lawyers.

• Satoshi warns against labeling Bitcoin as an investment.

• Crypto projects have received over $90B in all-time funding.

• Riot miner generated a record $281M in total revenue in 2023.

• MicroStrategy’s X account was hacked with phishing messages.

• Grayscale CEO says the firm is open to M&A-related opportunities.

• Circle partners with Krafton and Naver Z to build a ‘Roblox-style’ metaverse.

NOTEWORTHY READS & MEME

• Matti’s read on memetic premium.

• Data Always’ read on latency is money.

• @shumochu’s read on crypto infra thesis.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.