The launch of Unichain, Uniswap’s Layer-2 (L2) network, has sparked significant controversy within the decentralized finance (DeFi) community. Critics argue that the move raises serious concerns regarding transparency, centralization, and the broader impact on Uniswap’s ecosystem.
Uniswap Labs and Foundation Under Fire
Community members and UNI token holders have expressed frustration over their lack of input in Unichain’s development. DeFi analyst Ignas highlighted that the Uniswap Foundation recently approved a $165.5 million funding proposal to support Unichain and incentivize liquidity migration. However, this decision has been met with skepticism, as many believe it benefits Uniswap Labs and the Uniswap Foundation at the expense of UNI holders, who currently receive no revenue from the platform.
Uniswap Foundation votes on a massive $165.5m USD funding.
— Ignas | DeFi (@DefiIgnas) March 5, 2025
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
Adding to the controversy, Uniswap Labs has reportedly generated $171 million in front-end fees over the past two years without sharing any profits with UNI holders. Unlike competitors such as Aave (AAVE), which redistributes protocol revenues through a fee switch mechanism, Uniswap continues to centralize earnings, further fueling discontent.
Crypto analyst Duo Nine criticized Uniswap’s strategy, suggesting that the funds should be used for UNI buybacks instead. “They are better off buying UNI with that cash. Their flywheel won’t work if they don’t reward token holders. Creating an L2 seems like an unnecessary cost now,” he remarked.
They are better off buying UNI with that cash. Their flywheel won't work if they don't reward token holders.
— Duo Nine ⚡ YCC (@DU09BTC) March 5, 2025
Creating an L2 seems like an un-necessary cost now.
Liquidity Fragmentation Raises Red Flags
Beyond governance issues, Unichain’s launch has also raised concerns about liquidity fragmentation. Uniswap DAO has allocated $21 million to attract Total Value Locked (TVL) on Unichain, aiming to grow it from $8.2 million to $750 million. However, critics worry that these incentives may simply lure liquidity providers (LPs) away from Ethereum and other Layer-2 networks rather than attracting new capital.
Ignas warned that migrating liquidity to Unichain could reduce Uniswap’s market share on Ethereum, enabling competitors to gain traction. “Incentivizing TVL on Unichain leads to LPs migrating from Ethereum and L2s, decreasing market share on ETH/L2s, and enabling competitors to emerge,” he stated.
UNI Token Struggles Amidst Controversy
Since Unichain’s mainnet launch on February 11, UNI’s price performance has been underwhelming. As of this writing, UNI trades at $7.52, reflecting a modest 2% increase since Thursday’s session opened. While the Uniswap Foundation remains committed to expanding Unichain, skepticism persists over whether this move will deliver long-term value to the protocol’s ecosystem.
Also Read: Uniswap (UNI) Faces Sell Pressure as Exchange Reserves Surge—Is a Rebound Coming?
As debates over governance and liquidity continue, UNI holders remain wary of the platform’s future direction.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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