Uniswap’s Model Is a Science Project That Could Kill DeFi

In
traditional
finance,
when
one
deposits
money
into
a
savings
account,
one
can
expect
a
reliable
ROI
from
providing
liquidity
to
the
institution.
But
banks
carry
an
implicit
trust,
whether
through
consumer
protections
or
centuries
of
experience
in
managing
assets
and
navigating
volatile
markets.
DeFi
platforms
don’t
have
that
same
degree
of
investor
confidence.
Most
DEXs,
simply
put,
don’t
have
the
experience
to
capture
value
from
their
liquidity
successfully.

The
main
problem
with
Uniswap
and
similar
AMM
models
is
that
they
never
really
learned
how
to
profit
from
the
liquidity
they
collect.
Countering
this
requires
DEXs
to
implement
innovative
incentivizing
mechanisms
and
boost
their
transparency
to
encourage
investor
and
trader
participation.