Uniswap could expand on Binance

A few days ago, the Uniswap community voted via snapshot on the proposal to bring the DEX also to BSC (Binance Smart Chain). 

This was not a binding proposal voted on by the Uniswap DAO, but only a kind of poll in which UNI owners participated, but the victory was overwhelming: 80% in favor, and only 20% against. 

Uniswap in the Binance ecosystem: the proposal

The proposal was made by 0xPlasma, who made a request for implementing the Uniswap v3 protocol on BNB chain. 

🦄 We’re excited to share that our @0xPlasma proposal to deploy @Uniswap v3 on @BNBCHAIN has passed the “Temperature Check” with 20M votes “YES” and 6,495 $UNI voters (the biggest number for the whole Uniswap Governance History).
Moving forward to the final “Governance Proposal” pic.twitter.com/HoIJgY8mX1

— 0xPlasma Labs: DeFi & NFT Metaverse 🦇 🔊 (@0xPlasma) January 22, 2023

Since BSC is a different blockchain than Ethereum, i.e., the blockchain on which Uniswap’s DAO runs, it was not possible to create an automated mechanism. So 0xPlasma merely asked the community for permission to implement the Uniswap protocol also on the Binance Smart Chain. 

The Uniswap protocol is open source, as are all smart contracts on Ethereum, so it is not at all difficult to create an almost identical copy on other blockchains. BSC is also open source, and being compatible with the Ethereum Virtual Machine (EVM) the Uniswap protocol can be implemented without modification. 

However, the vote taken via snapshot was just a “Temperature Check,” or a kind of preemptive poll to ask the community what they thought about it. 

But since the results were unequivocal, with 6,495 voters forming the largest number of voters in the history of Uniswap Governance, 0xPlasma has now announced that it will advance an official “Governance Proposal” to the DAO. With these conditions, it is hard to imagine that the DAO will reject it. 

The reasons for the move to BSC

It is worth noting again that the proposal does not want to move the DEX to BSC chain by abandoning Ethereum, but to create on the BSC chain a copy of Uniswap that can work alongside the historical one on Ethereum. 

0xPlasma listed as many as 17 reasons in favor of this proposal, but it is probably the second one that played the biggest role in the overwhelming victory of those in favor: BNB Chain offers high transaction speeds and, most importantly, low fees. 

Indeed, despite the fact that in September 2022 Ethereum also switched to PoS (Proof-of-Stake), fees did not go down much. The average fee for individual transactions is still $4, with the median struggling to fall below $1. 

Instead, BSC chain would ensure not only much lower costs on transactions, but also faster transactions, which is very useful for example for those trading. 

0xPlasma also writes that BNB Chain currently has a large and growing user base, which is why it could provide a potential new market for Uniswap v3. It is no coincidence that the main competitor to Uniswap over time has turned out to be PancakeSwap itself, the main DEX on Binance Smart Chain. 

To be fair, PancakeSwap has lost some volume lately, due to the bursting of the 2021 speculative bubble that had sent them soaring, but it remains a large user base, albeit smaller than Curve and Balancer for now. Even the version of Uniswap on Arbitrum now has daily trading volumes similar to those of PancakeSwap. 

In addition, BNB Chain offers features such as staking and cross-chain support that could improve the functionality of Uniswap v3. 

Binance and Uniswap

0xPlasma further writes: 

“Binance has a global presence and a strong brand, which could help increase awareness and adoption of Uniswap v3 among retail and institutional investors.”

So behind this proposal also seems to lie the hope that even the world’s largest exchange could somehow promote Uniswap, should it become a major DEX on the BSC chain. 

It is worth noting that DEXs like Uniswap and CEXs like Binance have substantial differences. The main one is that on DEXs anyone can list their token, while CEXs have to choose them carefully by making a selection. 

It is worth mentioning that Binance has to some extent promoted PancakeSwap in the past, but lately seems to prefer not to do so as much, precisely because of the countless questionable, or even scammy, crypto projects that have launched their tokens on the DEX.

Thus, it is actually not at all a foregone conclusion that Uniswap will benefit from a boost given by Binance once it is implemented on the BSC chain. 

Binance co-founder and CEO Changpeng CZ Zhao has already tweeted about it, although he merely shared the news of the survey outcome. However, until December he had always promoted PancakeSwap explicitly as a competitor to Uniswap. 

The future of Uniswap

According to PancakeSwap’s statement, with the implementation on BSC chain the Uniswap ecosystem could increase its TVL by $1 billion, gain an additional one to two million users, and thus new UNI governance token holders, as well as increased adoption for the Uniswap NFT platform. 

It is actually hard to imagine that adding Uniswap to BSC would bring disadvantages to either ecosystem, and in fact could mostly bring advantages to all. Perhaps only PancakeSwap could be harmed somewhat, since to date it is by far the leading DEX on BSC. 

The UNI token

Curiously, on the day the poll results were published, the price of Uniswap’s UNI token did not undergo any significant change. 

However a couple of days earlier it had gained 9% in half a day. 

It is worth mentioning that it has been on the rise since 31 December, so it is actually not all that strange that it has not risen further after already making +22% in three weeks. Nevertheless, the market does not seem to have appreciated this news all that much. 

What’s more, it has gone down in recent days, making it quite clear that it does not believe that the implementation of Uniswap on Binance Smart Chain will positively affect the UNI token price in the short or medium term. 

Even though the current price is still 85% below the highs of 2021, it is still 82% above the lows of 2022. 

Paradoxically, the price of CAKE, i.e., PancakeSwap’s token, is also following a similar trend, with a rise of 6% two days before the outcome of the survey, followed by a +9% in the following days, before yesterday’s decline. 

However, the current price of CAKE is 91% below the highs of 2021, and 50% above the lows of 2022. This suggests that 2021 was a year marked by very large enthusiasm about this DEX.