Uniswap Labs Valued at $1.6B After $165M Funding Round

Uniswap Labs has closed a $165 million Series B funding round, one of the largest amounts of money secured by any company in decentralized finance. 

The raise, led by Polychain Capital, brings the protocol’s total valuation to $1.66 billion, sources familiar with the matter confirmed with Blockworks. Andreessen Horowitz, Paradigm, SV Angel and Variant also participated in the round. 

In a blog post published on Thursday, Uniswap founder Hayden Adams said that he could never have imagined in 2018 when he first built the protocol that it would one day support $1.2 trillion in trading volume to date.

“It has grown and evolved in ways I never imagined…and has become critical public infrastructure for exchanging digital value,” he wrote.

Uniswap is one of the largest decentralized crypto exchanges — with its 24-hour trading volume a little over $450 million at the time of writing. But its trading volume pales in comparison to those of centralized crypto exchanges such as Coinbase and Binance, which register 24-hour trading volume of over $2 billion and $15 billion respectively. 

As it currently stands, the protocol is also not yet profitable — but in an interview with Fortune Magazine, Adams said the company would be using its latest Series B raise to expand its product offerings and become financially sustainable.

The Uniswap community recently voted in favor of creating the Uniswap Foundation, an independent entity distinct from Uniswap Labs but part of the Uniswap ecosystem, to contribute to the protocol’s decentralized development and provide $60 million in grants to community projects over the next few years.

“We are thrilled to see more funding flowing into the Uniswap ecosystem, and are excited to see Labs continue to launch products that will help onboard the next billion users into web3,” Uniswap Foundation CEO Devin Walsh told Blockworks.

The DeFi protocol has also been flirting with the idea of implementing a fee switch, where the protocol would receive a tenth of the liquidity pool fees from three key trading pairs: DAI-ETH, which carries a fee of 0.05%; ETH-USDT at 0.03%; and USDC-ETH, with a 1% fee — cutting into the revenue of liquidity providers.

Although Uniswap governance has already overwhelmingly voted in favor of implementing the fee switch, no action has been taken since the vote. It is important to note, however, that Snapshot voting is off-chain and acts as a signaling vote rather than a binding one on-chain. 

Murky regulatory waters and potential securities implication risks are perhaps another reason for the community’s inaction on the fee switch — according to the Howey Test, a cryptoasset will be considered a financial security if there is a monetary investment in a common enterprise with an expected profit to be derived. 

Matt Fiebach, research analyst at Blockworks, said it will be interesting to observe how Uniswap Labs will allocate its capital and brainpower moving forward. 

“They could choose to focus on their venture arm or build something entirely new and pivot away from the Uniswap [the] protocol, entirely,” Fiebach said.

But, he wonders: “Without the core team building a V4, can the exchange maintain its brand moat and volume dominance?”

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