Where does Uniswap (UNI) money go?

Key Takeaways

• 2025 will be a pivotal year for Uniswap with the launches of Uniswap V4 and Unichain, its own Ethereum Layer 2 built on Optimism’s Superchain.
• The three primary focuses of the Uniswap Foundation have been: expanding the developer community, improving the governance ecosystem, and developing the Unichain network.
• A total of $15.88 million has been allocated across various funding initiatives throughout 2024.
• The start of 2025 has been challenging for Uniswap due to the lack of liquidity and adoption for its flagship products: Uniswap V4 and Unichain.

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Key Metrics

• 800+ developers onboarded for Uniswap V4
• 150+ hooks created for V4
• 620+ researchers engaged
• $15.88 million allocated in funding
• 100+ grant recipients

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The Most Anticipated Changes for Uniswap in 2025

The Arrival of Uniswap V4

Uniswap V4 is the fourth major update to the protocol, launched on January 30, 2025, after more than a year of development. The level of customization and efficiency introduced by V4 is unprecedented for both developers and users.

The most significant change introduced in V4 is the concept of “Hooks.” These are smart contracts that interact with liquidity pools by applying custom logic coded for execution. This innovation enhances liquidity management, automation, and adaptability to various needs. Some examples of hooks include:

• Custom AMMs
• Yield farming protocols
• Lending functionalities
• Synthetic asset platforms

All liquidity pools are now managed by a single smart contract, unlike V3, which created a separate contract for each deployed liquidity pool. This new feature is called “Singleton.” It is complemented by “Flash Accounting,” which optimizes operations within the protocol. For instance, when adding liquidity to a pool while holding only one of the required tokens, a swap is needed before adding liquidity. Previously, this required two separate actions. With V4, users can "compile" multiple actions to optimize both time and fees.

Additionally, users will no longer need to use Wrapped ETH (WETH) for swaps. V4 allows native ETH trading directly within the protocol. This optimization reduces gas fees (swapping WETH, the ERC-20 version of ETH, is approximately twice as costly) and eliminates unnecessary conversion fees.

In conclusion, V4 is an improved, optimized, non-custodial, and non-upgradeable protocol (meaning the contract cannot be modified post-deployment). You can read our full analysis of V4 below:

The Launch of Unichain Layer 2

In October 2024, Uniswap announced the development of its own Ethereum Layer 2 blockchain, built on Optimism’s OP Stack and integrated into the Superchain. After months of development, the blockchain launched on mainnet in February 2025.

The goal of this launch was to enable multi-chain swaps, provide a high-performance blockchain tailored for DeFi needs, and create a new revenue stream for Uniswap through collected fees.

Since its launch, we have gained more insights into the fundamental aspects of Unichain:

• Unichain utilizes the Flashblocks system for faster transaction execution.
• It is considered a Stage 1 Rollup, meaning it is secure and scalable but still lacks certain decentralization aspects.
• Validator nodes must stake UNI tokens on the Ethereum mainnet to be eligible for Unichain fee distribution.

We will provide a full breakdown of Unichain if its incentives successfully drive significant adoption.

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Uniswap Grants Distribution

Funding Allocation by Sector

Uniswap grants are distributed based on the relevance and long-term impact of applicants, focusing on community contributions, development, research, and governance. The impact of these grants is assessed quarterly and reviewed by governance biannually to ensure transparency.

Innovation & Protocol - $5.5 Million

• Research and optimization of protocol incentives
• Development of a liquidity allocation interface for V4
• Partnerships to design grant programs for Unichain’s launch
• Key Unichain partnerships: infrastructure, bridges, explorers, data indexers, faucets, node operators, oracles, stablecoins, and wallets

Developers - $4.5 Million

• Funding for Atrium Academy, an 8-week program with 10 hours per week of coursework, offering over $30,000 in prizes. Two separate grants have onboarded more than 900 developers and resulted in 165+ V4 hooks.
• Sponsorships for events like ETHGlobal London, Brussels, Singapore, San Francisco, and Bangkok.
• Security audits for hooks deployed on V4.
• Deployment of a V4 hook database.

Governance - $1.5 Million

• Governance-focused events at ETH Denver, ETH Brussels, and Devcon SEA.
• New governance dashboard.
• "Gas Relay" for voting on Agora, plus badges for active voters.
• Research on governance attack vectors.
• Development of funding distribution mechanisms.

Research - $2.2 Million

• Two conferences on AMMs, DAO implementations, and governance research.
• Core functionality research on Uniswap.
• Crypto-economic research (TEE, ZK fees, fee structures, etc.).
• A workshop with 75+ researchers producing four implementations in a single week.

Security - $1.9 Million

The security budget was allocated to audits, bug bounties, and protocol functionality upgrades.

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2025: A Crucial Year for Uniswap

Despite multiple announcements, including the promising launches of V4 and Unichain, Uniswap has struggled to attract liquidity to its new products. This is why a new incentive campaign has been proposed on the governance forum to allocate $165 million to the ecosystem.

The Uniswap Foundation’s goals are:

• Unichain: Increase TVL, which currently stands at $8.2 million—ranking it outside the top 100 blockchains by TVL.
• Uniswap V4: Encourage liquidity migration from V3 to V4. As of publication, V4’s TVL is $87 million—far behind V3’s $2.87 billion and V2’s $1.25 billion.

To address these issues, additional rewards will be deployed across both products:

• $24 million for Uniswap V4, targeting $32 billion in trading volume over six months (compared to $700 million in February).
• $21 million for Unichain, aiming for a total TVL of $750 million over three months.

With this incentive program, the foundation aims to strengthen its two flagship products of the year and expects significant results. To justify these expenditures, the governance proposal draws a comparison with Aerodrome, the DEX on Base, which deploys an average of $50 million per month to encourage user adoption.

The governance proposal also seeks to allocate $95 million toward developer programs, core contributors, and validators.

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Conclusion

Uniswap has remained a dominant force in DeFi, consistently innovating over the years. However, with the proliferation of blockchains and DEXs, liquidity fragmentation, and financial incentives drawing users toward competing platforms, Uniswap faces challenges in attracting liquidity to its new products.

Analyzing the funding allocations provides insight into Uniswap’s direction for the year ahead, based on past initiatives and newly launched strategies to attract users.

Challenges remain, particularly concerning MEV and the rise of intent-based solutions that divert liquidity that would have previously flowed to Uniswap.

Nevertheless, Uniswap remains a powerhouse, generating billions in trading volume monthly and maintaining a treasury capable of funding new initiatives and attracting liquidity.

For a detailed breakdown of Uniswap’s 2024 expenditures and future vision, you can read the full Uniswap Foundation Community Impact Report.