On February 14, 2025, Devin Walsh, Executive Director and Co-Founder of the Uniswap Foundation, proposed a liquidity incentive plan for Uniswap v4 and Unichain in the Uniswap governance DAO. After passing the Temp Check on Snapshot on March 3, the proposal was officially approved on Tally on March 21, with 53 million UNI and 468 addresses participating in the vote. The program’s technical partner, Gauntlet, announced that the first phase of the plan would last for two weeks and begin on April 15.

The proposal immediately sparked heated debate within the community—some voiced support, while others argued it was meaningless and harmful to the DAO’s interests. This article will detail the core content of the plan, how to participate, and the community’s perspectives.

Proposal Details

The proposal includes plans for both Uniswap v4 over the next six months and Unichain over the coming year. For Uniswap v4, the foundation aims to migrate the $32.8 billion 30-day rolling trading volume from v3 to v4 on target chains within six months, requesting a total budget of $24 million for this phase.

For Unichain, the incentive program is set to run for a full year. Over the next three months, the Uniswap Foundation aims to help Unichain reach $750 million in TVL and $1.1 billion in cumulative trading volume. To support this goal, Unichain is requesting around $60 million in incentives for the first year (including $21 million in this proposal). Like the v4 program, rewards will be distributed, but Unichain’s model will also consider non-DEX DeFi activities to drive organic liquidity demand—primarily from the Uniswap Foundation and other projects building on Unichain.

The two tracks have slightly different focuses: Uniswap v4 incentives are centered on increasing AMM trading volume on each chain, while Unichain incentives take a more strategic approach, targeting broader DeFi activity both across the chain and within AMMs.

The first Unichain incentive phase will launch on April 15, 2025, running for three months and distributing millions of dollars in rewards. $UNI incentives will be spread across 12 different Unichain pools to reward LPs. In the first two weeks, the following 12 pools will receive $UNI rewards: $USDC/$ETH, $USDC/$USDT0, $ETH/$WBTC, $USDC/$WBTC, $UNI/$ETH, $ETH/$USDT0, $WBTC/$USDT0, $wstETH/$ETH, $weETH/$ETH, $rsETH/$ETH, $ezETH/$ETH, $COMP/$ETH.

In this initiative, Gauntlet and Merkl play major roles. Gauntlet is an on-chain risk management simulation platform that uses agent-based modeling to adjust key protocol parameters, aiming to improve capital efficiency, fees, risk, and incentives. Merkl, incubated by a16z, is an all-in-one platform that aggregates DeFi investment opportunities across multiple chains and protocols.

For this campaign, Gauntlet is providing its “Aera” vault technology. After the DAO vote approves the funding request, the funds are stored in the vault. Gauntlet identifies the highest-volume liquidity pools on each network and calculates the additional yield needed to make Uniswap v4 the more economically attractive option. Adjustments are made every two weeks, and information on which pools qualify for rewards and how much they’ll receive will be published on the Merkl website.

Aggressive Growth Targets, Conventional Strategies

Debates on Incentive Effectiveness and Retention

A DAO member named “UreNotInD” was one of the first to oppose the proposal during the governance discussion. His main argument was that the funding justification relied on comparisons to other projects’ liquidity spending—such as Aerodrome spending $40–50 million monthly, ZkSync Ignite spending $42 million over 9 months, and Arbitrum spending nearly $200 million since March last year. He argued that this strategy has been tried many times with minimal lasting impact.

He also pointed out that the strongest current competitor, Fluid, is gaining market share without offering any incentives. Similarly, the popular L2 network Base managed to capture users without incentive programs. These strategies fail to address the structural issues that could help Unichain grow. Instead, he believes the foundation should focus on improving interoperability between superchains, creating unique DeFi use cases, and enhancing native asset issuance (like RWAs, Meme Coins, and AI tokens), as native assets tend to have the strongest stickiness. The foundation should attract and fund more developers through these approaches.

Member “0xkeyrock.eth” shared similar concerns, arguing that Gauntlet’s report should be made publicly available on the forum. He noted that while the report cost a significant amount of money, the information presented in the forum was shallow and insufficient to justify such a large-scale incentive program.

He pointed out several flawed comparisons in the report. For example, Aerodrome’s high incentive spending isn’t a fair benchmark, since 100% of fees are redistributed to veHolders, making it a different kind of liquidity incentive model. Additionally, zkSync’s $5 million monthly token rewards only increased its TVL from $100 million to $266 million, which he suggested is not a compelling return on investment.

At this point, Unichain’s total TVL is only $10 million, highlighting a lack of inherent market demand. Gauntlet’s claim that $7 million in monthly incentives could drive Unichain’s TVL to $750 million seems unrealistic.

Even if incentive subsidies temporarily boost activity, the sustainability of demand remains uncertain. Historical cases such as MODE (TVL dropped from $575 million to $19 million), Manta (from $667 million to $46 million), and Blast (from $2.27 billion to $233 million) suggest that Unichain could face a similar outcome.

Building on this, data from Forse Analytics comparing “TVL gained per dollar of incentives” across different chains shows that on L2s with strong infrastructure like Base, the best-case scenario yields $2,600 in TVL per $1 spent, while the worst-case performer, Blast, achieves only around $500. To reach a $750 million TVL target, this would require daily spending of $300,000 in the former case or $1.5 million in the latter.

While such comparisons are imperfect, they offer a general reference range. To achieve $750 million in TVL with $7 million over three months, Unichain would need to match Base’s infrastructure and user quality. Yet even the underperforming Blast currently has over 10 times Unichain’s TVL.

The member also shared the results of Uniswap v3’s incentive program when deployed on new chains in 2024. The best performer was Sei, ranking 6th in its chain ecosystem with a TVL of just $718,000. The worst performer, Polygon zkEVM, had a TVL of only $2,600, ranking 13th in its ecosystem’s DEX TVL. None of these deployments achieved a TVL over $1 million, and almost none entered the top DEX rankings on their respective chains. These deployments largely lost momentum, with the only trading volume coming from arbitrageurs fixing outdated prices.

A table created by 0xkeyrock.eth shows the TVL gained and DEX rankings after Uniswap deployed incentives on multiple chains.

These incentive pools nearly failed to generate a flywheel effect, with a sharp drop in TVL once the activities ended. Uniswap spent $2.75 million on these deployments (excluding protocol matching funds), and the annualized fees for these deployments amounted to $310,000. Even with fee conversion to recover costs (assuming a 15% share), the DAO would only earn about $46,500 annually, which translates to a 1.7% return. It would take 59 years to break even.

The area between the two dashed lines represents the incentive activity period, and it can be seen that almost all liquidity pools experienced a sharp decline after the activity ended.

However, some members argue that despite the common post-incentive liquidity cliff, this incentive program remains the most effective strategy. Member “alicecorsini“ referenced recent data from Forse Analytics reviewing UNI incentives on Base’s Uniswap v3 to highlight the difficulty of retaining users, liquidity, and trading volume after incentives end.

For Base, Uniswap’s biggest competitor is Aerodrome, and the data presents a more complex situation. 27.8% of Uniswap incentivized LPs provided liquidity to Aerodrome after the incentives ended, with 84.5% leaving Uniswap completely, and about 64.8% of users who left Uniswap did not transition to Aerodrome, despite having a better APR than non-incentivized Uniswap v3.

Although some LPs moved to Aerodrome, a larger proportion of users simply exited without shifting to a direct competitor. This suggests broader structural challenges in retaining users and liquidity. He believes that brainstorming methods to improve retention “alongside” deploying incentives is a worthwhile effort, but this incentive program remains the most effective first step in the traffic funnel.

Community Concerns About Gauntlet’s Capabilities

Community member Pepo “@0xPEPO” expressed concerns on social media platform X, pointing out that the Uniswap Foundation had already paid $1.2 million and $1.25 million to Aera and Gauntlet for participation fees, respectively, before the proposal was even approved. He questioned whether the Aera team had the capability to complete such a project, as they lacked a proven track record.

He mentioned that Gauntlet’s designated Uniswap Growth Manager, Peteris Erins, was the founder of Auditless and a member of the Aera team. Despite Peteris having almost no public track record aside from his work at Aera, the only notable public achievement was that the protocol reached over $80 million in TVL within its first year.

However, he argued that this total locked value may not accurately reflect actual performance. Since every Aera client is also a Gauntlet client, the growth data becomes questionable when a company’s performance depends on its parent company. He further cited data from Aave and Gauntlet, showing that Gauntlet may have been suppressing growth. After Aave parted ways with Gauntlet, its TVL and profitability saw significant improvement.

Devin Walsh, the Executive Director and Co-Founder of the Uniswap Foundation, responded to this by stating that Gauntlet has undergone more rigorous scrutiny than typical collaborators and has gone through two due diligence processes.

The first occurred in early 2023 when a consultant was being selected for incentive analysis. To choose the supplier, they provided similar proposals to three potential collaborators and evaluated the final results based on the rigor, comprehensiveness, and the ability to drive execution after the analysis. At that time, Gauntlet’s results far surpassed those of other companies. The second process took place in the third quarter of 2024, when the Foundation evaluated a batch of candidates to determine the best fit for collaborating on Uniswap v4 and Unichain’s incentive activities. They assessed the candidates’ past records, relevant experience, and their ability to achieve the desired results. Based on the analysis, they believed Gauntlet was the best fit for the task. Meanwhile, they also took the opportunity to renegotiate the contract, with plans to pay per activity and lock in the fee rate until 2027.

Repeated Security Issues with Layer0, the Underlying Technology of USDT0

Before the activity began, analyst Todd (@0x_Todd) pointed out the security risks associated with USDT0 on social media platform X. USDT0 is a cross-chain version of USDT, where the underlying asset, USDT, exists on ETH, and through Layer0, it is transferred across different chains to become USDT0. The chains that support USDT0 can also cross-chain with each other, such as ETH-Arb-Unichain-Bear Chain-megaETH, and so on.

USDT0 is led by Everdawn Labs, using the underlying technology of Layer0, and has the backing of Tether and INK. Todd expressed concerns about trust in Layer0, saying, “My trust in Layer0 is limited, and there are numerous cases of top cross-chain bridges failing, from Multichain to Thorchai. Cross-chain technology has no real barriers; it’s just multi-signature at the end of the day.”

Due to the current situation, besides bearing the risks of Tether and Uniswap, there are four additional risks to consider: the security of Everdawn, the security of Layer0, the security of Unichain, and the security of other public blockchains supporting USDT0. If other public blockchains are hacked and USDT0 is minted infinitely, the USDT0 on Unichain will also be contaminated.

How Can Users Take Advantage of Rewards?

By entering Merkl to check the incentive pool, these incentive mechanisms may increase or decrease over time. If users want to efficiently mine $UNI, they need to constantly monitor the reward changes in 12 pools.

Providing liquidity to these pools allows users to add liquidity to the incentive pool from any interface and earn liquidity activity rewards.

Claiming rewards on the Merkl personal interface, users can claim rewards through the Merkl interface or any interface connected to the Merkl API.

Overall, most community users are not optimistic about this proposal. They believe it harms the rights of $UNI holders in various ways. However, for retail investors who simply want to mine $UNI, they need to be cautious about potential risks and pay attention to the liquidity pool reward changes every two weeks. BlockBeats will continue to track and report on the potential risks in the future.

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