Uniswap Labs, the parent company behind the world’s largest decentralized exchange, has raised $165 million in Series B funding led by Polychain Capital.
Why it matters: This is a big bet by investors that decentralized app developers can build a valuable business on protocols that run largely on their own.
Details: The new funding values Uniswap Labs at $1.66 billion and includes participation from existing investors a16z crypto, Paradigm, SV Angel and Variant.
How it works: The Uniswap protocol is a smart contract that allows users to deposit tokens into liquidity pools with a defined buy and sell price for each listed token (making it an automated market maker or AMM).
- Uniswap (and similar DEXs) are priced via software, primarily based on the ratios of the tokens in their offering.
- Users make money with Uniswap by delivering capital to liquidity pools used for these trades. The more capital there is in a given pool, the less a trade can move out of sync with the market
go deeper: The latest version of the protocol, Uniswap v3, improves trading by allowing those providing funds to define the price range within which their funds can be traded.
- This gives traders better prices and more fee income for the smartest investors.
Yes but: Uniswap (the company) is not known to actually make money from trades done through the protocol. These fees go to liquidity providers instead.
- It is unknown if Uniswap Labs has any other revenue streams besides UNI token appreciation.
💭 Our thought bubble: Investors in the earlier rounds of Uniswap Labs must be very pleased based on the performance of the UNI token, but a round like this heralds a whole new direction for the company as it seeks to become one that actually generates revenue.
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