Data from Dune Analytics shows that in the month of September Uniswap decentralized exchange processed $15.371 billion in volume. In the same period, reports indicate that Coinbase processed $13.6 billion.
The significant spike in Uniswap’s volume can be attributed to two major factors. First, the explosive growth of decentralized finance (DeFi) and yield farming of governance tokens caused decentralized exchanges to thrive. Second, the launch of Uniswap’s governance token UNI led to a frenzy on the platform.
June marked the start of a frenzy in DeFi governance tokens, with Compound’s COMP token kickstarting the phenomenon.
The process is relatively simple: DeFi users “farm” new governance tokens by staking various cryptocurrencies, such as Ether (ETH).
DeFi protocols that release their underlying governance tokens in a decentralized manner distribute them over time to users who stake.
Top cryptocurrency exchanges have to consider various factors before listing tokens. Some of the criteria include liquidity, track record, and developer activity. For new governance tokens or DeFi-related cryptocurrencies, it is nearly impossible to meet those requirements.
Hence, Uniswap eventually evolved into the go-to platform to trade DeFi tokens and as the total value locked in DeFi surged it intensified the growth of Uniswap’s volume.
In the last few weeks the prices of DeFi tokens dropped and user activity in yield farming space declined but researchers at Dune Analytics are not interpreting this as a bearish signal. The researchers said:“Despite yield farming craze calming down DEX volumes crushed old records in September: $24B traded, up 100% from August. While last few weeks were down from beginning of month, all weeks in Sept were well above peak week from August.”