UNI - Uniswap
Generating about $1.2 billion in fees each year.
0.25% of the trading volume is interface fees ($5 - $10M per month) flowing into Uniswap Labs, while the remaining part is LP fees belonging to Liquidity Providers => UNI holders receive no value, lmao.
Furthermore, the design of UNI's tokenomics does not limit the total supply. Initial total supply = 1B, after complete vesting, the process of permanent inflation of 2% per year begins. Although this number is not too high (~21% after 10 years), it is a gradual erosion of the holder's value.
It's like saying, buy my company's shares; I won't share any annual profits with you, but each year, I will continue to print and sell an additional 2% of shares. LOL.
If nothing changes, the incentive to hold UNI will only be to wait for pump and dump. The only exit for UNI holders is the Fee Switch mechanism, which, when activated, allows for sharing a portion of the LP fee with the DAO Treasury and may be allocated to UNI holders.
In fact, the fee switch mechanism has been around from the start, but until now it has not been activated due to legal issues; it could cause the SEC to classify Uniswap as a security, and since the Uni founder is in the US, they are hesitant to take risks.
Recently, under the open crypto legal corridor during Trump's administration, Uniswap has been accelerating activities to activate the fee switch, such as establishing Uniswap Governance and testing revenue sharing. Hopefully, in the near future, UNI holders will receive value from holding the token.
In summary, the tokenomics of UNI follow a revenue-sharing model, with revenue flowing to token holders similarly to dividends, thereby creating accumulated value for shareholders. Additionally, the permanent inflation mechanism of 2% provides long-term incentives for ecosystem development activities and encourages holders to participate actively in the project rather than just passively holding the token.
CAKE Pancakeswap
Generating about $1.8 billion in trading fees each year, bringing in $450M in revenue and providing up to $325M in value for CAKE holders.
Since the tokenomics version 3.0, CAKE has abandoned veToken + revenue sharing to switch to a deflationary model through buyback & burn.
Accordingly, 15% of the swap fee along with many utility fees will be used to buy back & burn CAKE, thereby creating a token deflation effect. This model transition has brought CAKE 23 months of continuous deflation, eliminating about ~5% of the supply.
The total supply of CAKE is capped at 450M, with the current circulating supply around 369M. If the project continues to maintain its performance, it will never reach the supply limit of 450M.
So what is the weakness in this tokenomic model?
First, the buyback & burn model depends on the project's operational efficiency and BNBChain; deflation only truly achieves effectiveness when the fee revenue is large enough to burn more than the number of CAKE inflation. If CAKE hits the total supply limit, meaning no new CAKE can be minted, then there will be no incentive mechanism for Liquidity Providers => leading to a decrease in liquidity => decrease in volume => reduced burn amount.
Secondly, the revenue comes from various tokens, and the project needs to convert them into CAKE to burn; therefore, if the CAKE price rises significantly, it will also lead to a decrease in burn effectiveness. The buyback & burn model will be more effective when the CAKE price remains low.
Finally, this benefit doesn't seem as appealing as cash dividends because token prices often fluctuate significantly.
Thus, although the deflationary model works quite effectively, it also contains many variables.
HYPE - Hyperliquid
#H#Hyperliquid is currently the number 1 Perpdex product, always ranking in the top revenue of any leaderboard. Although it has only been operational for half a year, it is estimated that the project generates ~900 million USD in trading fees annually and especially transfers a value flow of up to $835 million to HYPE holders.
Diving into the cash flow of Hyperliquid, the primary source of revenue comes from Perp and Spot trading fees on Hypercore, listing auction fees, and profits from assuming liquidation positions. There are not many differences in cash flow compared to other Perps, but what makes HYPE skyrocket and gain community support lies in Hyperliquid's 'fair play'. The project does not retain any revenue but reinvests everything into the HYPE token.
The Perp fee part is calculated in USDC, transferring 7% to LPs, and the remaining 93% goes to AF (Assistance Fund) for periodic buybacks of HYPE. With the enormous trading volume on HL, the amount of HYPE being continuously bought (currently around 2.4% of total supply) creates upward pressure on the token price.
Additionally, the revenue from listing auctions is also directed to AF for buybacks, and the HYPE fees collected from Spot dex are burned immediately.
However, unlike CAKE, the tokens purchased from the Assistance Fund are not committed to burning, and in the future, the project may use them for various purposes.
Not only is there a willingness to invest in tokenomics, but during the project implementation phase, there was also a substantial airdrop of tokens worth billions of dollars to early users. It can be seen that Hyperliquid is very wealthy and knows how to please the community. Personally, I speculate that this willingness to invest will be suitable if the project owns a large number of tokens, as this way the buyback value flow will still return to the project; moreover, the share ratio for LPs also means that most of the liquidity comes from the project. This strategy helps the project gain both reputation and resources.
Overall, whether it's a deflationary or revenue-sharing model, operational performance plays a very important role. The value of revenue sharing or buyback & burn depends on the project's volume. In favorable conditions, high volume, and generating many fees, the allocation amount is large; when the project operates inefficiently, the shared revenue decreases, and the token becomes inflationary.
Hyperliquid has outstanding performance due to its focus on the perpdex segment; leveraged trading volume is always tens of times that of spot, so revenue is also multiplied by tens. As the market becomes more saturated and the margins lower, leveraged tools are used more, leaving plenty of room for hyperliquid and other perpdex exchanges to grow. Not to mention, later on, real assets will also be tokenized and traded on dex, making this segment the king of revenue; what you see now is just the beginning.
Being this bullish doesn't mean to call to buy HYPE, guys; the market outlook is such, but projects can bloom and then fade, idk.
Finally, returning to the topic of this article, which project’s tokenomics do you like? Personally, as a builder, I prefer the tokenomics of Uniswap the most; it is good for the long-term development of the project. And perhaps traders will like the tokenomics of Pancake, while financiers will prefer the tokenomics of Hyperliquid.
