Uniswap Labs on Thursday announced a $165 million Series B funding round led by Polychain Capital, valuing the company at $1.66 billion. The investment appears to be the largest yet for the decentralized finance sector and is a welcome endorsement for the broader crypto industry mired in a brutal slump for most of 2022.
Other supporters of the raise, rumors of which surfaced last month, include former investors Andreessen Horowitz, Paradigm, SV Angel and Variant.
Uniswap is the corporate entity dedicated to developing products around the eponymous protocol, which hosts the largest decentralized crypto exchange where users can deposit tokens into so-called liquidity pools that reward them for locking their funds.
Hayden Adams, the self-taught programmer who built and launched Uniswap in 2018, said he sees the funding round and Uniswap’s popularity as a validation of decentralized projects, which in some cases are run almost entirely with autonomous code.
“For us, the industry has started to prove itself and we see its value, especially in this bear market when many centralized infrastructures failed and many decentralized entities prevailed,” Adams said.
His observation comes from a year in which high-profile centralized lending projects like Celsius and Voyager blew up spectacularly, while more distributed projects like Maker DAO and Uniswap weathered the current downturn without incident.
Uniswap Labs isn’t currently profitable, Adams said, but the company intends to draw on Series B funding to expand its product offering and become financially sustainable in the years to come. He says this will involve building an NFT aggregator that will “unlock new interactions between tokens and NFTs.”
“Web2 is about competing for user control, while Web 3 has the ability to compete by empowering users.”
Hayden Adams, Founder and CEO of Uniswap Labs
More broadly, Adams says Uniswap Labs will focus on developing services that make Web3 more accessible to non-technical people – a challenge he likens to the early days of the internet, when basic navigation tools were often clunky and unintuitive .
“The world of NFTs and tokens and DeFi are viewed as two separate ecosystems… it’s like saying the world of chat boards and photos is different,” he says, explaining how the current crypto landscape is poised to evolve into a more unified experience.
A decentralized future?
In discussing the merits of decentralization, Adams cited Vitalik Buterin as his greatest influence, praising the way Ethereum’s creator promoted the protocol, but then stepped down to let others take the lead — an example being the Adams tried to emulate.
“While my role in the Uniswap ecosystem is important, it’s smaller than ever,” he says. “If I resigned, the thing would move on.”
Adams also says that decentralization could be the key to reducing the number of catastrophic hacking incidents that have caused serious financial and reputational damage to the crypto industry – especially DeFi. He notes that the most egregious hacks target centralized entities, or so-called bridges, which are used to transfer tokens across different blockchains — and are also a point of centralization, according to Adams.
The answer, he suggests, is to model more of these services on Bitcoin and rely on solid code — and rigorous audits of that code — to protect crypto projects. He proudly notes that Uniswap’s smart contracts also serve as such an example.
“There were no serious hacks in the $1.2 trillion that was traded,” he says. “Uniswap has been running for a few years. If there was a mistake somewhere, it would have been discovered long ago.”
Of course, it’s too early to know if Adam’s vision of Uniswap and other decentralized services evolving into a larger part of the financial sector will materialize. While Uniswap is the largest decentralized crypto exchange, accounting for over half of total trading volume, its total user base was between 3 and 4 million at the height of the recent bull market – a healthy number but still relatively small compared to exchanges like Coinbase or Binance, and tiny compared to the numbers in conventional brokerage houses and other TradFi entities.
Meanwhile, the company is grappling with an ongoing Securities and Exchange Commission investigation as it, like the rest of the crypto industry, struggles to set the regulatory rules of the road. A spokesman for Uniswap Labs said that “the company is committed to complying with the laws and regulations that govern our industry.”
Adams says his main focus for now is to further challenge the so-called Web2 business model embodied by Facebook and Google, which relies on gobbling customer data and selling their attention to advertisers.
“Web2 is about competing for user control,” he said, “while Web 3 has the ability to compete by empowering users. You compete not by owning, but by earning your business.”
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