Overvaluation vs. Sustainability: Why Uniswap's Founder Questions the Revenue Myth of Aerodrome

Uniswap founder Hayden Adams recently stated on X that the claim that Aerodrome’s protocol revenue is five times that of Uniswap is misleading. The core issue lies in the fact that the two protocols adopt completely different revenue models: Aerodrome generates artificially inflated revenue figures by charging 100% of LP fees and returning them in tokens or incentives; whereas Uniswap employs a more conservative approach, taking only a portion of fees for protocol operations and token buybacks. This controversy reflects a re-evaluation in the DeFi market regarding the sustainability of protocol revenues.

The Fundamental Difference Between the Two Revenue Models

Booked Numbers vs. Actual Sustainability

Aerodrome’s approach appears aggressive: taking 100% of trading fees and then returning them to liquidity providers in AERO tokens as incentives or liquidity rewards. As a result, the “protocol revenue” shown on the books appears enormous. Hayden Adams pointed out that if Uniswap adopted the same model, reported fee income could reach $1 billion.

However, a key issue exists: these “returned” token incentives are essentially achieved through increasing token supply, not from sustainable earnings derived from real trading fees. In other words, Aerodrome is creating an “illusion of revenue.”

In contrast, Uniswap’s new model is more pragmatic. According to recent updates, Uniswap has launched a fee switch mechanism: 0.05% of trading fees are taken as protocol fees to buy back and burn UNI tokens, while most of the fees still go directly to LPs. Although this reduces LP earnings, it ensures the authenticity and sustainability of protocol revenue.

Model Comparison at a Glance

Why the Market Is Prone to Confusion

The Harm of Inflated Data

According to relevant reports, in 2025, Uniswap, Jupiter, and Meteora all generated over $1 billion in fee income. These figures seem impressive. But the problem is, the token performance of these protocols has not been as strong as their on-paper revenue suggests. This highlights a reality: high protocol revenue does not necessarily mean high token value; what matters is whether this revenue is real and can truly benefit token holders.

Aerodrome’s approach amplifies this issue. By returning 100% of LP fees and incentivizing in tokens, it appears generous to LPs but is actually overextending for the future. In this model, LP returns are highly dependent on the AERO token price; if the token price drops, the actual value of incentives diminishes accordingly.

Changing Market Demand

The market has begun to see through these inflated figures. More participants realize that truly valuable protocols should have:

• Genuine, sustainable fee income
• Clear revenue distribution mechanisms
• Real benefits for token holders
• Long-term ecosystem health rather than short-term incentive stacking

Why Uniswap Is Changing Its Approach

Protecting Liquidity and Long-term Competition

This controversy arises in the context of Uniswap’s recent launch of the UNIfication plan. Besides burning 100 million UNI, a more important move was the activation of the fee switch—using part of trading fees for buyback and burn. Although this decision seems to cut LP earnings, it is actually a long-term balancing act.

According to reports, this has raised concerns about LP liquidity. Some analysts suggest that Uniswap is intentionally reducing LP rewards, while competitors like Aerodrome attract liquidity through higher incentives. However, Hayden Adams’s logic is: rather than maintaining short-term liquidity with artificially high incentives, it’s better to establish a genuine, sustainable value feedback mechanism.

Institutional Capital’s Changing Preferences

The market is experiencing a shift. The early DeFi model relying on high emissions and subsidies to attract participants is phasing out, replaced by a focus on real yields and sustainable models. When institutional capital enters DeFi, it looks for transparent, programmable, long-term reusable yield models rather than inflated APYs.

Deeper Reflection

Personal View

This controversy essentially reflects the maturation of the DeFi market. From the early days of “token incentives forever” to now emphasizing “real income,” market rationality is gradually improving. Hayden Adams’s criticism, though seemingly harsh, points to a key question: how should we evaluate the true value of a DeFi protocol?

Inflated revenue figures will ultimately be exposed by the market. Aggressive incentive models often overdraw future growth potential. In contrast, Uniswap’s conservative but sustainable approach, while potentially facing liquidity competition in the short term, builds a value feedback mechanism based on real income, which is more likely to earn market trust in the long run.

Summary

This debate between Uniswap and Aerodrome is fundamentally a deep interrogation of DeFi protocol revenue models. There is an essential difference between inflated figures and genuine sustainability. Aerodrome creates a “revenue myth” on paper through 100% fee returns and incentives; Uniswap opts for a more pragmatic route, reducing LP rewards but establishing a real, sustainable value feedback mechanism.

For market participants, the lesson is clear: when evaluating DeFi protocols, don’t be fooled by inflated revenue numbers. Focus instead on whether the protocol’s income is real, sustainable, and truly benefits token value. This signals a shift in DeFi from “incentive-first” to “value-first.”