The decentralized finance (DeFi) landscape is witnessing a significant shakeout, highlighted by a staggering 86% drop in Unichain“s Total Value Locked (TVL) from its peak. This sharp decline follows the conclusion of a $21 million incentive program, which had been key in attracting liquidity to the platform.
Initially launched in April 2025, the incentive program, managed by Gauntlet, distributed approximately 3.5 million UNI tokens, providing a substantial boost to Unichain”s TVL. However, as the program came to an end, the liquidity that surged into the network began to evaporate, raising concerns about the platform”s long-term appeal without these financial incentives.
Market analysts have noted that Unichain is not alone in this trend. Other networks such as Berachain and Linea have reported similar downturns, with TVL reductions of 91% and 78.9%, respectively. This widespread decline sparks questions about the sustainability of liquidity farming campaigns as a growth strategy within the DeFi space.
Experts, including Tom Wan from Entropy Advisors, suggest that the drastic capital outflow reflects a broader issue within the DeFi ecosystem, where short-lived incentives fail to create lasting value. Erick Pinos from Nibiru Chain and analysts like the user “Soleil” emphasize that without compelling applications and sustainable yields, networks struggle to maintain liquidity once initial rewards are removed.
Critically, Unichain”s primary appeal lies in its association with Uniswap, limiting its ability to attract a diverse ecosystem of applications. As liquidity providers (LPs) seek better returns, they have redirected their assets to platforms offering more attractive opportunities.
Eliezer Ndinga of 21shares succinctly characterized the situation, stating that the cryptocurrency market faces a product-market fit challenge when incentives are stripped away. While Unichain”s technological fundamentals remain robust, boasting quick finality and low transaction fees, the pressing issue is converting transient reward-seekers into regular users of its on-chain services.
The broader market context is also unfavorable, with major cryptocurrencies like Bitcoin recently surpassing $91,000, further complicating Unichain”s recovery efforts. As competition intensifies among various DeFi protocols, the future trajectory of Unichain”s TVL remains uncertain.
