TL;DR
- Unichain’s Total Value Locked (TVL) plummeted 86% from its all-time high.
- The decline is attributed to the end of the $21 million incentive program and a lack of sustainable yield.
- Other protocols like Berachain (91%) and Linea (78.9%) also experienced significant declines.
The Decentralized Finance (DeFi) ecosystem faces a new shakeout, an event that calls into question the sustainability of models based solely on subsidies. Unichain’s Total Value Locked (TVL), the Layer 2 chain developed by the giant Uniswap, dramatically plummeted 86% from its all-time high.
Market observers attribute the sharp decline to the exhaustion of its multi-million dollar incentive program, noting that the network lacks lasting appeal to retain liquidity once easy money disappears.
The program, managed by Gauntlet and distributing around 3.5 million UNI tokens, injected over $21 million starting in April 2025. Although the campaign astronomically boosted Unichain’s TVL, a considerable portion of that growth has now evaporated.
Tom Wan, head of data at Entropy Advisors, highlighted that this phenomenon is not an isolated event, with networks like Linea and Berachain reporting similar drops of 83% and 91%, respectively, from their peaks.
The Difference Between Sustainable Yield and Temporary Incentives
The rapid capital flight reignited the debate about the effectiveness of liquidity farming campaigns. Experts like Erick Pinos from Nibiru Chain, and other analysts like X user “Soleil,” agree that incentives are a “tricky tool to get right.”
Soleil argues: “‘Killer apps’ and sustainable yields are the only two elements that can maintain TVL. For Unichain, the application is basically Uniswap. When incentives end, Liquidity Providers (LPs) have alternative choices to maximize their ROI; the moat simply isn’t there.”
Unlike other established Layer 2 networks that have cultivated diverse application ecosystems, Unichain’s main draw remains its connection to Uniswap.
Without compelling reasons to maintain capital on the network beyond reward hunting, LPs have simply redeployed their assets to more lucrative opportunities elsewhere. Eliezer Ndinga of 21shares, commenting on the Unichain TVL drop, was even more categorical: “Crypto in reality has a product-market fit problem without those incentives.”
Technically, Unichain remains solid, offering fast finality and low fees, properties that should attract developers. However, current data shows that the key challenge is converting transient reward-seekers into regular users of on-chain applications.
Meanwhile, the broader market correction, with Bitcoin surpassing $91,000, could make Unichain’s TVL recovery slow and difficult, especially when competing with other protocols facing even steeper declines, such as Berachain, whose TVL plummeted 91.7%.
