UNI token soars 30% as Uniswap Labs and Foundation propose fee switch activation

Uniswap, the prominent Ethereum-based decentralized exchange, is moving to flick the much-anticipated protocol fee switch under a “UNIfication” governance proposal submitted by Uniswap Labs and the Uniswap Foundation on Monday. 

The plan, co-authored by protocol founder Hayden Adams, Executive Director of the Uniswap Foundation Devin Walsh, and Uniswap researcher Kenneth Ng, aims to reduce the supply of Uniswap’s native UNI token in part by activating a burn mechanism, according to the forum post.

UNI is trading above $8.65, a gain of nearly 30% on the day as of 4:50 p.m. ET, according to The Block's price page.

This marks a significant shift for the protocol and its token holders, who have long pushed for a so-called "fee switch" that would divert a portion of the trading fees that historically accrued to liquidity providers to the Uniswap protocol's treasury or UNI token holders.

The UNIfication plan takes a multifaceted approach towards reducing the token supply. In addition to using protocol fees earned by the Uniswap DEX and Unichain sequencer to burn tokens, it would also directly burn 100 million UNI tokens currently sitting in Uniswap’s treasury, representing “the protocol fees that could have been burned if fees were turned on at token launch.”

Additionally, the proposal would halt Uniswap Labs from earning fees on its interface, wallet, and API. The Uniswap Ethereum frontend has earned a cumulative $137 million, according to The Block’s data.

It remains unclear what percentage of the fees will go towards token burns. Uniswap has been one of the best-performing DeFi protocols in recent months, helping to lead a DeFi fee rebound, and is on track to earn over $2 billion in annualized revenue across its deployments. 

“Together with Uniswap Labs, we’re proposing a long-term model for the Uniswap ecosystem: one where protocol usage drives UNI burn and one aligned team focuses on protocol development and growth,” according to the forum post.

In addition to implementing plans to reward token holders, the UNIfication plan would merge the non-profit Uniswap Foundation into Labs, the entity primarily responsible for developing the protocol and Unichain L2. 

According to Adams, protocol leadership has waited to flip the fee switch “in great part due to a hostile regulatory environment.” Uniswap was one of many protocols targeted by the U.S. Securities and Exchange Commission under ex-Chair Gary Gensler’s tenure. 

“UNI launched in 2020, but for the past 5 years, Labs has been unable to meaningfully participate in Uniswap governance, and has been greatly restricted in the ways it can build value for the Uniswap community. That ends today!” Adams said.

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