Uniswap has announced a groundbreaking proposal that aims to activate protocol fees and initiate a perpetual burn of its native token, UNI. This includes a one-time retroactive burn of approximately 100 million UNI tokens. With this overhaul, the decentralized exchange (DEX) intends to allocate its substantial fee revenue to token holders, a move seen as crucial in addressing a long-standing gap in perceived value.
This proposal, referred to as “UNIfication,” was unveiled earlier in the week by Uniswap Labs and the Uniswap Foundation. The aim is to leverage the protocol’s impressive daily trading volume, which currently sits at around $650 million, by implementing protocol fees to support the token burn. Token burning, a process that permanently removes tokens from circulation, is anticipated to enhance the scarcity of remaining tokens and, consequently, their value. The proposal emphasizes “aligning incentives across the Uniswap ecosystem” as a key goal.
In recent days, UNI has seen a substantial price surge, rising by 41.5% in the last 24 hours and an impressive 83% over the course of the week, according to CoinGecko data. Commenting on the proposal, Peter Chung, head of research at quantitative trading firm Presto, highlighted that despite Uniswap’s position as the largest and original spot DEX since 2018—generating over $1 billion in annual fees—there has been no existing mechanism to directly channel value to token holders. He asserted that the proposed changes have the potential to significantly impact this dynamic.
In the past month alone, Uniswap has accumulated $222 million in fees, which translates to annualized earnings exceeding $2 billion. To date, the platform has generated cumulative fees totaling $5.4 billion, surpassing its total value locked (TVL) of $5 billion.
Beyond the token burn, the proposal introduces several strategic mechanisms intended to boost revenue and liquidity. These include Protocol Fee Discount Auctions aimed at internalizing Miner Extractable Value (MEV) and a reevaluation of the fee structure associated with Uniswap Labs’ front-end interface, wallet, and API. Additionally, the plan proposes the launch of “aggregator hooks,” which would evolve Uniswap v4 into an on-chain aggregator that capitalizes on external liquidity.
The authors of the proposal—Uniswap founders Hayden Adams, Ken Ng, and Devin Walsh—assert that this initiative comes at a pivotal moment for decentralized finance (DeFi). They note that decentralized trading protocols are increasingly challenging centralized platforms in terms of performance and scale, while tokens are gaining mainstream traction and institutions are actively building on Uniswap and other DeFi frameworks.
The proposal also reflects the evolving regulatory landscape, which they argue has better positioned the Uniswap community for its future endeavors following previous legal challenges. The founders have committed to accelerating growth through various initiatives, including builder programs, grants, partnerships, and potential mergers and acquisitions, all aimed at unlocking new value for the Uniswap ecosystem.
