- Uniswap DAO activated the protocol’s “fee switch”, directing a portion of swap fees to a reserve for UNI holders.
- Between one-sixth and one-quarter of fees from Uniswap v2 and v3 on Ethereum will flow to a smart contract called a “token jar”.
- The vote burns 100 million UNI and sets the path to close the Uniswap Foundation, moving most staff to Uniswap Labs.
- Uniswap Labs will stop charging fees on its retail interface and wallet; the DAO approved a MEV-related auction to compensate liquidity providers.
Uniswap DAO voted on Christmas Day to turn on the protocol’s “fee switch” (a mechanism that redirects some protocol fees). The change directs a portion of revenue to a smart contract called the “token jar” (a reserve that holds protocol fees). The move aims to let UNI holders burn tokens to claim value from that reserve.
The vote passed with near-unanimous support, after 125 million votes were cast, with fewer than 1,000 against, according to voting records. The activation follows an earlier proposal from the Uniswap Foundation to implement “UNIfication,” reported earlier this year (DeFi/uni-token-soars-as-uniswap-leadership-proposes-fee-switch/”>details) and posted on the governance forum (UNIfication proposal).
Under the change, existing swap fees remain the same, but between one-quarter and one-sixth of fees from pools in Uniswap v2 and v3 on Ethereum will be routed to the token jar. Anyone who burns UNI tokens using the “fire pit” (a smart contract that destroys tokens) can withdraw an equivalent amount of crypto from that jar. The DAO also approved the destruction of 100 million UNI tokens, a supply cut valued at about $600 million at recent prices.
Today, liquidity providers (users who supply assets to trading pools) receive the current fees. To offset this, the proposal backs development of a Protocol Fee Discount Auction intended to “add a new source of protocol fees by internalizing MEV that would otherwise go to searchers or validators,” as stated in the UNIfication proposal (proposal text). MEV is maximal extractable value, or profit available to transaction orderers.
Uniswap is active on multiple chains and processed more than $60 billion in transactions in the past 30 days, according to DefiLlama. Users paid more than $50 million in swap fees over the last 30 days, per DefiLlama fee data. The fee switch currently applies to Uniswap v2 and v3 on Ethereum; votes on v4 and other chains will come later.
The DAO also approved winding down the Uniswap Foundation. Most Foundation staff will move to Uniswap Labs, which will take over ecosystem and governance support and will stop collecting fees on its website and wallet.
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