The Uniswap community has delivered a significant boost to its ecosystem by greenlighting two governance proposals aimed at enhancing the Unichain network and the upcoming Uniswap V4 protocol. This initiative, known as “Uniswap Unleashed,” introduces a new grants program and liquidity incentives, while also signaling initial steps toward a much-debated “fee switch” that would enable the distribution of trading fees to holders of Uniswap’s native token, UNI.
While direct mentions of the fee switch were absent in recent governance discussions, relevant posts have alluded to plans to “activate revenue,” highlighting the community’s ongoing commitment to evolving the platform. In conjunction with this development, the Uniswap Foundation has put forth a request for a substantial budget of $95.4 million for grants, $25.1 million for operational expenses over a two-year duration, and an additional $45 million earmarked for liquidity incentives. These funds are integral to attracting users and fostering ecosystem growth through developer initiatives.
The approval of both proposals, which garnered the support of over 80% of UNI token holders, marks a pivotal moment for the Uniswap protocol. This success could finally enable the long-sought fee switch, which would redirect a share of protocol revenue—currently exceeding $1 billion annually—from liquidity providers to UNI holders. However, the activation of this feature, which has been stalled due to previous failed votes, is contingent upon the Uniswap Foundation’s legal preparations.
The concept of implementing a fee switch was originally introduced back in July 2021, aimed at piloting this mechanism within a select few Uniswap protocol pools. It is essential to note that while the fee switch does not intend to increase the fees borne by users, it will withhold a portion of the returns that liquidity providers (LPs) currently receive. This strategic move, however, may result in diminished earnings for LPs while enhancing rewards for UNI holders, thus adding a layer of complexity to the community’s discussions.
A notable effort to initiate this proposal faced setback earlier in 2023 when it was rejected by influential token holders, showcasing the need for consensus within the community before such changes can be enacted. Furthermore, establishing shared revenue would require the Uniswap Foundation to solidify its status as a legal entity, enabling clearer contractual relationships with other protocols.
The proposal stated, “If our vetting is successful and we believe the creation of a legal entity for Uniswap Governance is in its best interest, we would propose to Governance to implement a legal entity structure.” This step, if adopted, could open the door for further governance proposals aimed at allocating potential Protocol revenue to delegators.
As the Uniswap community embarks on this transformative journey, the exploration of new revenue-sharing mechanisms and enhanced support for developers will play a crucial role in sustaining the platform’s growth and ensuring its competitive edge in the ever-evolving DeFi landscape.
