Uniswap Governance Approves UNIfication Proposal with Overwhelming Support

Uniswap governance has successfully passed the UNIfication proposal, marking a significant transformation in the protocol’s economic framework and steering UNI toward a more deflationary future.

Key Takeaways:

Uniswap overwhelmingly approved the UNIfication proposal, putting UNI on a path to deflation.
The fee switch directs trading fees to facilitate ongoing UNI burns related to protocol usage.
The proposal also refines governance and funding structures to bolster long-term growth.

Voting wrapped up on Thursday with an impressive 99.9% in favor, as confirmed by Uniswap founder Hayden Adams.

A total of over 125 million UNI tokens voted in favor, while only 742 tokens were against the proposal, demonstrating strong agreement among token holders.

Uniswap Governance Approves UNIfication Proposal in Near-Unanimous Vote

Uniswap Activates the Long-Awaited Protocol Fee Switch

In November, Uniswap Labs and the Uniswap Foundation introduced the proposal, which activates the much-anticipated protocol fee switch.

Under this new arrangement, a portion of trading fees that were previously allocated solely to liquidity providers will now be redirected to the protocol itself.

These fees will be utilized to burn UNI tokens continuously, decreasing the overall supply over time. Additionally, net sequencer fees from Unichain will also be funneled into this burn mechanism.

Together, these changes establish a clear connection between protocol usage and the reduction of supply. As trading activity on Uniswap rises, more UNI tokens will be eliminated from circulation, effectively linking the token's economics to the protocol's growth.

Beyond simply adjusting fee structures, UNIfication also enhances Uniswap’s operational framework. The proposal integrates various teams and responsibilities within Uniswap Labs, removes fees from Labs’ interface, wallet, and API services, and sets up a recurring budget supported by UNI for sustainable development and ecosystem expansion.

Following the approval, the proposal will enter a two-day timelock, after which Uniswap plans to carry out a significant one-time burn of 100 million UNI.

This amount represents an estimation of UNI that could have been burned had the fee switch been operational since the token's initial launch.

The governance package also introduces a Protocol Fee Discount Auctions system, aimed at improving returns for liquidity providers and aligning the interests of Uniswap Labs, the Uniswap Foundation, and on-chain governance under a unified legal structure utilizing Wyoming’s DUNA framework.

The UNIfication proposal received strong backing from several prominent figures in the decentralized finance space, including Variant founder Jesse Waldren, Synthetix and Infinex founder Kain Warwick, and former Uniswap Labs engineer Ian Lapham, all of whom possess considerable voting influence.

Uniswap Responds to Changing Regulatory Climate

This initiative comes in response to years of regulatory scrutiny on decentralized finance (DeFi) during the tenure of former SEC Chair Gary Gensler.

In the proposal, Uniswap pointed out that the regulatory landscape has evolved and that DeFi has gained broader acceptance, making it feasible to implement value capture at the protocol level.

“I believe the Uniswap protocol can become the main venue for token trading,” Adams stated, asserting that the proposal “sets the foundation for the next decade of growth.”

As of late Thursday, UNI was trading at $5.92, reflecting an 18.9% increase over the past week.

Uniswap has generated over $1.05 billion in fees so far this year, emphasizing the significant activity driving its new economic model.