Uniswap puts fee switch, 100M UNI burn to final vote

Uniswap founder Hayden Adams advanced the UNIfication proposal to a final on-chain governance vote running Dec. 19-25, seeking approval to activate protocol fees and retroactively burn 100 million UNI from the treasury. If the proposal passes, the actions will execute after a two-day timelock.

The package would redirect a portion of trading fees from liquidity providers to the protocol and conduct a one-time burn equal to what the authors estimate might have been burned if protocol fees had been active since token launch. If approved, the proposal triggers on-chain steps on Ethereum mainnet, including turning on protocol fees for Uniswap v2 and v3 and routing Unichain sequencer fees into the same UNI burn mechanism.

Protocol fees would be phased in to limit disruption. On v2, activating the fee switch would lower liquidity provider fees from 0.30% to 0.25%, directing 0.05% to the protocol. On v3, protocol fees would be set as fractions of LP fees, initially one-quarter for select lower-fee tiers and one-sixth for the 0.30% and 1% tiers. Governance would retain authority to change these parameters over time.

The rollout would start with v2 pools and a selected set of v3 pools on Ethereum mainnet that account for a large share of fee activity, expanding later to additional pools. Adams indicated a separate governance proposal would address fee activation for Uniswap v4.

Future expansions contemplated by the authors include Layer 2 networks, other Layer 1s, Uniswap v4, UniswapX, a program to route certain MEV to the protocol, and aggregator hooks.

Unichain, launched about nine months ago, would direct its sequencer fees to the UNI burn after Layer 1 data costs, with 15% of sequencer fees allocated to Optimism. The team noted Unichain is processing roughly $100 billion in annualized decentralized exchange volume and about $7.5 million in annualized sequencer fees.

Beyond fee activation, the proposal outlines governance and operational changes to align Uniswap Labs with token holders. Uniswap Labs would enter a services agreement recognized in Wyoming under the Decentralized Unincorporated Nonprofit Association framework, alongside indemnification agreements for members of an independent negotiating committee. Operational responsibilities historically handled by the Uniswap Foundation would shift to Uniswap Labs, and Labs would eliminate interface, wallet, and API fees.

The governance package would also establish an annual growth budget of 20 million UNI from the treasury starting in 2026. The plan describes a model in which protocol usage drives ongoing UNI burns while Labs focuses on protocol development and growth under the new structure.

Adams urged delegates to vote ahead of the holiday period, writing on X: “Vote before Christmas or end up on Santa’s naughty list.”

The vote follows a request-for-comment phase from Uniswap Labs and the Uniswap Foundation. The authors cite past legal disputes and what they describe as a hostile U.S. regulatory climate under former Securities and Exchange Commission Chair Gary Gensler as reasons protocol fees were not activated earlier, conditions they now say have changed.