Relaying Leighton’s post:
A trustless system designed to collect fees in the pool, and swapping the protocol fees to be claimable for a designated token should add no more additional taxation responsbility to what LPs are currently responsible for. Unless there is a legal & taxation professional to contest, it appears straightforward that eliminating the requirement for a common enterprise to manage fees also eliminates the debate of legal & taxation concerns. Anecdotally, I’ve never seen any hard evidence on cited laws within these forums proving any impact to the intersection of Uniswap Protocol, Uniswap Labs, and its users regarding the legality of the protocol fees. Unless the cited laws carry merit to being catastrophic towards furthering the protocol fee, the community should just cope with the idea that you can sue anyone for anything.
I believe activating the protocol fee is fairly zero-sum. Here are some reponses to the fantastic proposal:
- Do you agree Uniswap does not need to offer substantial fee rebates to liquidity providers?
In a different lens, turning on the protocol fee could provide a like-for-like rebate via a hedge for LPs. In light of the fact that Liquidity Providing in volatile Uniswap pairs without considering a larger strategy - absent of protocol revenue mechanisms to hedge - is simply a bad idea.
- Do you agree a one-fifth fee tier is the appropriate starting point for a protocol fee?
Yes, a one-fifth fee tier represents a negligble impact to Liquidity Providers. It’s reasonable to assume that the overwhelming amount of users will always trade on Uniswap regardless of price impact - mostly because they don’t bother to check agregators or other DEXs for fractional savings in slippage. There has been some great research done by @rfritsch on this: https://arxiv.org/pdf/2206.04634.pdf.
- Do you agree a new system for fee management is a good approach to carrying out the necessary maintenance surrounding the fee switch?
Yes, and I believe that funding the design of a PoC system, writing the smart contract(s), and a third-party audit of a deployment strategy is well-suited use of treasury funds.
- Do you agree implementing the system on Polygon is a good first step?
Testing on Polygon and Arbitrum seems fitting before deploying on mainnet.
- What token do you think the DAO should trade fee income for to be held in the protocol treasury?
Protocol fees should be converted to the native protocol token: UNI. Trading fee income to stablecoins or alternative tokens should be decided upon by the claimant.