Hi Uniswap Governance ,
“1. Do you agree that Uniswap does not need to offer substantial fee rebates to liquidity providers?”
Uniswap has established itself as a trusted brand. For liquidity providers who commit for longer durations and offer a wide tick range, it provides a sense of security. While reducing fees for LPs may lead to some migration, it could also result in increased fees for those who remain.
“2. Do you agree that a one-fifth fee tier is an appropriate starting point for a protocol fee?”
Starting with a one-fifth fee tier seems reasonable. It strikes a balance by not being excessively high while still being meaningful enough to have an impact.
“3. Do you agree that a new system for fee management is a good approach to carrying out the necessary maintenance surrounding the fee switch?”
The proposed approach makes sense as it lays the foundation for capturing fees, which is an essential first step towards determining how those fees could be utilized.
“4. Do you agree that implementing the system on Polygon is a good first step?”
Polygon has demonstrated its reliability and maturity over time, making it a suitable platform for testing the fee switch and observing the loyalty of existing LPs. Additionally, with Polygon’s growing partnerships with traditional corporations, there may be additional opportunities to explore the utilization of collected fees to users.
“5. What token do you think the DAO should trade fee income for to be held in the protocol treasury?”
It would be advisable for the DAO to consider holding fee income in tokens such as USDC, ETH, and UNI. USDC provides stability during volatile periods, while ETH showcases alignment with the development of the Ethereum protocol and the potential for staking. UNI tokens can be utilized for buybacks, creating a solid foundation for the development of the Uniswap ecosystem, as well as supporting the community and builders.
Regarding @guil-lambert’s proposal for the fee switch:
The proposal primarily focuses on the potential use case of fees for liquidity management and falls short in terms of establishing the necessary infrastructure for the protocol treasury.
A fee switch that functions as a pass-through exposes Uniswap to external rent-seeking behavior and may solidify the position of early adopters of specific fee utilization, such as liquidity management protocols or on-chain options companies.
In response to the question of how the fee switch proposal contributes to the sustainable growth of the Uniswap protocol (rather than solely benefiting the $UNI token), it’s important to note that revenue generated through fees enables Uniswap to serve the public good. UNI represents a unit of public good. Without fee income, the fees would solely benefit profit-motivated LPs. The same applies to liquidity management protocols or other protocols competing for a share of the fees, as they are primarily focused on their own token holders and user base.
While I am not a lawyer, passing the responsibility of the fee switch tax to other decentralized protocols would introduce additional complexity. Those protocols would also face uncertainties regarding legality, jurisdiction, and potential conflicts with regulations, especially if they are located outside of the United States. This approach could exclude protocols that are unwilling to navigate such risks, further entrenching the fee switch structure. Regulatory opacity should not hold back the DAO from being a leader in the space.