[RFC] Enable 0.05% Protocol Fee on All Uniswap v3 Pools for One-Month Experiment

[neozaru]

[RFC] Enable 0.05% Protocol Fee on All Uniswap v3 Pools for One-Month Experiment

Date: May 10, 2025
Category: Protocol Fee Experiment
Status: Request for Comments

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Summary

This RFC proposes that the Uniswap DAO vote to enable a 0.05% protocol fee on all Uniswap v3 pools across all chains for a period of one month. The goal is to collect real-world data on protocol fee revenue, liquidity provider behavior, and trading volume to inform future governance decisions around sustainable DAO funding mechanisms.

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Motivation

Uniswap v3 has long included the ability for governance to activate protocol fees, but this feature remains unused. The DAO lacks comprehensive empirical data to understand the potential benefits and risks of enabling fees.

This proposal aims to:

• Run a controlled, time-limited experiment on all v3 pools.
• Measure the fee revenue potential for the DAO Treasury.
• Analyze liquidity, volume, and LP behavior changes under a uniform protocol fee.
• Provide hard data to guide any future permanent decisions.

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Specification

Scope:

• Activate a 0.05% protocol fee on all swaps in Uniswap v3 pools on all supported chains (Ethereum mainnet and all v3 deployments under DAO governance control).
• The experiment begins at a governance-approved block height or timestamp.
• The fee is automatically disabled after 30 calendar days, reverting to 0% unless the DAO votes otherwise.

Implementation Considerations:

• Leverage the existing fee switch parameter built into v3 contracts.
• Communicate the activation schedule widely to LPs and traders ahead of time.
• Collaborate with analytics teams to track metrics throughout the experiment.

Key Metrics to Track:

• Protocol fee revenue
• Trading volume trends
• Liquidity depth and pool utilization
• LP migration or withdrawal patterns
• Slippage and user experience

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Rationale

The 0.05% fee is designed to:

• Be low enough to minimize risk of LP or trader flight.
• Be high enough to generate meaningful data and revenue samples.
• Act as a neutral, unbiased test across all v3 markets simultaneously.

A one-month experiment gives clear boundaries and minimizes long-term risks.

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Alternatives Considered

• Enable fees only on selected pools → rejected to avoid bias and complexity.
• Activate fees permanently → rejected as premature without experimental data.
• Test different fee rates → rejected to avoid introducing multiple variables at once, at least for now.

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Risks

• LPs may migrate capital to non-fee protocols during the test period.
• Temporary disruption of trading behavior or routing.
• Minor operational challenges coordinating fee switch activation across chains.

The short, predefined test period significantly limits potential downside.

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Next Steps

1. Collect community feedback on this RFC.
2. If community sentiment is positive, proceed to Temperature Check and Consensus Check on Snapshot.
3. Submit an on-chain governance proposal for formal activation of the fee experiment.
4. Establish monitoring infrastructure and reporting cadence for transparency during the experiment.

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Conclusion

This structured test will allow Uniswap governance to move from theory to practice in evaluating the protocol fee switch on v3. The insights gained will be critical to any long-term revenue discussions.

Community input is highly encouraged.

[AbdullahUmar]

Hey @neozaru,

It’s very unlikely for a proposal like this to pass. Any fee switch activation will require a concerted effort, like the one that was put underway by the Foundation last year. Both clarity and effective implementation around the legal and technical side will have to be addressed in order to get all of the right stakeholders to vote in support of fees. There have been previous scenarios in which contributors like GFX Labs attempted to get fee activation through the door without avail. Therefore, we’re all mostly waiting for the UF to provide clarity around next concrete steps. This is a key component that they focused on during their renewal in March.

As for pool selection, Gauntlet wrote an analysis on fee switch rollout last year.

This probably deserves a revisit as the models and simulations should be updated prior to fee activation, representing the current state of the market.