Thanks everyone for the discussion. We want to address the LP impact concerns, specifically that protocol fees on v4 will push liquidity providers off Uniswap and towards other venues.
The same concern was raised before activating the fee switch on v2 and v3, and we have intentionally slowly rolled out fees since UNIfication to monitor this potential risk.
Based on the data from the last seven months, we saw that the growth of v4 actually came from net new assets, LPs, hooks, and other use cases, not from v3’s blue-chip liquidity:
- Blue-chip v3 liquidity stayed. The 25 largest Uniswap v3 pools on Ethereum at fee activation have held 98.5% of their pre-activation liquidity in token terms today. On Base, the top-25 fee-enabled pools hold 131% in token terms. Over the same windows, these pools’ swap volume fell far less than total DEX volume on Ethereum (down 20% vs. a 62% market decline) and in line with the broader market on Base (down 31% vs. 36%) As we shared in the February expansion post, market-adjusted TVL on mainnet rose after activation.
- Fees have steadily grown. Protocol fees have funded ~7.5M UNI (~$25.6M) of burn since December, with monthly fees growing from ~$3.1M in February to ~$5.1M in June as the rollout expanded across chains, including a record 186,000 UNI burned in a single day last month.
- v4’s growth did not come out of v3. The data analyzing v4’s growth on mainnet and Base shows that it is unrelated to v3’s fee switch. v4’s largest pools are new pairs and new liquidity, some coming from issuers who require battle-tested smart contracts (FIDD from Fidelity; PRIME from Figure (FIGR)) and from deep partnerships (USDS pairs with Spark), not migrated v3 blue-chip positions.
While acknowledging that Uniswap v4 has structural differences to Uniswap v3, our proposed fee configuration is the result of extensive research and modeling.
Just like with v3, if the proposal passes we intend to monitor the impact closely. If the fees on v4 are not well tolerated, additional governance proposals can be submitted to adjust them as needed.
LP performance remains a critical priority, and we are excited to evaluate the protocol fee’s performance over the coming weeks.