What made you decide to burn the UNI token instead of releasing fees to people who have voted/participants in UNI governance as previously discussed?
Thanks for creating this proposal. Given the importance and irreversibility of this proposal, Franklin DAO would like clarifications on several points.
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With the decrease of LP fees in v2 from LP fees 0.3% to 0.25% and Protocol fee changes, would the estimated returns of the Protocol Fee Discount Auction (PFDA) mechanism be sufficient to offset the difference in LP income and maintain Uniswapâs competitiveness in retaining LPâs?
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Building off the constructive suggestion of @SeedGov, what are the alternatives to the burn mechanism that have been considered, and what are tradeoffs considered?
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How is the size of the growth budget determined, and can the planned allocation of the budget be further elaborated?
We are excited for the development of this overdue transition. Given the importance, we want to ensure the best possible implementation for this new chapter.
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Not necessarily true. If the UNI appreciates that labs entity can get appraisal on that value. The other side is while technically Labs might needs to sell UNI at some point to fund certain operations as long as it sells a smaller percentage of itâs holding than token reduction then itâs stake in the protocol remains the same.
For example, in a given year labs sells 2% of itâs holdings and fees burn 2% of the supply, then itâs percentage stake in the protocol effectively remains the same. This would be creating a synthetic dividend
Thank you to the Uniswap team for empowering the UNI token â this is a major and meaningful change. By aligning the teamâs incentives with the UNI tokenâs value, and continuously iterating on products while capturing more on-chain trading volume, Uniswap is building a strong moat around its ecosystem. Looking forward to the official vote going live!
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I will support this proposal.
Let me first share my personal opinion on fee switches. The ideal solution would be for the protocol to remain a public good, a fee-less DeFi base layer. Iâm finally able to say this clearly, without risking that I appear to be siding with the âbad guysâ and being against any decisions. (Also to be clear, as delegate Iâm representing UNI holder interests, not my personal opinion - at least not just it.) That ideal solution is of course now not possible, due to many reasons. It probably stopped being a good option the moment the UNI token was created.
Having said that, this proposal is great. A couple of highlights:
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A 20M UNI budget for protocol development and growth. This is obviously a significant amount but directly depends on the UNI price, so indirectly on the protocolâs performance. And if we want to spend treasury funds on development and growth at all, Uniswap Labs is by far the most deserving candidate!
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Protocol Fee Discount Auction. Iâve been arguing many times that any fee switch needs to consider LPs and compensate them somehow. This is it. At worst, itâs a nice gesture that should be appreciated. At best, the Labs researchers have found a solution to the LP retention problem. It remains to be seen how efficient this mechanism is, as the theory only shows a ~5% reduction in arbitrage loss. However, if it works sufficiently well, it will be another example in which Uniswap produces a âgood enoughâ solution that actually works within the realistic implementation constraints.
Looking forward to better understanding the upcoming relations between equity and token holders , as well as the role of community hook builders in a world where the Labs drive protocol development & growth.
We appreciate the comprehensive and ambitious vision laid out in this proposal, which seeks to realign Uniswapâs economic model and governance structure for long-term sustainability. We are in support of the proposal and looking forward to the execution of the proposed initiatives in it.
Weâd like to raise a couple of issues to be addressed before its execution:
The proposed reduction of V2 LP fees from 0.3% to 0.25% introduces a real risk of liquidity migration to other DEXs offering more attractive terms. As @SEEDGov points out, lower liquidity could lead to higher impermanent loss and reduced trading activity, which would directly impact protocol revenue and the effectiveness of the UNI burn mechanism. While we acknowledge the development of the Protocol Fee Discount Auction system and its potential but its work is still in progress and only a promising theory as of now, shouldnât we consider temporary incentives for the LPs to stick to utilizing their assets into the Uniswap pools?
Another area that deserves discussions is the decision to allocate the entirety of protocol fees to token burns. While this creates a strong deflationary narrative, it may limit the DAOâs ability to fund future development, grants, or DAO operations. As a DAO, potentially in the near future, we should implement another Releaser in addition to Firepit to allocate a potion of the fee that accumulates in TokenJar to the DAO treasury for the DAO operations and other initiatives.
The last one is more of a question; we welcome the change where most of the members in the Foundation move to Labs and eventually will be dissolved because it simplifies the structure, and clarifies where the responsibilities and capacities exist. Is this decision made because the DAO finally adopts DUNI, and/or other regulation landscape has changed?
Your proposal is sound except that it reduces incentive, increases risk for LPs. LP fees are already too low.
Studies show half of LPs lose moneyâŚ.heavily leaning towards retail investors. v4 is nice but makes things more complex for retail investors. Is this how itâs going to stay? Pros make money and other LPs support the ecosystem by taking losses?
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I support the proposal but share the same concerns as others regarding the v2 LP fee cut to 0.25% and directing 100% of fees to burns, while creating a strong deflationary narrative, could starve the DAO of a sustainable, non-inflationary budget for its own operations and grants.
Great to see that Uniswap Foundation and Labs are merging to fully focus on UNI and the protocols adoption. Defi is becoming more competitive and it is way too early to focus on monetization over winning market share and distribution.
We at Arrakis support this proposal and think rolling it out to Uni v2 and v3 first is a good move. Migration to Uni v4 has been too slow, even though that we have worked hard on making it seamless and 1-click for our users managing their Uniswap liquidity on Arrakis Pro.
As someone representing Liquidity Providers using Uniswap, it would be great to have more discussions around finding a sweet spot of protocol fees vs LP fees in the future, since this will be an important topic to be figured out, especially in a world of a more competitive DEX landscape.
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Thank you for all the feedback/questions! Responding to the main themes Iâve seen so far:
Why burn instead of staking?
Burning is the most straightforward way to handle fees without introducing staking mechanics or other structures that add tax complexity. This doesnât close the door on governance choosing a different model later if the community wants to explore one.
Why burn instead of growth?
The treasury holds ~370 million UNI â the DAO is not short on resources. If that ever changes, governance has options to address that issue, including updates to the burn mechanism. But weâre a long way from needing that.
How will you use the growth budget?
The largest portion of this budget goes toward protocol development and product engineering, along with significant investments in builder support, partnerships, growth, and incentives. A smaller portion covers operations, policy, legal, and taxes. The proposal also includes a roadmap with some of what we aim to build, with a lot more to come. Weâll also provide regular updates on budget utilization, including impact reports.
What about the Foundation budget?
The Foundation will continue deploying existing funds for grants and ecosystem programs. Once those are fully deployed, the Foundation will close operations and ongoing ecosystem work will move to Labs, funded out of the growth budget.
Why denominate in UNI vs USD?
Denominating in UNI improves alignment, aligning upside and increase in resources to protocol growth. If the number is not right long term, this can be adjusted in future governance proposals.
What about decentralization?
Governance has control over protocol fees and the treasury regardless of whether this proposal passes or not. The protocol will always be decentralized and permissionless, enforced by immutable smart contracts.
Finally, if this passes Labs will shift its focus from its products, to protocol growth and development â which means empowering all the other teams building on the protocol. The result of this will be a further decentralization of the ecosystem around Uniswap.
What does this mean for LPs?
LPs are a critical priority. This includes shipping Protocol Fee Discount Auctions, which are designed to improve LP outcomes by internalizing MEV that currently goes to searchers. It also means Labs will invest heavily in LP tooling, such as hook integrations, hook development, CCA, frontend upgrades, and more.
As far as fee levels and impact on LPs, v2 fees are hardcoded and can only be enabled or disabled across all pools at once. On v3, we proposed a list of pools (available here), and fee levels, that we believe is the right place to start.
Weâll assist the community in monitoring the impact on LP performance and targeted incentives can be deployed as needed to help provide a smooth transition ahead of PFDA being implemented, along with future proposals to adjust fees if needed.
Will the contracts be audited?
A final round of audits is in progress, and the remaining contract changes are mostly minor. No onchain proposal will be submitted before this is done. All components will be added to the bug bounty program.
I really appreciate the thoughtful engagement so far! The response has been overwhelmingly positive and we plan to post the Snapshot soon.
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Iâve taken time to go through this proposal, and I appreciate how it tries to pull the whole ecosystem into one clear direction. Turning on protocol fees has been a long conversation in this community, and seeing a concrete path that ties those fees directly to UNI burn makes the model easier to understand. It gives people a simple link between protocol usage and token value, which is something many of us have been asking for over the years.
What stands out to me is the gradual rollout. Iâve watched fee discussions split the community before, so starting with the pools that carry most of the volume feels like a calm way to introduce the change without putting LPs under sudden pressure. I like that Labs plans to monitor the impact and suggest adjustments. Iâve seen proposals pass in other DAOs where parameters were set once and then ignored, and it always creates problems later. Having active oversight here matters.
The PFDA idea caught my attention because MEV has always felt like this invisible leak in the system. If thereâs a way to bring part of that value back to LPs and still support the burn, then itâs worth testing. Iâd like to see real data once this goes live because MEV mechanics often behave differently in practice, but Iâm open to the experiment.
I also think sending Unichain sequencer fees to the burn aligns the chainâs growth with UNI in a way that hasnât existed before. Since Unichain is still young, setting this direction early helps avoid the usual confusion that comes when a new chain grows without a clear economic link to its parent ecosystem.
The part about moving Foundation teams to Labs is a big shift. I understand the logic behind having one unified direction, though I hope the transition doesnât weaken the neutral governance support the Foundation has been offering. If this passes, Iâd like to see regular updates on how responsibilities are being handled so the community doesnât feel left in the dark.
Finally, the retroactive burn is a strong symbolic gesture. People have argued for years that UNI missed out on early fee capture, and while we canât rewrite history, this at least acknowledges that conversation.
Overall, this is a major step, and Iâm leaning positive. The proposal ties protocol growth, token value, and ecosystem incentives together in a way that feels more coherent than what weâve had. Iâd still like to see clarity on how Labs plans to communicate changes over time because coordination will matter more than ever once everything is under one roof. But directionally, this feels like the kind of push the protocol needs at this stage.
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Isnât the UNI converted to USD to fund operations and initiatives? Given this is price dependent what happens to excess UNI once the budget is met?
Wouldnât a more aligned incentive system be funding the budget dollar for dollar, maybe add in a x% buffer and then have a retroactive reward system based off value added from projects?
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We fully support this proposal and have voted in favor of it. We would like to express our special thanks to Hayden Adams for the clarifications provided in this thread and for the excellent, extensive discussion and Q&A session held among Govswap attendees at Devconnect in Buenos Aires.
This is our rationale as published on our Delegation Platform:
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I am voting FOR UNIfication. It is finally time to flip the fee switch and make UNI value-accruing.
This proposal goes beyond just protocol fees; routing Unichain sequencer revenue and MEV capture (via PFDA) into the burn mechanism creates a powerful engine for scarcity. Iâm also strongly in favor of the 100M UNI retroactive burn and Labsâ decision to drop interface fees to zero, this ensures total alignment where Labs only wins when the Protocol wins.
Big thanks to @haydenadams and the Foundation for the GovSwap meetups. Being able to ask questions directly really helped provide clarity on the details and gave the delegates the confidence to support this proposal.
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We are voting FOR this proposal.
The rationale for supporting the proposalâs implementation is that it represents a long-awaited step by the DAO/community to enable $UNI to capture value from the protocol developed by Uniswap.
However, historically, buyback programs do not always generate value for a token. There are recent successful cases in the industry, such as $PUMP and $HYPE, but there are also protocols that have allocated millions to buybacks and still failed to achieve meaningful token performance.
We recommend that this buyback program be accompanied by recurring reports from Uniswap Labs or the DAO itself, so that we can measure the impact relative to the fees allocated to this initiative.
Another point that requires attention - already raised by SeedGov and Tane - is the possibility of liquidity providers migrating to other DEXs. Since the fee percentage will be reduced from 0.30% to 0.25%, it is important to track capital movement after the fee switch, if enacted. If the fee switch reduces Uniswapâs competitiveness in the DEX market, it should be reconsidered. We are counting on the success of PFDA (Protocol Fee Discount Auctions) to keep Uniswapâs liquidity provisioning competitive.
Lastly, the 20M $UNI budget requested for Growth could be postponed to a separate request/proposal. Since the Foundation will be wound down and everything will become centralized under Labsâand given that the Foundation had already approved a budget covering growth and developmentâits remaining resources could be transferred to Labs to fund this objective.
More takes here.
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Abstain
As a Uniswap delegate, my responsibility is to vote in the long-term interest of the protocol and, as stated in my delegate statement, my position has been LP-first from the beginning.
Today, Uniswapâs moat is built entirely on LP economics and LP loyalty. While the pervasive narrative is that LPs are systematically losing money (LPing is tough, I know!), there are plenty of LPs still out there that have figured out how to remain profitable. I spoke with many of them over the past week, and those LPs will be quite sensitive to revenue dilution. Their hurdle is already tight, and any fee that reduces LP earnings by 25 percent will result in economically-driven migration to other platforms. Or maybe the goal is to force them to move to v4, but the fee switch could (will?) be turned on v4 pools too.
I also have a material conflict for this vote: my own protocol would benefit economically if Uniswap adopts this fee switch, since reduced LP revenue makes Panoptic more comparatively attractive and able to capitalize on that LP dissatisfaction.
Because of that conflict, I do not believe I should cast a vote on this proposal, as my vote could be interpreted as self-interested. I am therefore abstaining from voting on this issue to maintain neutrality and governance integrity.
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This question probably boils down to whether the protocol belongs to the UNI holders or the LPs, basically an analogy to whether a company belongs to its equity holders or its customers, which I believe the answer is clear.
LPs will always try to maximize their profit, but without token and revenue alignment, UNI basically moves toward 0, which result in 0 funding for future development.
There already are such cases for other protocols that delays alignment and eventually get surpassed by other protocols, which does not seem positive for long-term interest of the protocol.
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We have voted yes for now as the proposal has several of new alignment between Uniswap DAO and Uniswap Foundation and Labs. However, we will assess and vote each proposal independently, especially any proposals with specific budgets attached from the treasury.
I believe this initiative is especially important for our sector because it represents the core values that DeFi was built on. Choosing this path sends a powerful message: there is another way to create value for societyâone rooted in a shared objective and in genuine collaboration around a token. It confirms that value creation doesnât have to be extracted by a few, but can be distributed across the entire Uniswap ecosystem: LPs, builders, users, and token holders.
To me, thatâs the real promise here. Not just better incentives or better mechanics, but a proof point that coordination at scale is possible, and that we can align for the long term while sharing the upside fairly. Steps like these help build a more just systemâone that is stronger precisely because it is shaped by the sum of all of us.
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Hello, I think a uni trading reward pool should also be added. New pools can be created through LPS, and uni can be rewarded based on the trading volume reached by the pool. Users who participate in trading can also receive additional dividends. This pool will be dug up over a period of 5 to 10 years (with a halving cycle set). The specific and reasonable rewards are determined by economistsâ prediction of the annual trading volume growth rate of uni and a combined analysis of the uni token price