Uniswap Proposal: An Alternative Use-Case for the Fee Switch

Interesting approach to a potential protocol fee switch @guil-lambert !

First, let me say that I don’t think legal concerns should be the reason preventing UNI token holders to collect the fee switch themselves. Almost no countries has suited tax systems for DAOs and protocols revenue, and that shouldn’t be a reason not to innovate or move forward.

Now, using the fees collected to shape liquidity in specific ways is a very interesting idea. I don’t think giving it out to protocols to redistribute themselves is the best option either.

Uniswap DAO redistributing the collected fees itself to shape liquidity

The Uniswap DAO could use Merkl itself to shape V3 liquidity as it feels is best depending on the pool and the tokens. As @cryptoyeye said, it would directly impact positively Uniswap the Protocol by incentivizing more beneficial liquidity provisioning.

Practically speaking, requiring a vote from Uniswap’s DAO each time would be a hassle. The DAO could choose to give this task to a team of delegates, similar to the Uniswap Grants initiative. Other protocols or DAOs could also very well propose specific distributions of the collected fees and decide that together with the Uniswap delegates to benefit both protocols.

In any case, one feature of Merkl is that it allows multiple incentive distribution on the same pool, without requiring tokens to be staked. Thanks to this, there could very well be one incentive program from a protocol’s team, and another from Uniswap using from the fees collected.

You can read more about Merkl in Angle’s blog at angle.money/#/blog

Disclaimer: I am a contributor at Angle Labs, and have looked into the different ways of incentivizing liquidity on Uniswap V3. I don’t feel there is an optimal solution yet. Though Merkl is not perfect, it offers a lot of flexibility and possibilities to innovate on that front.


Kydo from Stanford Blockchain here.

I think this design is thought-provoking and challenges the status quo of the fee switch discussion. I believe we need more but not less of ideas like this!

However, I would highlight the immense operational pressure this would put on the DAO itself. Expecting the DAO to submit hundreds of onchain vote to send fee tokens to different DAOs are impossible in the current governance format. Therefore, I would believe this solution, in its current form, is not possible.