Uniswap Passes Governance Proposals, Activates Fee Switch for UNI Holders

Uniswap, a prominent decentralized exchange, has successfully passed two significant governance proposals aimed at accelerating the growth of its Unichain network and the Uniswap V4 protocol. These initiatives, collectively known as "Uniswap Unleashed," introduce a new grants program and liquidity incentives, while also laying the groundwork for a "fee switch." This switch, a contentious issue within the community, would allocate a portion of trading fees to holders of Uniswap’s native token, UNI.

The proposals, which were put to a vote by the Uniswap community, include a grants budget of $95.4 million and an operational budget of $25.1 million over two years. Additionally, $45 million has been allocated for liquidity incentives to attract users and stimulate ecosystem growth through developer campaigns. Both proposals garnered over 80% support from UNI token holders, indicating strong community backing.

The passage of these proposals could potentially activate the fee switch, a long-standing community goal. This switch would redirect a portion of the protocol's revenue, currently estimated to be over $1 billion annually, from liquidity providers to UNI holders. The activation of the fee switch has been delayed by past failed votes and hinges on legal preparations by the Uniswap Foundation.

The fee switch, initially proposed in July 2021, aims to pilot the switch for a small set of Uniswap protocol pools. It is important to note that the switch will not increase fees for users but will retain a small portion of what is currently paid out to liquidity providers. This could result in lesser fee earnings for Uniswap’s liquidity providers and more rewards for UNI holders, potentially increasing the value of the UNI token.

One of the key steps toward sharing revenue is the establishment of the Uniswap Foundation as a legal entity. This would provide clarity on the foundation's legal status and enable it to contract with other protocols. The proposal states that if the vetting process is successful and the creation of a legal entity is deemed beneficial, a governance proposal will be introduced to allow delegators to earn protocol revenue.

This development marks a significant milestone for Uniswap, as it paves the way for potential revenue sharing and further growth of the Unichain network and Uniswap V4 protocol. The community's strong support for these proposals indicates a shared vision for the future of the decentralized exchange and its ecosystem.