Uniswap has released a groundbreaking proposal: enabling a fee on/off switch and burn mechanism, but competitors call it a "strategic mistake."
Author: Nancy, PANews After several disappointing market expectations, Uniswap has finally seen significant positive developments with the introduction of a fee switch. On November 11th, Uniswap Labs and the Uniswap Foundation jointly announced a governance proposal called the "UNInitiation Proposal," which plans to officially enable the protocol fee switch and initiate a UNI burning mechanism. The announcement was met with enthusiastic response from the community, and the price of UNI immediately rose. The proposal includes a fee switch and a token burning mechanism; it may take 22 days to pass. Uniswap's ability to capture token value has long been criticized by the community. Although Uniswap has processed approximately $4 trillion in transactions to date, compared to protocols like Aave, Hyperliquid, Jupiter, Curve, and Raydium, which have already implemented fee collection, Uniswap's related proposals, despite being submitted multiple times over the past few years, have been delayed due to regulatory risks, opposition from the whale a16z, and failed votes. This has resulted in limited means of value appreciation for UNI, relying primarily on governance decisions, and its price performance has been relatively lackluster. As the US regulatory environment becomes clearer, the DeFi industry is reaching a compliance inflection point. In August, the Uniswap Foundation proposed adopting the DUNA DAO framework, which was interpreted as paving the way for enabling protocol fees. Sure enough, on November 11th, the UNIFication governance proposal was formally put forward, aiming to enable protocol fees and unify the incentive mechanism across the entire Uniswap ecosystem, thereby making the Uniswap protocol the default DEX for tokenized value. Unlike previous proposals, this one was initiated directly by the Uniswap team. The proposal aims to enhance UNI's value capture capabilities through a multi-pronged approach. According to the plan, UNI governance will vote to enable a fee switch, with a portion of transaction fees going into an automated UNI burning mechanism. The fee activation will be phased in, starting with v2 and v3 pools, followed by L2, other L1 pools, v4, and UniswapX. Simultaneously, Uniswap will integrate Unichain's ordering fees; this chain has generated approximately $7.5 million in annualized fees since its launch nine months ago, and the proposal plans to inject all of these fees into the UNI burning mechanism. Furthermore, 100 million UNI tokens in the foundation's treasury will also be directly burned to further enhance the token's value. To expand revenue streams, the proposal introduces an innovative auction mechanism called PFDA. This mechanism auctions off the right to waive protocol fees, converting MEV revenue and protocol fees into UNI burns and additional LP rewards, thereby optimizing returns for liquidity providers and enhancing the long-term value of the protocol. Uniswap v4 will be upgraded to an on-chain aggregator through Aggregator Hooks, integrating liquidity from other protocols and executing token burn logic, further expanding the protocol's revenue scope. Simultaneously, the proposal explicitly prohibits Uniswap Labs from earning fees through its front-end interface, wallet, and API; its Ethereum front-end has accumulated over $179 million in revenue. Regarding organizational structure and budget allocation, following the approval of the UNInformation proposal, Uniswap Labs will focus on protocol development and growth, while the foundation team will transfer to the Labs to assume responsibilities such as ecosystem support, governance, and developer relations. The foundation's board of directors will increase to five members, including Hayden Adams, Callil Capuozzo, Devin Walsh, Hart Lambur, and Ken Ng. The proposal also recommends establishing an annual growth budget of 20 million UNI, to be released quarterly starting January 1, 2026, for protocol development and ecosystem building. According to Uiswap founder Hayden Adams, the governance process is expected to take about 22 days, including a 7-day consultation period, a 5-day snapshot voting period, and a 10-day on-chain voting and execution phase. The actual effective date may be slightly delayed depending on the actual arrangements. Reduced LP returns could trigger liquidity outflows, with competitors calling it a "strategic miscalculation." The UNInitiation proposal marks a fundamental shift for UNI from a pure governance token to a yield-generating infrastructure. According to an analysis by MegaETH Labs member BREAD, the proposal changes the Uniswap fee mechanism from 0.3% paid to LPs to 0.25% paid to LPs and 0.05% used for UNI buybacks. Based on Uniswap's annualized fee of approximately $2.8 billion, this could generate about $38 million in UNI buybacks over 30 days. This amount exceeds PUMP's $35 million but is lower than HYPE's $95 million. CryptoQuant CEO Ki Young Ju points out that if the proposal takes effect, the price of UNI could experience a parabolic increase. Based on the $1 trillion in Uniswap v2 and v3 trading volume since the beginning of the year, the annual burn value is estimated at approximately $500 million. As market expectations for UNI's value growth strengthen, CoinGecko data shows that UNI has risen 38.9% in the past 24 hours, reaching as high as $9.9. However, the new proposal is also seen as potentially reducing liquidity providers' (LPs) returns in the short term, leading to liquidity outflows. Despite the proposal's introduction of multiple compensation mechanisms and long-term optimization strategies to improve overall LP returns, competitive pressure remains significant. Arca analyst Topher points out, "What people aren't seeing is that this is good news for Aerodrome, but bad news for Uniswap... Some predict that Aero's announcement on Wednesday will extend to the entire EVM ecosystem. If this is true, then Uniswap may have been disrupted, trying to steal the spotlight with this news (which backfired). Aero leads Uniswap on the Basechain (approximately 2:1 in trading volume) because LPs only care about how much return they get for every dollar of liquidity they invest. Aero does this better. If Uniswap turns on its protocol fees, it means that LPs' actual returns may be lower, or transaction fees on Uniswap may increase, which will be a dilemma." Alexander, co-founder of Aerodrome, the largest DEX on Berachain, publicly stated that Uniswap made a huge mistake by enabling fee switching. "I never expected that our biggest competitor would deliver such a major blunder the day before Dromos Labs' most important day… This is a huge strategic error at the worst possible time." Cap'n Jack Bearow, head of DeFi at Berachain, commented that Aerodrome may announce cross-chain expansion on Wednesday, and Uniswap's ability to reduce LP profitability by enabling fee switching will benefit Aerodrome's competitiveness. The proposal was said to have exceeded expectations, setting a precedent for DeFi value capture. However, after the UNIFICation proposal was released, the market generally believed that it exceeded expectations and significantly boosted market confidence and expectations for Uniswap and the entire DeFi sector. DeFi researcher CM pointed out that the UNIFication proposal far exceeded market expectations, demonstrating a strong commitment to supporting UNI's empowerment through multiple measures to enhance token value capture. CM believes that the proposal is more likely to be implemented through a buyback and burn mechanism rather than a dividend distribution model. Currently, compliance obstacles have been cleared, and the proposal has a high probability of passing. However, he also cautioned that Uniswap's ecosystem budget is relatively high. On the other hand, the market also believes that this proposal has exemplary significance for value capture in the entire DeFi ecosystem. According to crypto KOL @Michael_Liu93, the proposal not only retroactively burned 100 million UNI tokens, accounting for about 10% of the total supply, making up for the previously unburned portion, but also allocated 1/6 of each transaction fee to buybacks and burns. Transaction fee revenue over the past 30 days was approximately $230 million, or about $2.76 billion annualized, corresponding to a buyback and burn scale of about $460 million per year, with an annual deflation rate of less than 5% of the total token supply. Based on this estimate, UNI's current market capitalization is about $9.5 billion, corresponding to a P/E ratio of 21 and a P/S ratio of 3.5, which is relatively undervalued among crypto assets. In comparison, Hyperliquid FDV is $42.1 billion, with annual revenue of $1.29 billion, annual buybacks of $1.15 billion, a P/E ratio of 37, and a P/S ratio of 33; Pump FDV has annualized revenue of about $550 million to $730 million (100% buyback), with a P/E ratio of 6-8. These businesses might be valued at a 3-5 times premium in the US stock market, but in the crypto market they have become undervalued assets. According to crypto analyst Haotian, the long-awaited UNIfinity community proposal has finally changed its protagonists. This time, jointly initiated by Uniswap Labs and the Uniswap Foundation, it's no longer a vague "boy who cried wolf" game, effectively acknowledging UNI's goal of capturing value. Based on the current proposal, conservative estimates suggest hundreds of millions of dollars in continuous buybacks annually, providing ample room for future sustainable growth. Currently, blue-chip DeFi projects are using real revenue to drive token buybacks to prove they're not just empty promises. Uniswap, as a leading DEX, has held back its official announcement until now, which is intriguing. It may have set a benchmark for the entire on-chain protocol: "protocol revenue must support tokens." This also forces projects that are still relying on so-called governance rights and community faith to step up and prove themselves. Altcoins have finally embarked on the path of "self-proofing," "self-manufacturing," and "self-expanding" value. Furthermore, the UNIFICation proposal is also considered to play a role in security and ecosystem health. According to data analyst jpn memelord, a major benefit of Uniswap enabling fee switches is that it can eliminate fraudulent liquidity pools (such as honeypots and automated rugs) overnight, as these pools rely on protocols with zero fee rates. Rough estimates suggest that about half of Uniswap's trading volume on Base falls into this category. Official, unfiltered data shows that Uniswap's trading volume on Base in 2025 was $208.07 billion, but after adding some filters, the non-fraudulent trading volume is only $77.38 billion.
