Uniswap Weighs Proposal to Enrich Token Holders, Switch on Liquidity Pool Fees

Community members of decentralized exchange (DEX) Uniswap are considering a proposal to switch on fees for many of its liquidity pools. It’s the latest development in a long-standing debate on Uniswap’s protocol fees and broader finances.

Implementing fees on the pools would allow the Uniswap protocol to top up its treasury’s coffers and provide rewards to holders of the protocol’s native token Uniswap (UNI). Uniswap’s decision to further monetize its platform by switching on fees for a large swath of its version-three (v3) liquidity pools and all of its version-two (v2) pools could also set a precedent for the large DeFi ecosystem, of which Uniswap has captured roughly 70% market share.

“If Uniswap can monetize and bring in all these dollars by building a really great open-source protocol that gets usage then that will incentivize other folks to do this too,” Getty Hill, the proposal’s author, told CoinDesk. “I’m hopeful that this kind of changes some of those industry norms.”

Uniswap v2 has nearly $1.2 billion total value locked and has averaged roughly $367 million in daily volume on Ethereum during the past week, DefiLlama veri shows. Meanwhile, Uniswap v3, which is deployed on SushiSwap, Curve, Balance and PancakeSwap, among other networks, has roughly $2.9 billion total value locked.

The mechanism by which the protocol would collect those fees, where those fees would go and what type of initiatives the tokens would fund is up for debate, Hill said. Users will iron out those details in community-based discussions before the proposal goes to a formal vote.

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This isn’t the first time community members have called to activate fee switches on Uniswap liquidity pools. Last summer, a proposal to switch on fees became a point of contention within the uniswap community. The proposal ultimately failed to get enough traction, with opponents voicing fears the move could have broader tax implications for the protocol and its users.

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Edited by Stephen Alpher.

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