Uniswap Token Holders Approve Activation of Fee Switch
The Redistribution of Protocol Fees Finally Activated on Uniswap
Uniswap has reached a significant milestone in its history. Token holders overwhelmingly supported a key proposal to activate protocol fees and burn tokens, finally turning UNI into an asset with direct value creation. The vote was conclusive: more than 125 million favorable votes, against only 742 objections. A nearly unanimous consensus, rarely seen on this scale in DeFi.
This decision marks the culmination of the ‘UNIfication’ strategy jointly led by Uniswap Labs and the Uniswap Foundation. Up to now, UNI was primarily a governance token, with no direct economic connection to the platform’s activity. This paradigm is now a thing of the past.
With this proposal, Uniswap finally activates the infamous Fee Switch on its liquidity pools. A portion of the fees generated by trades will no longer be solely returned to liquidity providers, but redirected to an on-chain UNI burn mechanism.
Uniswap processes an average of nearly $2 billion in daily volume and generates around $600 million in annualized fees, according to DeFiLlama data. Until now, this intense activity was not reflected in the token’s value. Now, protocol usage will have a direct impact on UNI’s supply, introducing a deflationary dynamic directly correlated with adoption.
Massive Retroactive Burn From the Treasury
The vote goes beyond the future. UNI holders also approved a massive burn of 100 million tokens taken from the protocol’s treasury, worth nearly $600 million at current prices. This action is explicitly retroactive: it aims to reflect the fees that could have been captured if the mechanism had been active since Uniswap’s launch in 2018.
This is a strategic move, sending a strong signal to the market: governance acknowledges that the value historically generated by the protocol should have benefited, at least in part, token holders. Few DeFi projects have dared such a radical rebalancing.
UNI Joins the Category of ‘Productive’ Tokens
With this decision, UNI changes its status. It moves from the realm of purely political tokens to that of ‘productive assets’, whose value is linked to the economic performance of the protocol. This evolution is often demanded by institutional investors, tired of models where the bulk of the value escapes token holders.
Beyond Uniswap, this vote could set a precedent. It demonstrates that a mature protocol can evolve its economic model without community fractures, provided there is transparent governance and clear alignment of interests.
By directly linking protocol usage to the scarcity of its token, Uniswap redefines what it means to ‘hold’ a stake in DeFi. For UNI, it’s a new era. For the sector, a powerful signal: governance is no longer just a voting right, but a full-fledged economic lever.
