Uniswap has officially submitted three governance proposals for protocol fee activation on various chains and different versions of the DEX.
The first fee offer will be for versions 2 (V2) and 3 (V3) on the Robinhood chain. The new Ethereum L2 launched this month and has attracted the attention of many DEXs, including Uniswap. Approximately 10 days after launch, Uniswap’s trading volume exceeded $1 billion, ultimately demonstrating its growing traction.
Similarly, the project aims to enable V4 fees across Ethereum, Base, Arbitrum, Robinhood, BNB Chain, Polygon, and Optimism. Hayden Adams, CEO of Uniswap, added that a third fee offer for the remaining V4 chains will be available soon.
Adams’ statement is as follows:
Both redirect all new protocol fees to the existing UNI write mechanism. Based on current volumes, particularly Robinhood, we expect the impact on the UNI burn to be significant.
Mixed reactions to Uniswap’s fee offer
To clarify, fees are what users pay for each exchange on the DEX, and they mostly go to liquidity providers (LPs). Protocol revenue (partly directed to UNI burn) is a percentage of clearing fees going to the project after a governance vote.
In other words, such proposals would directly reduce the fees collected by LPs. So it was no surprise that some LP providers, such as Gamma Strategies, opposed V4 fee proposals on the grounds that they would impact lifelines.
Still, Gamma Strategies presented a solid argument in favor of its opposition, stating that Uniswap V4 is still not competitive enough and that the fees would cause it to lose out to its competitors.
(V4) still lags behind Uniswap V3 in terms of volume, and there is increasing competition between AMMs, propAMMs, RFQs, and spot limit order book DEXs such as Lighter/Hyperliquid.
However, Uniswap has only enabled fees on a few chains and versions. But most of the fees collected go to LPs.
In fact, LPs have generated a whopping +$5B in cumulative fees since 2018. However, the protocol only generated $25 Million in cumulative revenue.
If the proposal is accepted and balanced by competition, more protocol revenue will translate into greater UNI burn rate, as Adams predicts.
However, the project has now burned a total of 107.49 million UNI tokens. The UNI burn rate increased threefold last week, from $51,000 to over $160,000.
Can UNI extend July rally?
Robinhood’s appeal was this: led from the front by traders aspect Uniswap (UNI) price increased. In July, the price of UNI increased by 41%, from $2.7 to $3.8.
However, the bullish strength diminished as the price remained below the 200-day Moving Average (blue line). Therefore, the price could remain sideways above $3.5 or drop to $3 if Robinhood momentum stabilizes.
But the next rally could be triggered by renewed Robinhood momentum and fee bids leading to more UNI burning.
Final Summary
- Uniswap offers three fee protocol fees to accelerate UNI burning.
- Uniswap LPs currently accumulate over $5 billion, while the protocol generates relatively little revenue
