Uniswap Proposal Key Points: Activate Protocol Fee Switch and Introduce UNI Burn Mechanism, Burning 1 Billion UNI from the Treasury

BlockBeats News, November 11, Devin Walsh, Executive Director and Co-Founder of the Uniswap Foundation, along with Uniswap founder Hayden Adams, formally proposed a joint governance proposal aimed at establishing a long-term operating model for the Uniswap ecosystem, enabling protocol usage to drive UNI burning, and allowing Uniswap Labs to focus on protocol development and growth. The proposal mainly includes the following:

· Activate the Uniswap protocol fee switch and use these fees for UNI burning;

· Incorporate Unichain's sorter fee into the same UNI burning mechanism;

· Establish a protocol fee discount auction to increase Liquidity Providers' (LP) earnings while internalizing the value that originally belonged to MEV searchers;

· Introduce Aggregator Hooks to make Uniswap v4 an on-chain aggregator, collecting fees from external liquidity;

· Burn 1 billion UNI from the treasury, representing the approximate amount that should have been burned if the fee switch had been enabled since the protocol's inception;

· Allow Labs to focus on protocol development and growth, including fee revenue from interfaces, wallets, and APIs, and contractually commit to engaging only in projects that align with DUNI interests;

· Migrate the ecosystem team from the foundation to Labs, jointly aiming for protocol success, with growth and development funds provided by the treasury;

· Migrate governance-held Unisocks liquidity from the mainnet's Uniswap v1 to v4 on Unichain and burn the LP position, thereby permanently locking the supply curve.

Protocol Fees: The Uniswap protocol features a "fee switch" that can only be activated through UNI governance voting. This proposal suggests governance enable this fee switch and introduce an automated UNI burning mechanism.

Fee Activation Plan: To mitigate impact, the proposal recommends a phased approach to activate protocol fees, starting initially with v2 pools on the Ethereum mainnet and a portion of v3 pools representing 80%–95% of LP fees, expanding later to L2, other L1s, v4, UniswapX, PFDA, and aggregator hooks.

In Uniswap v2, fee levels are hardcoded, requiring governance to uniformly enable or disable fees for all v2 pools at once. When fees are disabled: LP fee is 0.3%; after enabling fees: LP fee is 0.25%, and protocol fee is 0.05%.

In Uniswap v3, the mainnet features multiple fee tiers, with the protocol fee adjustable per pool by governance. For the 0.01% and 0.05% fee pools, the protocol fee is initially set at 1/4 of the LP fee; for the 0.30% and 1% fee pools, the protocol fee is initially set at 1/6 of the LP fee.

Unichain Sorter Fees: Unichain, launched just 9 months ago, has seen an annualized DEX trading volume of approximately $100 billion, with annualized sorter fees of around $7.5 million. This proposal suggests that all Unichain sorter fees (net of L1 data costs and 15% going to Optimism) be entirely included in the UNI burning mechanism.

MEV Internalization Fee Mechanism: The Protocol Fee Discount Auction (PFDA) is designed to boost LP returns and create a new fee source for the protocol by internalizing MEV (Miner Extractable Value).