Uniswap Labs And Foundation Propose Activating Fee Switch And UNI Burn Mechanism
In Brief
Uniswap Labs and the Uniswap Foundation have introduced proposal to activate protocol fees, implement a UNI burn mechanism, and unify their operations under a single framework.
Decentralized exchange (DEX) developer Uniswap Labs, in collaboration with the Uniswap Foundation, has introduced a joint governance proposal aimed at activating protocol fees and aligning economic incentives across the Uniswap ecosystem. The initiative seeks to position Uniswap as the default DEX for tokenized assets by establishing a long-term, self-sustaining model for network growth and governance.
The proposal follows a period of both expansion and regulatory challenges, during which the Uniswap protocol processed approximately $4 trillion in total trading volume, supported by thousands of developers, millions of liquidity providers, and hundreds of millions of active wallets. The new governance framework coincides with a broader turning point for decentralized finance (DeFi), as decentralized platforms increasingly match centralized exchanges in performance, liquidity, and institutional adoption.
Under the proposed structure, protocol fees would be activated and directed toward burning UNI tokens, creating a deflationary mechanism that links protocol usage to token value. Additional sources, including Unichain sequencer fees, would feed into the same burn mechanism. The plan also introduces Protocol Fee Discount Auctions (PFDA) to internalize miner extractable value (MEV), improve returns for liquidity providers, and enhance fee efficiency. Furthermore, aggregator hooks in Uniswap v4 would enable the protocol to collect fees from external liquidity sources, effectively transforming it into an on-chain liquidity aggregator.
The document also includes a retroactive burn of 100 million UNI tokens from the treasury — a symbolic move representing the amount that could have been removed from circulation if protocol fees had been active since launch. Uniswap Labs has committed to focusing its resources on protocol growth and development, discontinuing interface and wallet fees while aligning future operations with community governance through the DUNI framework.
From a technical perspective, all protocol fees would be funneled into an immutable on-chain contract called TokenJar, with withdrawals only permitted when an equivalent amount of UNI is destroyed in a corresponding contract known as Firepit. Initial adapters for Uniswap v2, v3, and Unichain are already deployed, while mechanisms for PFDA, v4, aggregator hooks, and cross-chain bridges are planned for future governance proposals.
This governance initiative marks a milestone in the evolution of Uniswap’s protocol economics, emphasizing transparent fee distribution, deflationary tokenomics, and a unified governance model that integrates innovation with sustainable ecosystem growth.
Uniswap Moves Toward Unified Structure And 20M UNI Annual Growth Budget To Drive Protocol Development
The governance proposal outlines a plan to consolidate the activities of Uniswap Labs and the Uniswap Foundation, creating a unified structure to support protocol development and ecosystem expansion. Under the proposal, Foundation teams and responsibilities—including governance coordination, developer relations, and community funding—would transition to Labs, which would assume a broader mandate focused on protocol growth and adoption, supported by a dedicated growth budget sourced from the Uniswap treasury.
If approved, most Foundation staff would join Labs, while a small group would continue managing existing grant commitments before transferring future funding responsibilities to the Labs-managed growth budget. The Foundation’s board would expand to include Hayden Adams and Callil Capuozzo alongside current members Devin Walsh, Hart Lambur, and Ken Ng. Labs would discontinue monetization of its interface, wallet, and API, setting associated fees to zero, with an emphasis on using these products to strengthen liquidity, integrations, and trading volume across the Uniswap protocol.
The document highlights several development priorities, including improvements to liquidity provider performance through PFDA and the deployment of new hooks to enhance automated market maker (AMM) efficiency. Additional initiatives include expanding on-chain integrations, scaling Uniswap’s developer ecosystem, and increasing accessibility through a revamped API and open-source SDKs. Uniswap Labs also aims to optimize Unichain as a high-performance liquidity hub and broaden Uniswap’s reach to new blockchain ecosystems and tokenized asset classes.
In order to fund these initiatives, governance would establish an annual growth budget of 20 million UNI, distributed quarterly through a vesting contract beginning January 2026. This budget would be governed under a formal service provider agreement between Labs and DUNI, ensuring operational alignment with tokenholder interests. The Uniswap Foundation, acting as Ministerial Agent, would oversee the negotiation process, with an independent committee managing final approval and execution upon community vote.
It also addresses the legacy Unisocks token. Governance would migrate the original SOCKS/ETH liquidity position from Uniswap v1 on Ethereum to Uniswap v4 on Unichain and permanently lock it by sending the liquidity tokens to a burn address. This step would preserve the original price curve and symbolically align the historic collectible with Uniswap’s evolving multichain framework.
Overall, the initiative seeks to streamline Uniswap’s organizational structure, strengthen coordination between development and governance, and ensure sustainable, transparent funding for the next phase of protocol and ecosystem growth.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
