Uniswap UNI token soars 50% amid DAO proposal to flip on $3.3bn ‘fee switch’

Uniswap’s native token surged to its highest price in almost two years.
The surge is likely due to a new fee switch proposal.
If flipped, the switch would start rewarding UNI holders who stake and delegate their tokens with fee rewards.

Uniswap’s UNI native token soared 65% on Friday to cross $12 for the first time in two years.

Today’s price increase coincided with a new fee switch governance proposal for Uniswap’s decentralised exchange.

It must still pass a preliminary vote and a final onchain vote, according to the project’s governance rules.

The proposal, authored by Uniswap Foundation lead Erin Koen, recommended an upgrade that would reward UNI token holders who stake and delegate their staked tokens with a portion of the protocol’s fee earnings. Since its inception, the protocol has raked in $3.3 billion in fees, per DeFiLlama.

Delegation is when users pass on the voting rights attached to their governance tokens to recognised DAO actors known as delegates. Token holders can also delegate to themselves.

Uniswap's UNI token surges suddenly on fee switch proposal

As Uniswap’s native token, UNI also confers governance power to its holders to participate in decision-making within the Uniswap DAO — the decentralised community that oversees the protocol.

Uniswap is the largest decentralised exchange in crypto, with a market size of $4.9 billion, according to DefiLlama. The protocol has processed almost $1.8 trillion in lifetime cumulative volume since it was launched on the Ethereum blockchain four years ago.

Since then, Uniswap has earned billions in revenue from fees levied on token swaps. This fee is given to liquidity providers — users who supply liquidity in the form of cryptocurrencies that enable token swaps on the protocol.

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If the new proposal is adopted, UNI token holders will earn a portion of that revenue.

Uniswap fee switch lore

Previous proposals to turn on Uniswap’s fee switch have divided the community. Critics of the plan say it may bring unwanted regulatory attention to the project and its UNI tokens.

As such, the most recent attempt to turn on the fee switch did not pass the temperature check stage. Temperature checks are initial governance polls to gauge sentiment within a crypto project community about a proposal.

For Koen, the new plan is all about invigorating governance participation within the DAO.

The proposal noted that less than 10% of UNI’s circulating supply routinely participates in governance votes.

It also said that almost half of the top 30 delegates by voting power had not voted on the last 10 proposals, and only a few of them had ever created proposals.

By turning on the fee switch and directing the reward flow to holders of staked UNI, Koen said delegate apathy will become a thing of the past, and more delegates will be incentivised to join the DAO.

This latest fee switch recommendation is still in the proposal stage. DAO participants will discuss it within days.

If the discussions prove fruitful, the matter will be put to a series of votes before being executed on the protocol level.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.