Key Proposal Details
Uniswap has introduced a significant proposal aimed at enhancing the protocol's value accrual and governance structure. The initiative, internally referred to as “UNIfication,” includes activating protocol fees, implementing a perpetual UNI burn mechanism tied to trading activity, and consolidating the Uniswap Foundation and Uniswap Labs into a single entity.
The proposal outlines a multi-faceted approach to reduce UNI's circulating supply and strengthen the connection between the token's value and the protocol's usage. This strategic shift seeks to align incentives across the Uniswap ecosystem and position the protocol for sustained growth as a leading decentralized exchange.
Supply Reduction and Fee Capture Mechanisms
A central tenet of the UNIfication proposal is the activation of protocol fees, a feature that has not been previously implemented. A portion of these fees will be directed towards a continuous burn of Uniswap (UNI) tokens, directly linking the token's value to the exchange's trading volume. This mechanism will also encompass revenue generated from Unichain, Uniswap's layer-2 network, where sequencer fees will contribute to the burn.
Furthermore, the proposal includes a one-time burn of 100 million UNI tokens from the treasury. This amount is calculated based on the fees that would have been burned had the fee mechanism been active since UNI's launch in 2020. This immediate burn is expected to reduce the circulating supply from approximately 625 million to around 525 million tokens, representing a 16% decrease.
An additional mechanism involves a system where traders can bid UNI to secure discounted trading fees. The UNI tokens used in these auctions will subsequently be burned, facilitating a gradual reduction in supply while reinforcing the connection between trading incentives, liquidity provision, and value accrual within the Uniswap ecosystem.
Governance Restructuring and Operational Alignment
The UNIfication proposal also addresses the organizational structure of Uniswap by advocating for the merger of the Uniswap Foundation and Uniswap Labs. This consolidation aims to create a unified entity with a singular focus on expanding the protocol's reach and capabilities. Foundation staff are slated to transition to Uniswap Labs, effectively streamlining the separate organizational layers that have existed since UNI's inception.
In conjunction with this merger, Uniswap Labs will cease collecting revenue from its interface, wallet, and API. This strategic shift moves the platform's economic model away from product-specific monetization and towards a greater emphasis on protocol-level adoption. A dedicated growth budget, funded from the treasury, will be allocated to support ecosystem incentives and development. These allocations are planned to be distributed quarterly starting in 2026.
This comprehensive proposal comes in the wake of a shifting regulatory environment in the United States earlier this year. Uniswap's leadership has indicated that these changes have removed previous legal impediments that had constrained protocol-level participation and governance involvement.
Following the public announcement of the proposal, UNI's market price experienced a significant surge, increasing by over 40% within a few hours.