The native token of Uniswap, UNI, experienced a significant surge of over 38% following the introduction of a proposal by the Uniswap Foundation and Uniswap Labs. This initiative is designed to increase the attractiveness of holding the UNI token for investors.
Key elements of the "UNIfication" proposal include the potential activation of a protocol-level fee mechanism intended to burn Uniswap (UNI) tokens. Additionally, the proposal outlines the creation of a Protocol Fee Discount Auctions system aimed at improving returns for liquidity providers, as stated by the Uniswap Foundation in a joint proposal with Uniswap Labs on Monday.
A further aspect of the plan involves burning 100 million UNI tokens from the treasury, which represents approximately 16% of the UNI's circulating supply. This action is expected to positively impact the supply and demand dynamics for UNI, the governance token powering the Uniswap decentralized exchange.
Fees generated on Unichain, Uniswap's Ethereum layer 2 solution, which has accumulated $7.5 million in annualized fees since its launch nine months ago, will also be directed towards the same UNI burn mechanism.
"We believe this proposal positions the Uniswap Protocol to win as the default decentralized exchange for tokenized value," the Uniswap Foundation stated.
UNI Token Experiences Significant Price Increase
The news of the proposal led to a surge in UNI's price, with the token rallying by approximately 38.5% to reach $9.70. This marks a notable recovery for the governance token, which had been lagging behind other prominent cryptocurrencies such as Bitcoin (BTC), BNB (BNB), and Solana (SOL) in the current market cycle.
Following this price movement, UNI's market capitalization surpassed $6 billion, positioning it as the 34th largest cryptocurrency by market value.
Uniswap stands as the leading decentralized exchange (DEX), having processed an estimated $4 trillion in cumulative volume since its inception in November 2018.
Uniswap Focuses on Protocol Development and Ecosystem Growth
While the Uniswap Foundation has characterized the UNIfication proposal as ushering in the protocol's "next era," the foundation emphasized that continuing to issue grants to foster protocol development and growth, alongside supporting decentralized finance builders, will remain a key priority.
To facilitate these objectives, Uniswap plans to establish a Growth Budget, which will involve the distribution of 20 million UNI tokens.
The UNIfication proposal also formally introduces a Uniswap Growth Budget, designed to fund ongoing protocol and ecosystem expansion each quarter, benefiting industry builders.