Uniswap (CRYPTO: UNI) unveiled a plan this week that could reshape how value circulates through DeFi’s largest marketplace. The “UNIfication” proposal published on November 10th would activate a long-dormant fee switch, re-routing a slice of trading fees to support token burning. That would effectively turn the crypto into a cash-flow asset.
The move sent UNI soaring more than 40% in a single day to around $8.47, its sharpest rally in over two years. But the proposal has also split the DeFi community, pitting liquidity providers against token holders in a debate over whether Uniswap has just reinvented tokenomics or compromised its own market edge.
A Protocol Matures
Since launching in 2018, Uniswap has handled more than $3.3 trillion in annual trading volume, powering much of DeFi’s infrastructure. Yet it has never collected protocol-level revenue: all 0.3% trading fees went to liquidity providers who staked assets in its pools. UNI holders, accounting for roughly 350,000 wallets, had governance rights but no direct claim on protocol cash flows, a source of frustration that grew during years of regulatory uncertainty under the SEC’s former leadership.
Now, with a more crypto-friendly policy backdrop, Uniswap’s leadership sees a chance to align incentives. As founder Hayden Adams wrote on X, the plan “turns on protocol fees and aligns incentives across the Uniswap ecosystem,” calling Uniswap “global financial infrastructure.”
How the “Money Machine” Works
Under UNIfication, Uniswap would redirect part of its trading fees into a smart-contract burn system:
Fee switch: For V2 pools, 0.05% of each 0.3% trade – about 16.7% – would go to the protocol, with the remainder to liquidity providers. In V3 pools, protocol fees would take 25% of low-fee tiers (0.01% and 0.05%) and 16.7% of higher tiers (0.3% and 1%). Funds would flow to a “TokenJar” contract, redeemable only by burning an equivalent value of UNI in a “Firepit” mechanism. Retroactive burn: An immediate destruction of 100 million UNI tokens, equal to roughly $800 million, to reflect fees that would have accrued since 2020. Ongoing burns: Future protocol and Unichain (Uniswap’s L2) revenues would feed the same burn loop. Structural reform: Uniswap Labs would stop charging interface, wallet, and API fees, merging its operations with the Uniswap Foundation under a single growth entity funded by $20 million in UNI annually from 2026.
Supporters call it a long-overdue alignment of incentives. The move could generate between $416 million and $693 million in annual burn value based on current volumes.
Market Response
Investor reaction was swift. Data from CoinGecko shows UNI’s daily trading volume spiked to $2.66 billion after the proposal went public. Some analysts compared the change to Ethereum’s EIP-1559 upgrade, which introduced regular burns that trimmed annual ETH supply by around 1-2%. The proposal also includes an immediate retroactive burn of 100 million UNI tokens, potentially unlocking billions in revenue for DeFi’s biggest DEX.
Podcaster Ryan Sean Adams hailed it as “a good day for DeFi and a good day for Ethereum.” Minal Thukral, growth lead at CoinDCX, echoed the sentiment on X, saying the unified incentives and fee cuts could “grow the entire pie” by internalizing MEV and making Uniswap’s front-ends free to use.
The Critics’ Case
Given that DeFi’s total value locked is still fighting to re-take its 2021 high, opponents of the proposal worry that the fee shift could trigger a liquidity drain. LPs, whose fee share would shrink, might look elsewhere for better yields on rival platforms like Aerodrome (CRYPTO: AERO). Modeling from WEEX Crypto News suggests a 4-15% liquidity outflow if APRs fall meaningfully.
Dromos Labs CEO Alex Cutler, whose firm operates Aerodrome and Velodrome, endorsed the critique with a simple “Bingo,” signaling agreement that the move could give competitors an edge when it comes to yield-driven liquidity.
DeFi educator Richard Hsu argued that “the @Uniswap fee switch is going to force a lot of liquidity providers over to @AerodromeFi or other DEXs. It’s great for $UNI holders but bad for LPs.
An analysis by @MargincalledG amplified these risks, modeling a “10-15% [LP] migration to Aerodrome due to the 20% (0.05% = 16.7% less fees) return differential,” which could redirect $100-150 million in annual fees to rivals if yields compress 15-20% on key pools.
The Take Away
The proposal now moves into the 22-day governance process, which includes feedback, snapshot, and on-chain voting. That will decide whether Uniswap evolves into a deflationary, revenue-sharing powerhouse or remains DeFi’s under-monetized giant.
Approval could mark DeFi’s closest step yet to equity-style cash flows; rejection might keep Uniswap dominant but value-agnostic. Either way, the episode underscores how DeFi’s blue chips are maturing. They’re less driven by speculation, more about sustainable economics.
Quick Hits
Watchlist: (CRYPTO: UNI), (CRYPTO: AERO-USD), (CRYPTO: CRV) – Eyes on UNI for governance-vote fireworks, AERO as the ve(3,3) rebel, and CRV for Curve’s next bribe battle.
Hot Take: Uniswap’s fee switch is akin to Ethereum’s EIP-1559 remix: bullish for burns, but if Aerodrome steals the LP show on Base, DeFi’s “alignment” crown could go to the underdog.
Pro Tip: Look to Aerodrome’s Base pools for bribe yields, or vote to sway the UNIfication fate; governance tools like Snapshot.org make it simple.
Disclaimer: Not financial advice. DYOR.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
$AEROAerodome Finance – United States dollar$0.9603-1.17%Overview$CRVCurve DAO Token – United States dollar$0.46703.52%$UNIUniswap – United States dollar$7.701.76%Market News and Data brought to you by Benzinga APIs
