UNI Soars 48% as Uniswap’s Fee Switch Proposal Ignites DeFi Frenzy

Uniswap’s governance token UNI rockets nearly 50% in 24 hours after a controversial fee redistribution proposal hits the forums. The move could reshape DeFi’s most iconic DEX—and make some whales very rich.

Fee Switch Flips the Script

The proposed mechanism would divert protocol fees to UNI stakers, turning the token from governance paperweight to yield-bearing asset. Traders are front-running the vote—because nothing says decentralization like profiting from insider knowledge.

DeFi’s perpetual governance circus strikes again. This time, the clowns might actually get paid.

What’s behind the fee switch proposal

The UNIfication plan represents a major milestone for Uniswap, which has long debated whether to enable the so-called “fee switch.” Currently, liquidity providers (LPs) receive 100% of trading fees.

The new proposal WOULD alter this dynamic by allowing the Uniswap protocol to keep a portion of these fees, resulting in a self-sustaining model in which protocol revenue encourages token burns and potentially increases the long-term value of UNI.

The proposal also introduces a burn mechanism that would use fees collected from the Uniswap DEX and the Unichain sequencer to burn UNI tokens, thereby reducing supply. 

Furthermore, Uniswap plans to burn 100 million UNI tokens currently in its treasury, which would have been destroyed if the fee switch had been enabled since the token’s launch in 2020. This represents roughly $800 million worth of UNI at current market prices.

Governance reform and treasury restructure

The proposal also outlines a major governance overhaul. Under UNIfication, the Uniswap Foundation would merge into Uniswap Labs, consolidating development, governance, and ecosystem growth under a single umbrella. 

From 2026, governance would approve an annual budget of 20 million UNI, distributed quarterly to fund development and ecosystem initiatives.

In an X post, Uniswap Founder Hayden Adams and Foundation Executive Director Devin Walsh described the proposal as a “long-term model for the Uniswap ecosystem—one where protocol usage drives UNI burn and one aligned team focuses on growth.” 

Today, I’m incredibly excited to make my first proposal to Uniswap governance on behalf of @Uniswap alongside @devinawalsh and @nkennethk

This proposal turns on protocol fees and aligns incentives across the Uniswap ecosystem

Uniswap has been my passion and singular focus for… pic.twitter.com/Ee9bKDric5

Adams added that the team had delayed the fee switch for years due to “a hostile regulatory environment” but now believes the time is right to MOVE forward.

Why this matters for the DeFi sector

Uniswap’s move could reshape decentralized finance (DeFi) economics. The platform, which processed over $150 billion in transactions in the past month, is already one of the most profitable protocols in crypto. 

According to DefiLlama, users have accrued more than $227 million in swap fees in the past 30 days alone. By redirecting even a small portion of those fees, Uniswap could generate substantial revenue for its treasury, potentially over $2.75 billion in annualized income across all deployments.

The proposed fee switch would initially apply to pools on Uniswap v2 and v3, which account for around 95% of liquidity provider fees. Future votes could extend it to v4 and other blockchains. 

A new “Protocol Fee Discount Auction” is also planned to offset LP losses by internalizing MEV (Maximal Extractable Value)—revenue that typically goes to validators and searchers.

Regulatory shadows and market impact

The proposal arrives amid a shifting regulatory climate. Under former Securities and Exchange Commission (SEC) Chair Gary Gensler, Uniswap faced scrutiny for potentially offering unregistered securities. Adams said the project’s leadership had been “restricted in the ways it can build value for the Uniswap community,” but that “ends today.”

Investors appear to agree. The UNI token has been one of the strongest performers recently, outpacing most DeFi assets. Its surge follows renewed Optimism around DeFi protocols that are beginning to show real revenue potential and clearer governance structures.

Price impact on UNI token

Currently, Uniswap (UNI) is trading around $8.67, with a 24 hour trading volume of approximately $2.96 billion. It is currently ranked 24 on CoinMarketCap with a market cap of about $5.52 billion. 

A historic turning point — but with risks

If the Uniswap DAO approves the UNIfication plan, it will be the most significant reform since UNI’s debut in 2020. It combines financial restructuring, token burns, and governance simplicity to improve transparency and long-term stability.

But there are risks associated with the strategy. Redirecting fees may lessen liquidity providers’ incentives, which could have an effect on trading efficiency and market depth. Additionally, there is still regulatory uncertainty, particularly if authorities see the new model as profit-sharing with token holders.

Despite these challenges, the market’s reaction shows confidence in Uniswap’s new approach. The token’s fast gain reflects growing investor confidence that the fee switch activation would change UNI from a passive governance token to one with significant economic value.

The following weeks will show whether governance voters approve what could be the most significant evolution in decentralized exchange history, and whether Uniswap can strike a balance between innovation and compliance in the next chapter of DeFi expansion.

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