Uniswap’s UNInception: Why the Protocol Is Finally Turning On the Fee Switch

Uniswap founder Hayden Adams has submitted a landmark governance proposal. The plan, titled “UNInception,” aims to activate protocol fees and align incentives across the ecosystem. Adams stated this is the first step toward a full on-chain vote.

In a joint address, Uniswap Labs and the Uniswap Foundation cited the change in the US cryptocurrency regulatory atmosphere as motivation for the project’s progress.

According to the statement, the team said that adopting DUNI and DUNA in Uniswap’s governance is part of the steps it has taken under the new dispensation, having survived a hostile regulatory environment under the previous SEC administration.

In the meantime, the Uniswap hierarchy noted that the latest proposal establishes a long-term model for how the Uniswap ecosystem would operate, where protocol usage drives UNI burn, alongside allowing Uniswap Labs to focus on protocol development and growth. The team highlighted the various aspects of the Uniswap protocol where it intends to implement changes, including turning on protocol fees and using them to burn UNI.

Some other aspects of the Uniswap protocol that the latest proposal intends to affect include sending Unichain sequencer fees to this same UNI burn mechanism, building Protocol Fee Discount Auctions (PFDA) to increase LP returns and allow the protocol to internalize MEV, and launching aggregator hooks, turning Uniswap v4 into an onchain aggregator that collects fees on external liquidity.

Meanwhile, Uniswap Labs and the Uniswap Foundation are also proposing to burn 100 million UNI from the treasury, representing the approximate amount of UNI that would have been burned if fees were on from the beginning and focus Labs on driving protocol development and growth, including turning off our interface, wallet, and API fees and contractually committing only to pursue initiatives that align with DUNI interests.

Additionally, if approved, the proposal will allow the Uniswap protocol to move ecosystem teams from the Foundation to Labs, with a shared goal of protocol success, with growth and development funded from the treasury, and migrate governance-owned Unisocks liquidity from Uniswap v1 on mainnet to v4 on Unichain and burn the LP position, locking in the supply curve forever.

According to Adams, Uniswap will immediately execute the 100 million UNI burn and turn on the fee switch once the proposal passes approval.