UNI Surges After “Fee Switch” Vote is Proposed

The DefiantDecember 03, 2022

Uniswap’s Token UNI surges after a fee switch is proposed. This supposed switch would divert 10% of all trading fees from a liquidity pools towards Uniswaps treasury. The liquidity pools in question are ETH-USDC, DAI-ETH, and USDC-ETH showing a small but meaningful pilot considering these are some of Uniswap’s biggest pools.
A strategy for what would happen to the retained fees is not expressly stated in the post on Uniswap's governance forum, but one-tenth of the trading fees from each of those pools would go to Uniswap's treasury. Subsequently, this would bolster Uniswap’s effectiveness in capturing value from what they have built.
DeFi enthusiasts have long speculated that the UNI token will ‘one day’ be also eligible to receive some portion of the fees, but this is not what is in the current proposal. Nevertheless, the governance token of Uniswap UNI, rallied on this proposal. 
The plan is not without its problem, since legal as well as regulatory issues related non-custodial censorship-resistant decentralized protocols sharing revenue with the token holders are not resolved. According to the Uniswap Foundation itself, "the regulatory and private litigation atmosphere for DeFi in the U.S. has been extremely fast-moving and complex."
Another underlying question of such a proposal is how many liquidity providers (LPs) will move their capital if 10% of the trading value is siphoned away from them. This in particular, combined with the open-source nature of Web3 invites Uniswap forks to gain more market share. The exact outcome is unclear and thus an experiment seems indeed warranted.