DeFi
Uniswap’s ‘fee change’ vote sends token up 20% – here’s what it means for investors – DL News
- Uniswap will begin another vote on a “fee change” proposal on Friday.
- The proposal is designed to boost participation in the Uniswap community.
- However, some members fear this could prompt greater scrutiny from the SEC.
Uniswap DAO members will begin voting on a proposal on Friday that moves the cooperative closer to activating the so-called “fee change.”
For years, proponents have argued that enabling the fee change would be a boon for investors in Uniswap’s governance token, UNI, by creating a way for them to share in Uniswap’s success.
Uniswap has collection more than $3.6 billion in fees since its launch nearly five years ago.
“A lot of people assume that one day this thing will be activated and I will get revenue,” said Getty Hill, co-founder of GFX Labs. DL News.
“Otherwise, there’s not really a reason to symbolize these things in the first place,” he said.
GFX Labs is one of the largest participants in the Uniswap DAO, helping to manage the network.
Uniswap, the largest decentralized exchange on the Ethereum blockchain, processed more than $20 billion in transactions over the past week, according to data from DefiLlama. UNI jumped more than 20% on the announcement of Friday’s vote.
But enabling the fee change isn’t a done deal, according to Hill.
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“This is another vote in a series of many votes, and it will take more votes until we get to the point where the revenues start flowing in,” Hill said.
What is the fee change?
UNI tokens grant membership to the Uniswap DAO, the digital cooperative that runs the exchange, as well as the right to propose and vote on changes.
The proposed fee change would divert some of Uniswap’s revenue to UNI token holders.
THE last version of the proposal – and the first to benefit from the support of the Uniswap Foundation, a non-profit organization responsible for supporting the protocol – is also designed to accomplish something else: boost otherwise lackluster participation in the DAO.
Under the current fee change proposal, only those who “delegate” their tokens for use in protocol governance will earn revenue via the fee change. Delegation occurs when users lend the voting rights attached to their governance tokens, usually to subject matter experts. Token holders can also delegate.
“Parasitism and apathy remain existential risks to the sustainability of the Uniswap protocol,” read the February 23 paper. proposal, written by Erin Koen, Head of Governance at the Uniswap Foundation. “Less than 10% of UNIs in circulation are used to vote on any given proposal.”
Friday’s vote ‘lays the foundation for autonomous tax collection and distribution’, Koen wrote on the Uniswap governance forum. “Additional votes will be required to enable fees in Uniswap V3 pools.”
Koen did not return immediately DL News” request for comment.
That process may not conclude until the second half of August, Hill said.
And while he’s confident Friday’s rather technical proposal will pass, he’s less certain that subsequent votes that actually activate the fee change will garner enough support.
“I’m optimistic, but I would by no means say this is a certainty,” he said.
The SEC is taking shape
That’s because a regulatory cloud still hangs over this effort.
“We have heard questions about whether the proposal could make it more likely that UNI will be scrutinized more closely” in the United States, the foundation said. wrote in 2022 in response to an earlier, unsuccessful effort to activate the fee change.
“Regulators or private litigants could file lawsuits against the DAO and seek to hold UNI token holders liable.”
Indeed, the Securities and Exchange Commission signaled last month its intention to prosecute Uniswap Labs – the company that built the Uniswap protocol – for violating federal securities laws.
Among other things, the SEC alleged that UNI is an unregistered security, according to Uniswap Labs.
It was a significant escalation in the SEC’s war on crypto, marking the first time the regulator turned its ire on the developers of a major DeFi protocol.
Additionally, some delegates are concerned about the tax implications of enabling the fee change, according to Hill.
Others simply don’t like the proposal, fearing it will drive away liquidity providers, who currently earn all the revenue generated by the protocol.
Liquidity providers deposit their crypto into Uniswap to facilitate trading.
“There are still a lot of opinions floating around about how this should be done,” Hill said. “It’s one thing to talk about implementation and debate infrastructure, but it’s a whole other thing to say, ‘Hey, let’s finally turn it on.’”
Aleks Gilbert is a DeFi correspondent at DL News. Do you have any advice? Send him an email to aleks@dlnews.com.