Uniswap is about to make a major turn. Looking at recent governance proposals, it’s clear that the protocol’s monetization strategy has become much more serious.

Until now, Uniswap has returned 100% of trading fees to LPs (liquidity providers). But that changed with the end-of-year “UNIfication” initiative. The new proposal this time is the second phase of that effort. After introducing a fee switch on the Ethereum mainnet, the next goal is to expand it across all L2s.

The targets are eight Layer 2 networks: Arbitrum, Base, Celo, OP Mainnet, Soneium, X Layer, Worldchain, and Zora. Why L2? The answer is simple: trading activity is already flowing to these chains. From the standpoint of the protocol’s long-term sustainability, monetization through an L2 switch is an inevitable move.

What’s especially interesting is a mechanism called a “hierarchy-based” adapter. Previously, a governance vote was required every time a new pool was created, but with this system, protocol fees are automatically applied based on existing fee tiers (0.01%, 0.05%, 0.30%, and so on). In other words, when a new token is launched on L2, Uniswap can start earning revenue immediately. That means management overhead is nearly zero.

So what is the real economic impact? According to analyst estimates, expanding this L2 switch alone is expected to generate about $27 million in additional annual revenue. When combined with the existing fee switch on the Ethereum mainnet, it comes out to about $34 million worth of UNI being burned annually. Taken together, the scale is close to $60 million per year.

The burn mechanism is also distinctive. Fees collected on each L2 (in multiple assets such as ETH and USDC) are bridged to the Ethereum mainnet. Then, UNI is bought back from the market and sent to a “burn” address. That means the protocol’s revenue directly leads to a reduction in token supply.

However, there are trade-offs. Since protocol fees are deducted from LP rewards, liquidity providers’ returns decrease. In an environment where competing DEXs such as Aerodrome and Camelot are offering strong incentives on L2, whether Uniswap can continue to maintain liquidity is the key issue. Some also view Uniswap’s brand strength and relationship with aggregators as forming a “moat,” but it’s still necessary to monitor how liquidity actually moves in practice.

This proposal was scheduled for on-chain voting from late February to early March. From the broader market perspective, this is an important example of a shift from “valueless governance tokens” to “cash flow-backed tokens.” If Uniswap succeeds in implementing the L2 switch, there could be spillover effects for other DeFi protocols as well. In other words, it’s trying to set a precedent for how decentralized protocols can monetize in a multi-chain environment.