$UNI Has Risen by Over 49% in the Past 3 Days, How Has the Uniswap Foundation Sparked Intense Community Discussions?

TD;LR

The Uniswap Foundation proposes a large-scale upgrade to the governance of the Uniswap protocol to incentivize active, participatory, and thoughtful delegation, enabling the Uni fee mechanism to reward UNI token holders who have authorized and managed their tokens.

The Uniswap Foundation’s proposal describes the motivation behind this change and provides a detailed deion of the technical and logistical changes required to implement it.

Assuming there are no significant obstacles, the snapshot vote for this proposal will be released on March 1, 2024, and the on-chain vote will be released on March 8, 2024.

Introduction

The Uniswap Foundation is proposing to allocate any protocol fees to holders of staked UNI tokens, and the market has responded enthusiastically to this news. $ UNI has risen by over 49% in the past 3 days and is currently around 11U; In addition, prior to the announcement, there had been movements in the on-chain whale wallet.

Source: Gate.io

Uniswap Foundation: Distribute Protocol Fees to UNI Token Holders

Uniswap is one of the largest decentralized exchanges (DEX) and is a decentralized exchange protocol built on Ethereum. The Uniswap protocol was founded by Hayden Adams in 2018, and its technical principles were first proposed by Vitalik Buterin, co-founder of Ethereum. Currently, Uniswap is the DEX with the largest trading volume on Ethereum.

Uniswap provides the basic functions of an exchange, such as trading cryptocurrencies and liquidity mining. It runs on Ethereum and users use the Automatic Market Maker Protocol (AMM), known as the Constant Product Market Maker, instead of traditional spot market orders to exchange for ERC-20 tokens.

On February 23, the Uniswap Foundation announced in a post that the snapshot vote for the “Activate Uniswap Protocol Governance” proposal will be released on March 1, 2024, and on-chain voting will be released on March 8, 2024.

The proposal suggests upgrading the protocol, and the proposed changes include: 1 Upgrade Uniswap protocol governance to achieve no license or programmatic protocol fees required; 2. Distribute any protocol fees proportionally to UNI token holders who have staked and entrusted their voting rights; 3. Allow governance to continue controlling core parameters: which pools require payment, and the size of the fees.

Meanwhile, this proposal involves two new smart contracts, which are expected to convert incentive fees into universal ERC-20 tokens and distribute them to UNI’s stakers and holders.

Source: Uniswap

Why is the Proposal Important

Initially, the main purpose of Uniswap issuing tokens was to resist vampire attacks caused by Sushi‘s attraction of user liquidity, as Uniswap Lab’s concerns about compliance checks have not enabled the “cost conversion” switch like most DeFi projects.

That is to say, although the Uniswap platform itself receives transaction fees through massive transactions, they are independent of the $UNI token and have not been converted into UNI’s token supply or benefited holders, resulting in a significant decrease in UNI holders’ interest in participating in governance voting and protocols.

According to Dune’s data, Uniswap’s front-end transaction fee revenue has exceeded $3.5 million since October 2023 alone, and once they are converted and distributed, the benefits can be significant.

The cost conversion will be activated for approximately 4 months, and the earned fees will be credited to the Uniswap DAO treasury. This proposal can truly empower UNI and bring higher investment returns to holders, thus attracting more users to become UNI token holders, and the price quickly rises accordingly.

The Trend of On-chain Whale Wallets

According to Lookonchain monitoring, on February 23, addresses starting with 0×-Eab removed 1.2 million UNI liquidity and subsequently deposited 1 million UNI into Binance; On February 24, the address marked as “Uniswap Team/Investor/Advisor Wallet” on the chain sold 90,000 UNIs for $11.48. The wallet received a total of 5.44 million UNIs and currently holds 926,000.

It is worth noting that the wallet address marked as encryption research institution a16z holds $64 million in UNI ($720 million, accounting for 6.4% of the total supply), which has a decisive impact on the voting, as 4% of the UNI supply votes in favor to reach the quorum.

A16z obtained $64 million UNI ($720 million) from the Uniswap team/investor/consultant wallet and transferred it to 31 wallets.

Conclusion

Uniswap has always been a top DEX exchange, attracting a considerable amount of Ethereum capital Flow, but the UNI token itself lacks sufficient empowerment and upward momentum; And now the UNI team and community have clearly made relevant strategies in this regard.

It is worth mentioning that there is a certain degree of independence between Uniswap Lab and Uniswap Foundation. Uniswap Lab mainly conducts research and development work, while the Foundation represents the interests of some communities in terms of governance. This proposal was also proposed by the Uniswap Foundation.

Blur founder Pacman also praised UNI’s actions and stated that the BLUR community can learn from UNI’s experience.

In addition, Uniswap v4 is tentatively scheduled to be released on the Ethereum mainnet in Q3 2024. At present, the empowerment of Uni will give holders and investors great confidence but it may also face severe regulatory issues after updating the protocol. The proposal is still in the waiting stage for voting and has not truly been implemented, so investors need to pay attention to potential risks.