The recent proposal to introduce protocol fees for the Uniswap decentralized exchange did not pass on June 1, leading to the continued opportunity for liquidity providers (LPs) to earn all revenue from swaps. According to the official webpage of the proposal, the “no fee” camp narrowly won with 45.32% of the votes, while 42.34% favored charging liquidity providers one-fifth of the fees they receive from users. A further 12.3% voted for a fee charge of one-tenth, and a small percentage of 0.04% voted for a fee charge of one-sixth.
The ‘no fee’ camp won the Uniswap DAO votes
Although the “no fee” camp prevailed, it is worth noting that proponents of a protocol fee might have been successful had they united behind a specific fee percentage. The vote served as a “temperature check” and was non-binding, with the possibility of further refinements and discussions in the future.
Uniswap is governed by its Decentralized Autonomous Organization (DAO), which consists of holders of its token. Currently, the exchange charges traders fees ranging from 0.01% to 1% for each swap, depending on the specific pool used. However, all these fees are directed to liquidity providers or market makers, while the UNI token holders, who theoretically own the protocol, do not receive any of these fees.
Supporters of the proposal argued that the protocol has reached a level of maturity as an exchange where it no longer needs to provide full rebates to liquidity providers. They highlighted a comparison of fees between Uniswap and competitors Coinbase and Binance, emphasizing that Uniswap’s subsidies to LPs would still make it the preferred platform for conducting business.
Debates surrounding the future of fees on the platform linger
On the other hand, opponents of the proposal raised concerns about potential tax and regulatory complications for UNI holders if fees were introduced. Some suggested that fees should only be implemented once Uniswap governance becomes an incorporated legal entity or when a decentralized “flow of funds” is developed to directly distribute revenue to UNI holders. This would help ensure that the taxable obligation rests with the users rather than the DAO.
Like most decentralized autonomous organizations (DAOs), Uniswap DAO has members across multiple jurisdictions worldwide and is not registered as a business in any country. Although the exchange originated on the Ethereum network, it has been exploring expansion into additional networks. For instance, the DAO voted to deploy Uniswap to the Polygon zero-knowledge Ethereum Virtual Machine (zkEVM) network on April 14. Additionally, on May 17, the voters approved the launch of a Moonbeam Polkadot parachain version.
While the proposal to implement protocol fees for Uniswap did not succeed in the recent vote, the outcome provides valuable insights into the community sentiment and highlights the ongoing discussions around balancing revenue generation and the interests of liquidity providers within the decentralized exchange ecosystem.
