UNIfication Greenlights 100M UNI Burn and Switches On Protocol Fees
Key Takeaways:Uni Governance Provides a Resounding VoteWhich UNification Changes to the Core of UniswapThe Treasury will burn a 100 Million UNIProtocol Fee Switches are Put into ServiceFrontend Fees Are Turned OffThe Reason This Vote is Important to UNI TokenomicsLiquidity Providers Wave Red Flags
Although this was almost unanimous, UNIfication has raised eyebrows among veteran liquidity providers (LPs). Other arguments lobbed by some LPs are that protocol fees will squeeze already small margins, particularly on Uniswap v3 pools where capital efficiency is high but returns are very price-elastic to fees. A minor protocol take can have a material impact on profitability.
Two broad paths of risk have been presented by critics. In the former, there is no aggressive intervention as a form of governance. The decreasing net LP returns are a gradual withdrawal of liquidity which causes a decrease in depth and poor fee generation. In the second, the governing body has a high dependence on UNI incentives to retain liquidity in place. Although this could stabilize pools, it can also cause a systemic effect of a circular economy of token emissions compensating protocol fees at the expense of long-term UNI holders.
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