Uniswap Token Skyrockets 70% as DAO Considers Fee Rewards Proposal
Will rewarding Uniswap's UNI token holders with a share of the protocol's $3.3 billion in fees breathe new life into its governance process?
A provocative new proposal aims to find out, sending the UNI token skyrocketing over 65% to hit $12 for the first time since early 2022.
Uniswap's native UNI token surged 70%, hitting $12 for the first time in nearly two years. The price jump coincided with a new governance proposal to activate Uniswap's "fee switch" and start rewarding UNI holders who stake and delegate their tokens with a portion of the protocol's fee revenue.
The proposal, authored by Uniswap Foundation lead Erin Koen, calls for an upgrade that would direct a cut of Uniswap's $3.3 billion in cumulative fee earnings to UNI token stakers. The proposal aims to reinvigorate participation in Uniswap's decentralized autonomous organization (DAO) by incentivizing more token holders to govern the protocol actively.
Uniswap is the largest decentralized exchange, with a $4.9 billion market and nearly $1.8 trillion in lifetime trading volume processed since its 2019 launch on Ethereum. The fees generated from this volume have historically flowed only to liquidity providers who supply trading pairs on Uniswap.
As Uniswap's native token, UNI allows holders to vote on proposals that determine the protocol's future. However, Koen's proposal notes that less than 10% of UNI's circulating supply routinely participates in governance votes. Almost half of the top 30 delegates by voting power have not voted in the last 10 proposals.
By turning on the fee switch and compensating delegated UNI stakers, the proposal aims to incentivize more engaged participation from existing token holders and attract new delegates to the DAO. However, some critics argue the move could invite regulatory scrutiny over the governance token's status.
Previous attempts to activate the fee switch have divided the Uniswap community and failed to pass preliminary "temperature check" votes gauging sentiment. The current proposal must clear community discussions over the next few days before proceeding to a more formal series of governance votes required for enacting changes on Uniswap.
Editor's Opinion: This proposal exemplifies how a DAO can potentially benefit everyone in its ecosystem. By incentivizing more active governance participation, the plan could strengthen Uniswap's decentralized decision-making and align token holder interests with the protocol's long-term success. If implemented fairly, spreading fee rewards among engaged UNI stakers represents a positive step in DAO governance that other projects may look to emulate.
