Uniswap is on the brink of one of the most consequential governance decisions in its history, as its sweeping UNIfication proposal, currently in the voting stage, heads toward approval after clearing quorum with ease. The proposal , introduced by Uniswap Labs CEO Hayden Adams and core contributors, opened for voting on December 20 and is scheduled to close on Christmas Day. After the conclusion of the voting process, the protocol will enter a two-day timelock period. Once that expires, Uniswap plans to activate protocol fees across v2 and selected v3 pools on Ethereum mainnet and Unichain. By early Monday, more than 62 million UNI had already been cast in favour, comfortably surpassing the 40 million vote requirement. Opposition has been negligible, underscoring rare consensus within the Uniswap community. Burning 100 million UNI from Uniswap’s treasury At its core, the UNIfication proposal aims to activate Uniswap’s long-debated protocol fee switch while approving a retroactive burn of 100 million UNI from the protocol’s treasury. If executed, the burn will immediately reduce circulating supply from roughly 629 million tokens to about 529 million, materially tightening supply dynamics. Markets have reacted swiftly, with Uniswap (UNI) price gaining nearly 25% since voting began and rebounding from a prolonged market-wide downturn. Earlier enthusiasm around the proposal had already driven UNI close to $10 in November, highlighting how closely traders are watching governance outcomes that directly affect token economics. Turning fees into a burn engine The UNIfication proposal will also introduce a structural shift in how Uniswap monetises its massive trading volume, which has surpassed $4 trillion since launch. Under the new model, protocol fees collected from swaps will be routed into a dedicated on-chain mechanism that can only release funds when UNI is burned. On Uniswap v2, activating the fee switch will reduce liquidity provider fees from 0.3% to 0.25%, with the remaining 0.05% flowing to the protocol. For v3, protocol fees will be applied pool by pool, initially capturing between 16% and 25% of LP fees depending on the tier. These protocol revenues, along with Unichain sequencer fees, will be sent to a system built around two contracts known as TokenJar and Firepit. Fees accumulate in TokenJar and can only be withdrawn by permanently destroying UNI in Firepit, ensuring that increased usage translates directly into reduced token supply. Aligning incentives across the ecosystem Beyond burns and fees, the UNIfication proposal also aims to formalise a deeper operational alignment between Uniswap Labs, the Uniswap Foundation, and on-chain governance under the DUNI framework. Most Foundation teams will transition to Labs, consolidating development, ecosystem support, and growth under a single operational umbrella. As part of this shift, Uniswap Labs has committed to eliminating interface, wallet, and API fees. The strategy aims to drive higher-quality volume to the protocol while ensuring that any value generated ultimately benefits the Uniswap ecosystem rather than external revenue streams. To support this transition, governance will approve a growth budget funded by 20 million UNI annually, distributed through a vesting contract beginning in 2026. Uniswap Labs’ activities under this budget will be governed by a services agreement designed to keep incentives aligned with UNI holders. New mechanisms to boost Uniswap LP returns The proposal also introduces the Protocol Fee Discount Auction, or PFDA, a novel system designed to internalise MEV that would otherwise flow to validators or searchers. Through short-lived auctions, selected traders can earn temporary protocol fee exemptions, with winning bids sent directly to the UNI burn mechanism. Early estimates suggest that the system could significantly enhance liquidity provider performance, yielding incremental returns on trades that often operate within tight margins. Combined with aggregator hooks in Uniswap v4, which allow the protocol to source external liquidity while collecting fees, the design positions Uniswap to expand without diluting value capture. As the vote enters its final days, the message from the community is clear: Uniswap is ready to move beyond debate and into execution, reshaping its protocol around sustainable value, aligned incentives, and a deflationary future for UNI. The post Uniswap’s UNIFICation governance proposal set to pass, approving a 100M UNI burn appeared first on Invezz
