Kyle Reidhead
Over 25k subscribers
GM DOers!
Uniswap has settled a whopping $1.9 trillion in volume since 2020, and generated 3.5 billion in fees for its liquidity providers.
How much did $UNI holders get out of all of this activity? A big fat $0.
Regulatory concerns have prevented the Uniswap Foundation from activating the fee switch, a feature to share Uniswap's revenue with $UNI token holders.
However, this could soon shift, as the Head of Governance at Uniswap Foundation has recently proposed a move to enable this revenue-sharing feature.
Translation?
Engaging with Uniswap's governance – whether by voting directly with your $UNI tokens or delegating them to someone who does – could now earn you a cut of the protocol's revenues. 💰
We believe this long-awaited revenue-sharing proposal for Uniswap token holders is a game-changer for the industry.
The market seems to agree, as the news caused $UNI to surge 70% within an hour of its announcement.
At the same time, many other top DeFi tokens pumped on the speculation that they too would turn on their own fee switches.
DeFi is once again the meta in crypto, and the opportunities are huge. Let’s talk about:
The Uniswap fee switch proposal ✍
How much revenue $UNI holders will get 📊
What this means for the industry 🤔
At the end, I give my theory on when the crypto supercycle will begin!
Vamos! ⏬
First, let’s be clear that this is just a proposal, not yet a sure thing.
There have been many other similar proposals that have not gone through in the past.
The reason this one is getting more hype is because it was proposed by Erin Koen, the Governance Lead at Uniswap Foundation.
The TL;DR of this proposal:
Rewarding Participation: If you hold $UNI, voting or delegating your vote earns you a share of Uniswap's trading fees. Think of it as a "thank-you" bonus for your input.
Technical Upgrades: Uniswap plans to roll out two new smart contracts to automate fee collection and distribution to active participants.
Encouraging Active Delegation: This setup aims to discourage passive delegation by rewarding active and thoughtful participation, ensuring voters are engaged.
Implementation Steps: A vote on this proposal is imminent, with a Snapshot vote scheduled for March 1st, and an onchain vote on March 8th.
If the majority votes yes (which is probably most likely), then Uniswap will move to finally turn on the fee switch after many years of waiting.
The question now is… How much will $UNI holders get by staking their tokens?
Since its inception, Uniswap has settled over 300 million trades…
… which have compounded to almost $1.9 trillion in volumes (this is an insane number). 🤯
From all of this activity, the Ethereum network earned $3.5 billion, while different L2s earned up to $10 million.
(This revenue came from users paying gas fees when transacting on Uniswap).
At the same time, liquidity providers on Uniswap earned a total of $3.5 billion across all chains.
We wrote a full Uniswap value accrual report in the past, showing how much each party made. We summarized it in this infographic.
The main takeaway? – That $UNI holders never got a dime, despite their critical role in the protocol, given their votes significantly impact its future.
So how much will $UNI holders get if this proposal goes through?
While we don’t know exactly how much of the revenue will accrue to holders versus LPs, we can make some assumptions.
Since October 2023, LPs have earned a total $309 million. Source
Here's how the earnings for $UNI holders would break down based on different percentages of the $309 million earned by LPs:
50%: $154.5 million / year
25%: $77.25 million / year
15%: $46.35 million / year
10%: $30.9 million / year
5%: $15.45 million / year
Better than nothing, amirite?
Please understand that this is a US-based protocol that has turned its governance token into one that earns revenue for holders.
The reason Uniswap hasn’t done this before is because of regulatory concerns – sharing revenues with your token holders is similar to how stocks share dividends with shareholders.
For this reason, crypto protocols have always hesitated to share revenues, as they never wanted to be categorized as securities by the SEC.
With this proposal, Uniswap is basically telling the SEC “f*ck off, you can’t touch me”. 😂
We predicted this to happen back in July 2023, when XRP won its lawsuit against the SEC about it being a security.
We wrote that when $UNI was $5 – if you added it to your portfolio, congrats! If not, don’t worry. I think the opportunity is just getting started.
I think this sets a precedent for all DeFi tokens, who now must turn on their own fee switch or get left behind.
Frax Finance is already asking their community if they should do this.
Going even deeper, I think this sets precedent for all governance tokens in crypto. Being just a governance token won’t cut it anymore.
For any protocol, not just in DeFi, it's crucial for your token to gain value for holders; otherwise, there's little incentive for people to buy it.
I said this multiple times before, but I think that the so-called crypto supercycle comes when profitable protocols figure out how to share value with their token holders.
Ethereum has done this. Uniswap is about to.
Next up, expect Maker, Lido, Rocketpool, L2s like Arbitrum, other DEXs like Frax, protocols like ENS or even marketplaces like BLUR to follow suit and start sharing revenues with their token holders.
When all of these protocols/apps figure this out at scale, that’s when the supercycle begins. Not one day before this moment.
I think that few understand this…
Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤️
Let us help you wrap your head around this industry that’s constantly transforming.
Take our Free 1-hour Web3 Rabbit Hole Course to learn the foundational components you need to start building and investing successfully.
Secure Your Crypto w/ a Hardware Wallet – Get a Ledger Today
Join us on Discord | Follow us on Twitter
Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
1,135
