UNI Rises 40% as Uniswap Labs and Foundation Propose Fee Switch Activation

UNI has seen a strong rise, gaining 40% and briefly moving above $10. The increase comes after Uniswap Labs and the Uniswap Foundation proposed using the “fee switch”, a system that would send part of trading fees to token burns and holder rewards. Investors are reacting positively, seeing it as a step toward linking the token’s value to the protocol’s growth.

What Is the “UNIfication” Proposal?

“UNIfication” is one of the biggest changes to the platform’s structure and tokenomics since UNI launched. The plan combines governance updates with tokenomics adjustments. A key part is a one-time burn of 100 million UNI from the treasury, meant to account for fees that would have been burned if the mechanism existed since 2020. This would reduce the circulating supply by around 16 percent, from about 625 million to 525 million UNI.

The proposal also adds a “token jar” that directs protocol fees to future burns. UNI holders would see a direct link between trading activity and token scarcity. Traders can also use UNI to get discounted fees, with those tokens then burned, further connecting usage and value.

Unichain, Uniswap’s layer-2 network, is included in the plan, with sequencer fees going into the burn. Unichain currently handles about $100 billion in annual DEX volume and generates around $7.5 million in sequencer fees each year. This makes the token’s value tied to real usage on both layer-1 and layer-2 networks.

Implications for Governance and Ecosystem Growth

Governance changes are a key part of the plan. Uniswap Labs will stop taking revenue from the app, wallet, and API and will use the money to support protocol growth. The plan also combines Labs and Foundation staff under one team, making operations simpler and focusing on expansion rather than product-level profits.

By merging the teams, Uniswap hopes to make decisions faster and use resources to increase adoption. Foundation staff will move under Labs and be supported by a growth fund from the treasury, keeping development and incentives aligned and sustainable.

The proposal also updates governance steps. After a seven-day comment period, a five-day snapshot vote, and a ten-day on-chain execution, the changes could be applied quickly, meeting the need for faster, more responsive governance.

Uniswap CEO Hayden Adams highlighted the proposal on X, saying Labs had limited influence before. He wrote that these limits “end today”, marking a new stage for the protocol’s structure.

Market Reaction and Price Dynamics

The market reacted quickly to the “UNIfication” announcement. UNI rose to $10 in early Asian trading, a level not seen since September, before settling at $8.31. This is still up 22% for the day and 61% for the week. Investors seem confident that the fee switch and token burn could raise long-term value.

Token burns work by reducing supply, which can create scarcity if demand holds steady. Uniswap consistently ranks among the top DeFi protocols for fee generation, earning nearly $3 billion annually. Under the new proposal, trading volume would directly drive token burns. Analyst Ki Young Ju said annual burns could reach $500 million if current trading continues.

Still, some concerns remain. Critics worry that early investors could benefit more than others and question whether the burn and governance changes favor insiders.

What to Expect Next?

The “UNIfication” proposal marks an important milestone in Uniswap’s development, connecting UNI’s value more directly to protocol activity and introducing ways to gradually reduce supply.

Although the market has reacted positively so far, the full effect of the proposal will rely on community approval and real-world usage of the protocol. If adopted, it could usher in a new phase for Uniswap where token economics and governance work together to promote long-term growth.