Uniswap reaches a historic turning point: UNIfication proposal passes with near-unanimous votes, 100 million tokens about to be burned

On December 25th, the Uniswap governance community overwhelmingly approved the core proposal titled “UNIfication” with a support rate of 99.9%, marking the most significant change to the protocol’s economic model since its inception. The proposal officially launched the long-delayed protocol fee switch, redirecting a portion of trading fees from liquidity providers to the protocol treasury, for continuous UNI token burns, along with a one-time destruction of 100 million UNI tokens.

This move not only establishes a clear deflationary path for UNI but also integrates operational functions and sets a long-term growth budget, laying a solid foundation for Uniswap to compete over the next decade. The high consensus reflects the community’s shared vision for sustainable development after enduring prolonged regulatory pressures and value capture challenges.

Near-Consensus Vote: Why Did UNIfication Win 99.9% Support?

In the crypto world, where decentralized governance often stalls due to disagreements, a nearly unanimous vote is rare and powerful. Recently, the Uniswap governance community approved the “UNIfication” proposal with over 125 million UNI in favor and only 742 against, achieving a support rate of 99.9%. This was more than a simple technical upgrade vote; it was a strategic declaration of unity among stakeholders—including whales, core developers, the Foundation, and the broader community—regarding the future direction.

Behind this high consensus lies years of anticipation and strategic negotiations. Since UNI’s launch, “when to activate the fee switch” has been a core community debate. The fee switch would allow the protocol to divert part of the trading fees—originally fully allocated to liquidity providers—into its treasury for development and value feedback. However, under the regulatory pressure from the US SEC, led by Gary Gensler, activating the fee switch prematurely risked being viewed as revenue generation, potentially violating securities laws. The proposal explicitly states that “the regulatory climate has shifted,” and decentralized finance is gaining broader acceptance, making protocol-level value capture feasible.

This judgment has received public support from prominent DeFi figures such as Jesse Waldren, founder of Variant, and Kain Warwick, founder of Synthetix. They expressed their stance through significant voting power, sending a clear signal: the industry believes the time is right. Uniswap founder Hayden Adams described the proposal as “laying the groundwork for growth in the next decade,” and the community’s overwhelming vote indicates that most participants are willing to embrace this historic shift—even if it involves short-term adjustments in profit distribution.

Key Information and Voting Data of the UNIfication Proposal

• Proposal Name: UNIfication
• Vote Result: Passed with 99.9% support
• Specific Votes: Over 125 million UNI in favor vs 742 UNI against
• Core Change 1: Activate the protocol fee switch, directing part of trading fees to ongoing UNI burns
• Core Change 2: Execute a one-time historic burn of 100 million UNI
• Core Change 3: Integrate Uniswap Foundation functions into Uniswap Labs, removing service fees for frontend, wallets, and APIs
• Core Change 4: Establish an annual growth budget funded by UNI for long-term ecosystem development
• Price at Vote Closure: $5.92, up 18.9% over the past week
• Protocol Annual Revenue: Over $1.05 billion generated this year

Economic Model Rebuild: Details of Fee Switch and “Deflationary Flywheel” Activation

The core of the UNIfication proposal is a fundamental rewrite of Uniswap’s economic engine. The most anticipated part is the activation of the long-discussed protocol fee switch. Under the new architecture, a portion of each transaction’s fees (the exact ratio to be determined by future governance) will be diverted from liquidity providers into the protocol treasury.

These captured fees, along with the net fees from Uniswap’s upcoming dedicated chain Unichain, will be directed into a continuous token burn mechanism. This means that as long as there is trading activity on Uniswap, UNI tokens will be permanently removed from circulation. This creates a powerful “deflationary flywheel”: protocol usage increases → captured fees grow → UNI burn rate accelerates → token scarcity rises. This mechanism establishes a direct, quantifiable economic link between UNI’s value and the protocol’s actual utility and growth.

In addition to ongoing deflation, the proposal includes a one-time “historical compensation” burn. After passing and undergoing a two-day timelock, the protocol will immediately execute a burn of 100 million UNI. This figure is estimated based on the amount that would have been burned if the fee switch had been active since UNI’s inception. This move significantly reduces the current circulating supply (roughly a substantial proportion of the total supply) and is seen as a symbolic reward to long-term holders, demonstrating the community’s commitment to honoring its promises.

These burning mechanisms aim to fundamentally address the long-standing “value accumulation” criticism of UNI. As one of the highest market cap DeFi governance tokens, UNI has historically been more like a “governance rights certificate,” with its price not directly benefiting from the protocol’s massive revenue. Now, by tying protocol income to token burns, UNI is gaining a more solid value foundation and adopting characteristics of a “deflationary asset,” which could be a key step toward evolving into a more mature financial asset.

Beyond Token Economics: Operational Integration and Long-term Strategy

The UNIfication proposal is more than just token burns. It also signifies a profound organizational and operational restructuring aimed at improving execution efficiency and long-term competitiveness. The proposal mandates integrating the Uniswap Foundation’s team and responsibilities into Uniswap Labs, eliminating potential overlaps and communication losses, creating a more unified and agile operational core to face rapid market changes and increasing Layer 2 and competing protocols.

Strategically, the proposal abolishes fees charged by Uniswap Labs for its user interface, wallets, and API services. This “free value-added” approach appears to sacrifice short-term revenue but aims to maximize user and developer accessibility, strengthening Uniswap’s position as a liquidity infrastructure. When trading experiences are entirely free and protocol value is captured through the token economic model, network effects become more robust and harder to replicate.

To sustain ongoing development, the proposal also approves a “growth budget” funded directly by UNI tokens. This budget will support long-term R&D, ecosystem projects, and global market expansion. It marks a shift from past governance driven by short-term incentives to a more long-term investment approach. The funds will be used to build competitiveness over the next decade, rather than being spent on unsustainable liquidity mining subsidies.

Furthermore, the proposal introduces a “protocol fee discount auction” system, offering liquidity providers a new mechanism to potentially earn higher returns. It also leverages Wyoming’s DUNA legal framework to unify Uniswap Labs, the Foundation, and on-chain governance under a single legal structure, enhancing legal clarity and operational resilience. These measures demonstrate that UNIfication is a carefully considered, comprehensive upgrade designed to transform Uniswap from a successful product into a more vibrant, resilient, and growth-oriented decentralized ecosystem.

Market Impact and Industry Insights: A New Era of Value Capture for DeFi Governance Tokens

The approval of the UNIfication proposal triggered swift and positive market reactions. After the vote, UNI’s price closed at $5.92, up 18.9% for the week. The market’s optimism is driven not only by the short-term supply shock from the massive burn but also by a revaluation of UNI’s long-term deflationary narrative and value accumulation potential. Considering that Uniswap generated over $1.05 billion in fees in 2025, even a small percentage allocated to burns could result in an astonishing annual burn volume, adding a new variable to UNI’s valuation model.

This event has profound implications for the entire DeFi industry. For years, governance tokens of DeFi protocols—especially DEXs—faced existential questions about their utility. Many tokens only had governance rights but did not benefit directly from protocol revenues, resulting in weak valuation support. Uniswap’s near-unanimous community consensus to enable value capture sets a benchmark for others. It proves that, with the right timing (e.g., regulatory environment easing) and community communication, deeply integrating protocol income with token economics is a feasible and broadly supported path.

This could spark a wave of upgrades in DeFi governance token economic models. Leading protocols like Aave and Compound may reevaluate and push their own “fee switch” proposals. Uniswap’s success offers a comprehensive reference—from legal structuring (e.g., adopting the DUNA framework), community mobilization, to mechanism details (like one-time burns). The industry’s competitive landscape may shift from solely competing on trading volume and liquidity depth to also competing on token economic sophistication, sustainability, and appeal to holders.

Future Outlook: Challenges and Governance Topics Ahead

Despite the promising outlook, the path to implementing UNIfication remains fraught with challenges. First, the specific fee ratio has yet to be determined, which will be a critical governance issue. A high ratio could harm liquidity provider incentives and pool depth; too low might weaken deflationary effects. Finding the right balance will test community wisdom.

Second, the new economic model demands effective use of the long-term growth budget. Whether the funds are allocated efficiently toward technological R&D, ecosystem projects, and strategic acquisitions will directly impact the mechanism’s credibility and sustainability. Governance must ensure high-quality proposals and strict oversight.

Finally, the regulatory landscape remains uncertain. While the proposal is based on the “regulatory climate shift” hypothesis, how regulators in the US and globally will classify “protocol fee collection and token burns” remains unclear. Uniswap’s exploration of legal frameworks like DUNA is promising but unproven. The protocol must continue balancing value capture with maintaining sufficient decentralization to avoid securities classification.

In any case, the approval of UNIfication marks a milestone in Uniswap and DeFi development. It signifies a transition from “powering with passion” and experimental governance to a mature phase of carefully designed economic models, active value capture, and feedback to supporters. UNI’s “unification” reform not only aligns community consensus but also seeks to unify protocol success with token holder prosperity. Its subsequent evolution will be closely watched by the entire crypto world.