The Uniswap Foundation announced a new governance proposal last night aimed at distributing protocol fees to UNI token stakers. As soon as the news was released, the UNI token experienced a 62.8% surge in the past 24 hours. Why is this proposal able to incentivize such a significant increase in UNI?
(Uniswap Foundation Plans to Distribute Protocol Fees to Stakers)
Uniswap Foundation released a new governance proposal “Activating Uniswap Protocol Governance” on its official website last night, intending to distribute protocol fees to UNI token stakers. CoinGecko data shows that UNI, the governance token of Uniswap, surged 53% within one hour of the news release, surpassing $12 at one point, and skyrocketed by 62.8% in the past 24 hours. At the time of writing, it was still oscillating around $12.
The scheduled Snapshot vote for this proposal will be released on March 1, 2024, and the on-chain voting will begin on March 8, 2024.
(UNI Price Trend Chart)
Uniswap’s daily average transaction fee is $2.05 million.
As for why this governance proposal can significantly stimulate the increase in UNI price, one reason is that UNI holders have been criticized for not receiving many benefits. This governance proposal aims to distribute protocol fees, undoubtedly increasing the empowerment of UNI, and it is a significant empowerment. This is because the transaction fees generated by Uniswap are second only to Ethereum and higher than Bitcoin, ranking second among all cryptocurrency projects.
According to Crypto Fees data, Uniswap generated approximately $2.143 million in transaction fees in the past 24 hours, with a daily average of $2.052 million in the past 7 days.
(Return on Investment Estimated at Nearly 5%)
However, not all transaction fees generated by Uniswap will be collected by the protocol. Currently, they are still fully distributed to liquidity providers. There has been a discussion about the “fee switch” in the past, and Uniswap will only start collecting protocol fees when it is turned on, but it has not been turned on yet.
Further reading:
Uniswap Tests “Fee Switch” Proposal, Open for On-Chain Voting Within 14 Days
Researcher Henson estimated the return on investment for staking UNI tokens. Assuming the protocol fees account for 20% of the transaction fees, the annual protocol fees would be $173 million. Assuming that half of the circulating UNI tokens will be staked, there will be a staking scale of $3.5 billion. Under this assumption, the annual return on investment would be 4.94% (1.73/35).
Henson finally stated that if trading volume doubles or even more with the bull market and the popularization of Web3, the annual investment return rate would be over 10%.
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