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The Uniswap DAO has voted against a proposal to turn on protocol fees for liquidity providers. The poll saw 45% opposed to turning on proposal fees, while support for two fee plans was divided.
A Divided Community
The community vote ran neck and neck and concluded at 1.05 PM ET on Thursday, with extremely close results and a divided community. Looking closely at the poll, 45% of the votes expressed complete opposition to the proposal to turn on fees. 42% of the votes supported the proposal to charge 1/5 of the pool fee across Uniswap V3 pools, while the remaining 12% voted in favor of charging 1/10 of the pool fee, and 0.04 voted in favor of charging 1/6 of the pool fees.
“Uniswap fee switch vote neck and neck in the final hours. Fun fact, I don’t think any UNI vote that’s passed on snapshot has been turned down once proposed on-chain.”
However, it is worth noting that the proposal failed to pass despite 54% of the votes cast favored charging liquidity providers protocol fees. However, those supporting protocol fees were sharply divided regarding how much liquidity providers must be charged, as seen in the breakup of the voting preferences. This meant that while support for charging a fee collectively surpassed the opposition to implementing a fee (55% vs. 45%), no category exceeded the support for the “no fee” votes. 56 million UNI tokens were used to cast the votes.
Another factor that potentially swung the votes towards those that voted against implementing a fee was a handful of wallets that voted against protocol fees at the last minute. A closer look at the history of the wallets in question revealed that the addresses linked to the wallet were only recently created and had nearly zero transaction history prior to the vote. Chris Blec, a DeFi researcher, commented on the results stating,
“The whales that dominate Uniswap governance (a16z, Hayden, etc.) refuse to activate the fee switch because they don’t want to create a legal liability. The irony is that they’re still creating legal liability by using their massive voting power to kill every fee switch proposal.”
The result will not prevent further votes by the community on the proposal. While support is high, opposition to the fee is also significant.
Should The Fee Be Implemented?
The initial proposal behind introducing protocol fees stated that the fee would demonstrate Uniswap’s revenue-generating capabilities. The protocol stated that the fee would also indicate that liquidity providers are operating professionally and earning enough revenue to not require any sort of rebates. Governance members expressed some support for the proposal, but many noted that the decision to implement fees could carry legal and regulatory implications, with regulators potentially considering a fee-generating Uniswap as a security. Furthermore, the proposal could require the payment of income tax as well. The current proposal indicated that it would not impact fees paid by most Uniswap users and would collect fees directly from liquidity providers.
The proposal was put forward on the 10th of May by GFX Labs, the Uniswap Governance Delegate. The protocol’s current fee structure offers several rebates to liquidity providers, who made over $77 million in fees during the month of March alone. While putting forward the proposal, its author, Getty Hill, stated,
“If Uniswap can monetize and bring in all these dollars by building a really great open-source protocol that gets usage, then that will incentivize other folks to do this too. I’m hopeful that this kind of changes some of those industry norms.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.