Uniswap Community Approves $165M Budget Proposal: A Milestone for the Ecosystem and Fee Sharing Mechanism

Budget proposal content 165.5 million USD

According to the official announcement, the $165.5 million budget will be allocated as follows:

• $95.2 million in grants to support projects and developers building on Uniswap, driving innovation in the ecosystem.

• $25.1 million is used for the Uniswap Foundation's operating costs, ensuring the organization has enough resources to maintain and develop the protocol.

• $45 million will be used for liquidity incentives, to attract more users and liquidity providers to participate in trading pools.

Additionally, a second proposal related to legal restructuring was also passed, with the goal of optimizing how the Uniswap Foundation manages funds and complies with current legal regulations in the US. These two proposals received strong support from the community, with approval rates of 99.99% and 100% respectively, showing a high consensus on the future direction of Uniswap.

Context: Uniswap Faces Growth Challenges

The approval comes as Uniswap faces increasing competitive pressure from other DEXs like PancakeSwap and SushiSwap, along with internal challenges following the launch of Uniswap v4 and Unichain – the project’s own Layer 2 blockchain. Data shows:

• Uniswap v4's total value locked (TVL) is currently only around $85 million after more than a month of launch, lower than expected.

• Unichain, which is expected to improve speed and reduce transaction costs, also recorded a modest TVL of only $8.2 million.

These numbers show that Uniswap needs a strong push to regain its growth momentum and consolidate its leading position in the DeFi sector. The $165.5 million budget is considered a strategic “medicine” to solve this problem, both supporting technology development and encouraging community participation.

Fee Sharing Mechanism: A Great Incentive for Users and Investors

One of the key highlights of the event is Uniswap’s plan to activate a fee split mechanism – a feature that has been hotly discussed by the community since early 2024. Previously, all trading fees (typically 0.3% per swap) were distributed to liquidity providers. With the new mechanism, a portion of these fees can be shared with UNI token holders, transforming UNI from a mere governance token into a passive income asset.

This move not only increases the real value of the UNI token but also creates incentives for the community to participate more deeply in the governance and staking process. After the news was announced, the price of UNI increased by 7% to $6.76, while open interest in the derivatives market increased by 17% to $196 million, reflecting investor optimism.

Implications for the Uniswap ecosystem and the DeFi market

This event has many positive impacts:

• Fostering Innovation: With $95.2 million in funding, Uniswap can support innovative projects, from new user interfaces to multi-chain integration applications, thereby expanding its reach.

• Strengthening liquidity: $45 million in incentives will help increase TVL and trading volume, especially on Uniswap v4 and Unichain, which are in need of a boost.

• Signal to the market: The active participation of the community in approving such a large budget is a testament to the strength of decentralized governance, and sends a message that Uniswap remains a force to be reckoned with in DeFi.

However, there are concerns. Some argue that allocating such a large budget could lead to selling pressure on UNI if the Uniswap Foundation liquidates tokens to convert to stablecoins or other assets. This requires the organization to have a transparent and effective fund management strategy to avoid negative market impacts.

Potential Impact on the Community and UNI Price

For the Uniswap community, this event is a big step towards realizing the vision of “complete decentralization”. The fee sharing mechanism, if successfully implemented, could make UNI one of the most attractive DeFi tokens, competing directly with projects like Curve (CRV) or Aave (AAVE).

On the market front, UNI’s price could continue to benefit in the short term due to positive sentiment. However, the sustainability of the gains will depend on how efficiently the Uniswap Foundation uses its budget and when exactly the fee sharing mechanism is activated. If successful, Uniswap would not only consolidate its position but also lay the foundation for a new phase of DeFi growth.

Conclude

The Uniswap community’s approval of a $165.5 million budget and the launch of a fee-sharing mechanism is a major milestone that underscores the project’s ambition to lead the blockchain space. It’s not just a financial story, but also a testament to the power of community governance in shaping the future of a decentralized protocol.

With the new resources, Uniswap has the opportunity to overcome its current challenges, from improving the performance of v4 and Unichain to attracting more users and developers. Will this be the “push” for Uniswap to regain its glory in the DeFi era? Time will tell.