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Uniswap Labs have proposed a sweeping overhaul of how the UNI token functions including the long awaited fee switch.
Author: Sahil Thakur
11th November 2025 – Uniswap Labs have proposed a sweeping overhaul of how the UNI token functions including the long awaited fee switch. The proposal includes two major shifts: activating the long-debated protocol fee switch and burning 100 million UNI tokens from the treasury, worth nearly $800 million.
If approved, this would fundamentally change how UNI holders benefit from the protocol. Instead of directly receiving fees, tokenholders could burn their UNI and withdraw an equivalent value from a new smart contract known as the “token jar.” This mechanism would reduce UNI supply while potentially increasing its value.
Right now, liquidity providers earn all swap fees on Uniswap. The proposed change won’t alter the fee percentages. But it would redirect a slice, between 16% and 25% – into the token jar. Any UNI holder who uses a separate smart contract called the “fire pit” to burn their tokens could then redeem from this shared pot.
To balance this shift, the team plans to launch a “Protocol Fee Discount Auction.” This system would offer ways for LPs to win discounts and keep rewards competitive. Uniswap Labs says this could also help capture MEV that would otherwise go to third parties like validators or searchers.
Initially, the fee switch would activate on Uniswap v2 and v3 pools on Ethereum mainnet. Votes on v4 and other chains would come later.
A core part of the proposal is burning 100 million UNI tokens. That’s the amount of fees that might have gone to UNI holders had the fee switch been live from the beginning. This move would instantly cut circulating supply by around 16%, potentially tightening tokenomics in favor of long-term holders.
UNI Spikes 38% After News
Markets responded fast. UNI surged 38% after the announcement, hitting $9.70. Its market cap crossed $6 billion, and it became the 34th largest crypto asset. The price pump reflects renewed excitement over Uniswap’s governance and vision for growth.
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Foundation to Fold, Labs Takes Over
The proposal also suggests a major power shift. The Uniswap Foundation would wind down its operations. Its responsibilities – like grants, governance, and ecosystem support, would mostly shift to Uniswap Labs, the for-profit company behind all four versions of the protocol.
The Foundation would continue administering a $100 million grants program until completion. After that, it would shut down entirely. Labs would also stop collecting interface fees for now but reserves the right to explore monetization in the future.
Context and Controversy
The “fee switch” has been a controversial topic since UNI launched in 2020. Although supported by many tokenholders, the Foundation has been hesitant. In one instance, a vote was pulled at the last minute. Lawmakers even questioned the Foundation’s centralized influence over what was supposed to be a decentralized DAO.
Earlier this year, the DAO approved a legal wrapper known as DUNA, which was seen as a prerequisite to enabling the fee switch. Since then, UNI holders have been waiting for the next step.
That moment is here.
With this proposal, Uniswap is not only changing token economics, it’s redefining its governance. Labs is taking the lead, and the Foundation is stepping aside. Whether the community embraces this shift will depend on how it votes in the coming weeks.
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