A proposal by the cryptocurrency exchange Uniswap to investigate whether decreasing trading costs will result in a significant decrease in trading volume has generated considerable attention among the community and users.
The idea to pilot a “fee switch” for a small number of Uniswap protocol pools was presented in July. The vote was postponed until December 1 to give voters more time to deliberate. On December 2, the vote passed, and the decision was made to proceed with the test.
The changeover will not increase user costs, but it will keep a tiny amount of what is now paid out to liquidity providers or users that lock up tokens on Uniswap in exchange for fee incentives.
If implemented under the current circumstances, the fee switch might result in lower fee revenues for Uniswap’s liquidity providers and more incentives for holders of Uniswap’s native token UNI, hence increasing the value of UNI.
The proposal is a 120-day pilot experiment designed to investigate the impact of enabling the fee switch on trade execution on a subset of Uniswap pools that use USD Coin (USDC), dai (DAI), and Ether (ETH).
According to Uniswap’s developers, the experiment will be deemed a success if trade execution does not decrease for pools with the fee switch enabled. It has numerous ongoing examples of community-led decisions dictating the future development of protocols such as Uniswap.
Meanwhile, community reactions continue to be predominantly supportive if cautious.
Some users in support of the plan argued that not implementing the proposed modifications would stifle governance/revenue model innovation. In contrast, others voiced fear that liquidity providers would withdraw their funds from the site.
One user described the idea as significant for Uniswap but believed it was the wrong time to implement the change.
In addition, this idea might have extremely severe and unforeseen adverse effects on community members such as Uniswap Labs, the Uniswap Foundation, and even community members themselves.