Decentralized exchange Uniswap is considering introducing fees for certain liquidity pools

Proposed introduction of transaction fees

Decentralized exchange (DEX) Uniswap is considering a proposal to charge a fee on its liquidity pool. Targets liquidity pools with regular trading volumes that generate 1.34 million yen (US$10,000) or more in annual revenue.

Currently, token trading on Uniswap is fully remunerated to Liquidity Providers (LPs). However, the Uniswap protocol has a code called “fee switch” which, when “on”, allows fees to be distributed among LPs, the protocol treasury, and token holders.

The main reason for this is that the introduction of fees for LPs will allow the protocol to replenish its treasury and offer rewards to holders of its native token UNI. Additionally, Uniswap will take the lead with a 70% market share, showing that there are big gains to be made in the DeFi ecosystem by introducing fees.

The main Uniswap protocols are Uniswap V2 and V3 with Total Value Locked (TVL) of approximately 147.5 billion yen (US$1.1 billion) and 321.8 billion yen (US$2.4 billion) respectively. Dollar). The average daily trading volume is 10 billion yen (US$75 million) for V2 and 53.6-147.5 billion yen (US$400-1.1 billion) for V3.

The proposal points out that the most profitable LPs on Uniswap are professional market makers and not individual investors (traders). He compared transaction fee examples from major exchanges Binance and Coinbase, explaining that Uniswap is the only major exchange that rewards makers.

DEX (Distributed Exchange)

A decentralized exchange based on blockchain. It is also called “DEX”, from “Decentralized EXchange”, which is an English translation of “decentralized exchange”. Since transactions are processed directly between parties without the need to involve a central administrator, there is no need to pay a fee to the administrator. Other features include low liquidity and user management of the private key.

▶️Cryptocurrency Glossary

opposite opinion

This is not the first time that Uniswap is considering introducing fees for LPs. A similar proposal was actively discussed in the community last summer, but ultimately failed to garner enough community support and the launch was shelved.

The greatest concern at the time was the tax problem with the collection of fees. Legal and tax risks were also mentioned in the comments on this proposal.

At the Uniswap Governance Forum, where the proposal is being discussed, the following opinion was expressed:

The current government is very hostile to cryptocurrencies, but Uniswap Labs is based in the United States. Rumor has it that the lab is/was already under investigation by the SEC. How about giving the government even more reasons to pursue Uniswap by making the token look like a security?

Another poster said, “I totally agree with you on the SEC and tax issues,” arguing that legal and tax issues should first be resolved before discussions about introducing fees begin.

Also, V3’s business license (allowing commercial use of the code) just expired on April 1st, and enabling the “toll switch” will encourage competing projects to fork. pointed out.

Connection:Why the DEX market is attracting attention in April as Uniswap v3 commercial use restrictions expire

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