BlockchainAltcoinsOpinion
|6 min ReadUniswap’s Last Card: The Power of the Burn
Lucca Menezes
Senior Analyst
Published
Jan 16, 2026
Uniswap just played its final hand. Founder Hayden Adams has dropped a new governance proposal — and it’s not just another routine “fee switch” debate. This time, it comes with real firepower: token burns, a merger between Uniswap Labs and the Foundation, and a long-awaited path toward turning UNI into a yield-bearing asset.
The market loved it. UNI soared nearly 40% overnight, pulling the entire DeFi sector up with it. Big holders are signaling support, and prediction markets now give the proposal a 79% chance of passing. But for Uniswap veterans, the “fee switch” saga is an old wound. The same idea has been proposed seven times in two years, each time collapsing under legal, political, and governance pressure.
Two years, seven failed attempts — and one big blocker
The fee switch is a familiar mechanism in DeFi. Protocols like Aave, Curve, and Raydium have all activated it successfully, turning protocol revenue into buybacks that feed token value. Aave’s activation in 2025 helped its token rise from 231, a 75% annualized gain.
So why did Uniswap fail every time? The answer has three letters: a16z.
The venture firm holds about 64 million UNI — enough to swing any major vote. It repeatedly blocked past attempts, citing legal and tax risks. In December 2022, a16z used 15 million votes to kill a proposal to activate a 1/10 fee rate on core trading pools. Its lawyers warned that any mechanism distributing revenue to token holders could make UNI a security under the U.S. Howey Test — since it could imply profit “from the efforts of others.”
In later rounds, GFX Labs tried again. In May and June 2023, both proposals were struck down after a16z voted no. Even a creative 2024 workaround — forming a Wyoming-based “DUNA” legal entity — collapsed after “questions from an unnamed stakeholder,” widely believed to be a16z.
Beyond securities law, the tax angle also worried them. If Uniswap collects protocol revenue, the IRS could demand corporate taxes. With no legal entity or accounting system, the DAO could face multimillion-dollar exposure and personal liability for governance participants.
But the winds have shifted. With Trump’s return to the White House and a friendlier SEC, the regulatory chill has eased. a16z’s stance appears to be softening — making this proposal Uniswap’s best shot yet.
The new fee model: balancing LPs and protocol revenue
From a technical view, the plan reworks how fees are split. In V2, the 0.3% total fee remains, but 0.25% goes to liquidity providers and 0.05% to the protocol. V3 refines that ratio dynamically — between one-quarter and one-sixth of LP fees go to Uniswap itself.
That structure could bring 40 million in annualized income, or up to $120 million in a bull market. The proposal also includes an immediate burn of 100 million UNI — 16% of supply — plus a permanent burn schedule.
In short, UNI would evolve from a “governance-only token” into an income-generating asset.
Yet that value must come from somewhere. The total trading fee doesn’t change; it’s just being reallocated. Every dollar going to the protocol is a dollar taken from LPs.
Community simulations show Uniswap could lose up to half of its Base chain volume overnight if LPs migrate to higher-yield rivals. To counter that, Hayden’s plan includes MEV-internalization tools and new V4 “hooks” to dynamically adjust fees and open fresh revenue streams.
A16z steps aside, but the competition heats up
Even if governance passes, Uniswap faces another test — competition. Aerodrome is already dominating the Base chain.
Aerodrome’s CEO Alexander at Dromos Labs mocked Uniswap on X, saying, “I never imagined our biggest rival would hand us such a gift on our biggest launch day.”
The data backs him up. Over the past 30 days, Aerodrome processed 12 to 473 million versus Uniswap’s $300–400 million.
Why? Yields. Aerodrome’s ETH-USDC pool offers 50–100% annualized returns with AERO token incentives, compared to Uniswap’s 12–15%. LPs go where the profits are, not the brand names.
If Uniswap’s fee switch cuts LP income further, more liquidity could flee. Model estimates suggest 4–15% could exit, triggering slippage, reduced volume, and a downward spiral.
Can the burn and fee switch save Uniswap?
Financially, the math looks strong. Community member Wajahat Mughal estimates Uniswap V2 and V3 together have already generated 114 million if switched on. Including Base, UniswapX, and V4 expansion, that could top $130 million annually.
If the 100 million UNI burn proceeds, worth over 7.4 billion, with a circulating market cap near $5.3 billion. That sets a forward price-to-earnings ratio around 40 — not cheap, but far more grounded than before.
For the first time, UNI holders could see real cash flows tied to protocol performance. Yet risk remains. The estimates rely on bull-market volumes. A downturn could slash fee income fast. Execution also matters — whether burns and buybacks are automated or discretionary will decide how effective they really are.
Aerodrome, Curve, Fluid, and Hyperliquid are all pushing aggressive incentive programs. If Uniswap shrinks LP rewards now, the liquidity drain could outweigh the burn benefits.
The fee switch could make UNI valuable again. Whether it also restores Uniswap’s throne — that’s a different fight entirely.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.