The Uniswap Foundation announced a new governance proposal last night, aiming to distribute protocol fees to UNI token stakers. As soon as the news was released, the UNI token saw a surge of 62.8% in the past 24 hours. Why does this proposal incentivize such a significant increase in the value of UNI?
Uniswap Foundation released a new governance proposal called “Activating Uniswap Protocol Governance” on its official website. The proposal intends to distribute protocol fees to UNI token stakers. CoinGecko data shows that within one hour of the news release, the UNI governance token experienced a rapid increase of 53%, surpassing $12 at one point. In the past 24 hours, it soared by 62.8% and was still oscillating at around $12 at the time of writing.
The scheduled Snapshot vote for this proposal will be released on March 1, 2024, and the on-chain voting will begin on March 8, 2024.
Uniswap’s average daily fees amount to $2.05 million.
As for why this governance proposal significantly motivates the increase in the UNI token price, one reason is that UNI holders have been criticized for not receiving many benefits. This proposal aims to distribute protocol fees, which undoubtedly increases the empowerment of UNI. Moreover, it is a significant empowerment because Uniswap generates fees that are second only to Ethereum and higher than Bitcoin, ranking it second among all crypto projects.
According to Crypto Fees data, Uniswap generated approximately $2.143 million in fees in the past 24 hours, with an average daily fee of $2.052 million in the past 7 days.
Not all fees generated by Uniswap will be collected by the protocol. Currently, all fees are still fully distributed to liquidity providers. There has been discussion about the “fee switch,” which, once activated, would allow Uniswap to collect protocol fees, but it has not been activated yet.
Researcher Henson estimated the return rate for staking UNI. Assuming the protocol fees account for 20% of the fees and there is $173 million in annual protocol fees, and assuming half of the circulating UNI will be staked, there will be a staking volume of $3.5 billion. Under this assumption, the estimated annual return rate is 4.94% (1.73/35).
Henson concluded by saying that if trading volume doubles or even more due to the bull market and the popularity of Web3, the annual investment return rate could be over 10%.
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