Uniswap (UNI), one of the largest decentralized cryptocurrency exchanges (DEXs) in the industry, has announced a major upgrade proposal that could have significant implications for UNI token holders. The proposal aims to improve governance participation, enhance resilience, and reward token holders for active engagement within the Uniswap ecosystem.

Uniswap Foundation (UF) Lead Developer Erin Koen, who expressed his excitement, said that it has been the “biggest week in Uniswap Protocol Governance” and revealed the details of the proposed upgrade. The core of the proposal is a fee mechanism that would reward UNI token holders who stake and delegate their tokens. By actively participating in the governance process, token holders could earn additional rewards in the form of protocol fees.

Koen said that the proposal would invigorate governance by incentivizing not only delegation but thoughtful and active delegation, by tying delegation to protocol fees. He said that he believes that UNI token holders would be motivated to choose delegates whose votes and engagement with the protocol would lead to the protocol’s growth and success. He also said that he expects to see an influx of new delegations if the proposal succeeds.

Uniswap’s benefits from the upgrade

The proposed upgrade would not only benefit the UNI token holders, but also the Uniswap protocol and the broader DeFi (decentralized finance) space. Some of the benefits are:

The upgrade would increase the number of actively involved token holders, which would make the governance structure more robust and decentralized, ensuring that decisions align with the collective interests of the UNI community.
The upgrade would maintain governance control over key parameters such as fee-charged pools and fee magnitude. Token holders would collectively decide on these critical aspects, allowing for flexibility and adaptability in response to market dynamics.
The upgrade would create a positive feedback loop between the protocol and the token holders, as the protocol fees would reflect the success and adoption of the protocol, and the token holders would benefit from the increased value and rewards of their tokens.
The upgrade would also attract more users and liquidity to the Uniswap protocol, as it would offer a more differentiated and premium service than its competitors, and a more transparent and fair fee distribution model.

Koen said that the upgrade would transform the Uniswap protocol into a “public good” that would serve the best interests of the UNI community and the DeFi ecosystem.

Uniswap’s process and timeline for the upgrade

The proposed upgrade is not yet final, as it requires the approval of the UNI token holders through an on-chain vote. The proposal has been posted on the Uniswap governance forum, where it has received positive feedback and support from the community. The next step is to submit the proposal to the Uniswap governance contract, where it will undergo a seven-day voting period.

If the proposal passes the on-chain vote, the community will have the option to activate the fees. Gauntlet, a trusted entity, is reportedly preparing a proposed roll-out process that will be shared on the forum. Only after completing this separate governance process will the fees be collected and distributed according to the adopted contracts.

Koen said that he hopes that the proposal will receive enough support from the UNI token holders, and that he looks forward to seeing the Uniswap protocol reach new heights with the upgrade.