New proposal will not bring enough funds for significant change
The fee switch proposal initially posted back in July would collect small fees on certain Uniswap liquidity pools. However, community members preferred taking more time and conducting more research prior to making a decision on such a sensitive topic, and here’s why.
Self-sustainability was the initial goal behind the aforementioned protocol charge. The feature would include the exact percentage amount hardcoded into core contracts, which remain non-upgradable.
People getting excited at yet another proposal to turn on the Uniswap fee switch.
Even if it happens, are current value, the entire protocol would bring in $14.6M/year, roughly $0.02 per token, per year.
Meaning its valuation is 314.93x profit. pic.twitter.com/5jBn7ra19F
— Adam Cochran (adamscochran.eth) (@adamscochran) December 3, 2022
In the case of success, at the current value, the entire protocol would bring in almost $15 million a year, which is, at the current valuation, 314x profit. Additionally, the profit from the fee switch sends money to the protocol, even though there is no staking mechanic implemented.
The excessive funds that would be generated if the proposal goes through have not been assigned yet, even though the consensus is to spend them on further growth of the project.
However, industry experts do not see $15 million added annually having a significant effect on the growth of the industry-leading on-chain swap protocol. Even the direct $15 million pool incentive would not change the TVL in the biggest pools.
Considering all the factors, Adam Cochran believes the vote will not be successful and may even cause a “sell the news” event once people finally discover the lack of value the protocol would bring.
In the past few days, the protocol’s token UNI has been showing a solid price performance despite the descending volume and the overall bearish state of the market. Since Nov. 28, UNI has gained more than 17% to its value and is now trading at the $6.1 price level.