Proposed introduction of transaction fees
Decentralized exchange (DEX) Uniswap is considering a proposal to impose a fee on its liquidity pool. Targets liquidity pools with regular trading volume that generate annual revenue of 1.34 million yen ($10,000) or more.
Currently, token trading on Uniswap is paid in full to Liquidity Providers (LPs). However, the Uniswap protocol has a code called a “fee switch” that, when turned “on”, allows fees to be distributed among LPs, the protocol’s treasury and token holders.
The primary reason for this is that the introduction of fees for LPs will allow the protocol to supplement its treasury coffers and provide rewards to holders of its native token, UNI. In addition, Uniswap, which has a market share of 70%, will take the lead in showing that it is possible to make large profits by introducing fees in the DeFi ecosystem.
Uniswap’s main protocols are Uniswap V2 and V3, with total assets deposited (Total Value Locked = TVL) of approximately 147.5 billion yen ($1.1 billion) and 321.8 billion yen ($2.4 billion) respectively. The average daily trading volume is 10 billion yen ($75 million) for V2 and 53.6 billion to 147.5 billion yen ($400 million to $1.1 billion) for V3.
The proposal points out that the most profitable LPs on Uniswap are professional market makers, not individual investors (traders). Giving comparisons to examples of transaction fees from major exchanges Binance and Coinbase, he explained that Uniswap is the only major exchange that rewards makers.
DEX (Distributed Exchange)
A decentralized exchange built on blockchain. It is also called “DEX” from “Decentralized EXchange”, which is an English translation of “decentralized exchange”. Since transactions are conducted directly between parties without going through a central administrator, there is no need to pay a fee to the administrator, and other features include low liquidity and the user managing the private key.
This is not the first time Uniswap has considered introducing fees to LPs. A similar proposal was actively discussed in the community last summer, but in the end it was not possible to obtain sufficient support from the community, and the introduction was shelved.
At that time, the biggest concern was the tax problem in collecting fees. Opinions on this proposal also pointed out legal and tax risks.
At the Uniswap Governance Forum, where the proposal is discussed, the following opinion was expressed:
The current administration 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 reason 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 be resolved first before discussions about introducing fees begin.
Also, V3’s business license (permitting commercial use of the code) just expired on April 1st, and turning on the “fee switch” will encourage competing projects to create forks. pointed out.
connection:Why the DEX market is attracting attention in April when Uniswap v3 commercial use restrictions expire