The Uniswap decentralized exchange has entered a new era following the overwhelming passage of the landmark 'UNIfication' governance proposal. The vote, which concluded on December 25, 2025, received near-unanimous support with over 125 million UNI tokens voting in favor and a mere 742 against, representing a 99.9% approval rate and far exceeding the 40 million vote quorum.
The centerpiece of the proposal is a one-time burn of 100 million UNI tokens from the protocol's treasury. Valued at approximately $590-$600 million at the time of the vote, this burn permanently removes roughly 10% of the initial 1 billion token supply, reducing the circulating supply from about 630 million to 530 million tokens. The burn was executed after a mandatory two-day governance timelock period, with blockchain monitors confirming the transfer of tokens to a verifiable, inaccessible burn address.
Beyond the historic burn, UNIfication activates Uniswap's long-anticipated protocol fee switch, fundamentally altering its economic model. Previously, all trading fees went to liquidity providers (LPs). Now, a portion will be captured by the protocol itself to fund ongoing UNI token burns. The fee switch is initially active on Uniswap v2 and select v3 pools on Ethereum mainnet, covering 80-95% of LP fees.
The fee structure varies: For v2 pools, LPs receive 0.25% of fees while the protocol takes 0.05% for burns. For v3 pools, the protocol's share is one-quarter of LP fees for 0.01% and 0.05% pools, and one-sixth for 0.30% and 1% pools. With Uniswap processing around $2 billion in daily volume, analysts estimate the fee switch could generate roughly $130 million annually for token burns. Additionally, net sequencer fees from Uniswap's Layer 2 network, Unichain—which processes about $100 billion in annualized DEX volume—will also feed into the burn mechanism.
The burn process is managed by two smart contracts: 'TokenJar,' where fees accumulate, and 'Firepit,' where users must burn UNI tokens to claim their share of the fees, creating a deflationary feedback loop. The proposal also introduces Protocol Fee Discount Auctions (PFDA), allowing traders to bid for fee exemptions, with winning bids used to burn additional UNI.
UNIfication also brings major organizational changes. Operations between Uniswap Labs and the Uniswap Foundation are being consolidated, with most Foundation team members transitioning to Labs. The Foundation will deploy its remaining $100 million grants budget before winding down. Uniswap Labs will remove all fees from its interface, wallet, and API services to drive volume to the protocol. Governance approved an annual growth budget of 20 million UNI tokens, starting in 2026, to fund ongoing development.
The proposal's passage follows years of regulatory uncertainty under former SEC Chair Gary Gensler, which delayed the fee switch. The community now believes DeFi has reached a "mainstream inflection point." The market reacted positively, with UNI gaining 2.5-3% in the 24 hours after approval, trading around $5.90-$6.02, and having climbed over 17% in the preceding week in anticipation of the vote.
