The UNIfication proposal passed with overwhelming support on December 25, 2025, setting the stage for a massive token burn and new fee structure.
Overwhelming Approval from Token Holders
The vote wasn’t even close. Over 125 million UNI tokens supported the proposal, while only 742 voted against it. This represents 99.9% approval from the community. The result far exceeded the 40 million vote requirement needed for the proposal to pass.
Uniswap founder Hayden Adams confirmed the results on December 26, stating that the protocol can now become “the primary place tokens are traded.” The voting period ran from December 20 through Christmas Day, with the quorum being reached within just two days.
The $600 Million Token Burn
The most eye-catching part of the proposal is a one-time burn of 100 million UNI tokens from the protocol’s treasury. At current prices, this represents approximately $590-600 million worth of tokens being permanently removed from circulation.
This retroactive burn accounts for the fees that could have been collected if the protocol fee switch had been active since Uniswap launched in 2018. The burn will execute after a mandatory two-day governance timelock period.
Source: @UniswapFND
Currently, UNI has a circulating supply of approximately 630 million tokens. After the burn, this will drop to around 530 million tokens, creating a significant supply squeeze.
Protocol Fee Switch Goes Live
Beyond the one-time burn, UNIfication activates Uniswap’s long-discussed protocol fee switch. This represents a fundamental shift in how the exchange operates.
Previously, all trading fees went directly to liquidity providers who supply tokens to the platform. Under the new model, a portion of these fees will be redirected to the protocol itself. These fees will then be used to burn UNI tokens on an ongoing basis.
The fee switch will initially activate on Uniswap v2 and select v3 pools, covering 80-95% of liquidity provider fees on Ethereum mainnet.
For v2 pools, liquidity providers will receive 0.25% of trading fees while the protocol captures 0.05% for token burns. For v3 pools, the protocol’s share varies by tier: one-quarter of LP fees for 0.01% and 0.05% pools, and one-sixth of LP fees for 0.30% and 1% pools. Future governance votes will determine activation on other networks and versions.
Uniswap processes approximately $2 billion in daily trading volume. Based on current volumes, analysts estimate the fee switch could generate around $130 million annually for token burns.
Net sequencer fees from Unichain, Uniswap’s Layer 2 network, will also flow into the same burn mechanism. Unichain currently processes approximately $100 billion in annualized DEX volume and generates around $7.5 million in annualized sequencer fees. This creates what developers call a “deflationary loop” where increased protocol usage directly reduces token supply.
How the Burn Mechanism Works
The protocol uses two smart contracts to manage the burn process. Trading fees accumulate in a contract called “TokenJar.” UNI holders can only withdraw funds from TokenJar by burning their tokens in another contract called “Firepit.”
This means users must permanently destroy UNI tokens to claim their share of accumulated fees. The more the protocol is used, the more fees accumulate, and the more UNI gets burned over time.
The proposal also introduces Protocol Fee Discount Auctions (PFDA). This system allows traders to bid for temporary exemptions from protocol fees. The winning bids will be used to burn additional UNI tokens, capturing value that would otherwise go to MEV searchers or validators.
Major Organizational Changes
UNIfication goes beyond just economics. The proposal consolidates operations between Uniswap Labs and the Uniswap Foundation.
Most Uniswap Foundation team members will transition to Uniswap Labs, bringing ecosystem support, governance support, and developer relations under one roof. The Foundation will deploy its remaining $100 million grants budget before closing operations.
Uniswap Labs will also remove all fees from its interface, wallet, and API services. This move aims to drive more high-quality volume to the protocol while ensuring any value generated benefits the entire ecosystem rather than one company.
To fund ongoing development, governance approved an annual growth budget of 20 million UNI tokens, distributed through a vesting contract starting in 2026.
Regulatory Backdrop and Market Response
The proposal arrives after years of regulatory uncertainty. Uniswap faced scrutiny from the SEC under former Chair Gary Gensler, which delayed activation of the fee switch. The proposal notes that the regulatory climate has changed, and DeFi has reached an “inflection point of becoming mainstream.”
UNI price responded positively to the vote, gaining 2.5-3% in the 24 hours following approval. The token traded around $5.90-$6.02 on December 26-27, with market capitalization of approximately $3.7-3.9 billion.
Over the previous week, UNI had climbed more than 17%, suggesting traders anticipated the proposal’s passage. The token remains well below its all-time high of around $45 reached in May 2021.
Looking Ahead: The DeFi Test Case
UNIfication transforms UNI from purely a governance token into a value-accruing asset directly tied to protocol performance. This makes Uniswap one of the few major DeFi protocols linking token supply to actual economic activity.
Uniswap has processed over $4 trillion in total volume since launching in 2018, facilitated by thousands of developers and millions of liquidity providers. The protocol is active on more than 39 blockchain networks and remains the dominant decentralized exchange despite competition from platforms like SushiSwap, Curve, and Balancer.
The next few months will reveal whether the deflationary mechanism can sustain itself while maintaining the liquidity that made Uniswap successful. Liquidity providers will need to earn sufficient returns even with reduced fee shares, or they may migrate to competing platforms.
A New Chapter Begins
The UNIfication proposal represents the most significant overhaul in Uniswap’s seven-year history. By burning 100 million tokens and activating protocol fees, the community has fundamentally changed the relationship between UNI holders and the platform’s success. Whether this bold move pays off will depend on maintaining the delicate balance between protocol value capture and competitive liquidity provision. The DeFi world is watching closely.