Uniswap surges 60% after proposing fee reward mechanism for holders

Decentralized trade (DEX) Uniswap’s native token UNI climbed 60% on Feb. 23 to a two-year excessive of $12.48 following a governance proposal to introduce a fee reward mechanism for holders.

The token has since given up a few of its features and was buying and selling at $11 as of press time — up 48% every day, in keeping with CryptoSlate knowledge.

UNI was final buying and selling at these worth ranges in January 2022.

The first driver behind the worth rise is a new proposal to overtake the DEX’s governance system. It goals to sort out the essential situation of low engagement and “stale” delegation by immediately incentivizing energetic participation.

Energetic governance

In response to the proposal, Uniswap presently faces a troubling actuality: regardless of its governance system holding the reins of the protocol’s future, participation stays sluggish.

Lower than 10% of UNI tokens, the lifeblood of voting, are actively used, and a good portion of current delegation stands idle, failing to contribute to essential selections. The dearth of engagement poses a possible menace to Uniswap’s long-term stability.

The proposal desires to resolve this situation by making a compelling incentive for token holders that includes linking UNI token delegation and staking to a share of the protocol’s fee income. This creates a direct connection between energetic participation and potential rewards, aiming to foster a extra engaged group and appeal to new delegates.

The mechanism shall be carried out through two new sensible contracts which are meticulously designed to automate protocol fee assortment and distribute them pretty to stakers primarily based on their delegated UNI tokens.

The proposal lays out each element of those contracts, together with safety audits and code descriptions, to stay absolutely clear with the group.

Voting scheduled

The group has reacted positively to the event, and the surge in UNI’s worth signifies a shopping for frenzy forward of the voting snapshot.

After open dialogue and refinement on the Uniswap discussion board, the group will maintain two votes to find out whether or not it must be adopted — a snapshot vote on March 1 and an on-chain vote on March 8.

If profitable, the group will then have the ultimate say on activating the fee mechanism by means of a separate vote. This ensures each voice is heard and permits for additional deliberation earlier than taking the ultimate step.

This proposal’s potential ramifications prolong past Uniswap itself. Ought to it’s carried out efficiently, it may grow to be a reference level for different decentralized protocols in search of to reinforce energetic participation and accountable governance practices.

Nonetheless, cautious analysis is important to grasp the potential results on liquidity and commerce execution, as acknowledged throughout the proposal itself.

The proposal mirrors Osmosis DEX’s latest prop 651, which launched related incentives for token holders. The protocol has generated and distributed just a little over $4 million in taker charges to OSMO stakers.

Osmosis Lead Llama Emperor Osmo informed CryptoSlate:

“The recently suggested changes within Uniswap only help to cement that Osmosis governance acted with the sustainability and long-term viability of the Osmosis DEX in mind. Similar to what Prop 651 did for Osmosis, Uniswap aims to transform its UNI token from a governance-only token to one with a legitimate value accrual mechanism.”