Decentralized exchange Uniswap could switch on fees for its liquidity pools and generate additional revenues for the protocol.

A proposal put forth by governance delegate GFX Labs on May 10 called for switching on fees on all Uniswap’s liquidity pools that generate over $10,000 in annualized income.

“The LPs [liquidity providers] making the most money off Uniswap are not retail traders. They are professional market makers, just like the ones seen on traditional exchanges,” said GFX Labs.

Compared to major centralized exchanges that charge market makers between 0.02% and 0.60% in fees, Uniswap’s current fee structure is set up to pay liquidity providers.

If the proposal is to be implemented, anyone would be able to pay gas to collect the fees, sell these tokens automatically through the Uniswap auto-router and send the proceeds to the Treasury. The starting point for implementing protocol fees would be taking one-fifth of fees generated, which would amount to $52 million in fee revenue by GFX Labs’ estimates.

Although it’s still too early to determine how users feel about turning the fee switch on, initial comments on the governance forum suggest there might be some resistance from the community.

“Yeah, it’s clearly technically feasible, and your implementation makes sense – but that doesn’t mean we should go forward with development just because we can,” said one user, who expressed concerns that the move might increase competition and the additional revenue may not be effectively utilized by the DAO. 

Another concern among community members was the potential legal ramifications of monetizing the protocol in this manner.

“If Uniswap turns on fees, it will be way too big for the SEC to ignore and the industry is going to hate the outcomes. As soon as UNI is fee-generating, it’s almost definitively a security in the SEC’s eyes,” tweeted Graham Novak, founder of ConstitutionDAO.