Uniswap’s native token UNI surged 50% to an intraday high of $9.94 hours after Uniswap Foundation and Uniswap Labs jointly proposed a governance upgrade to activate protocol fees.

The proposal, known as “UNIfication,” aims to activate the long-debated fee switch. It would divert a portion of Uniswap’s protocol fees — currently going to liquidity providers — into a mechanism that burns UNI tokens. 

The fee switch would redirect between one-quarter and one-sixth of swap fees from Uniswap v2 and v3 pools to a “token jar” smart contract. 

UNI holders would then be able to burn their tokens and withdraw an equivalent amount of crypto from the token jar, effectively reducing the UNI supply and effectively boosting the value of the remaining tokens.

This story is an excerpt from the Unchained Daily newsletter.

The proposal also includes the direct burning of nearly 100 million UNI tokens worth around $800 million, representing the fees that could have been burned since Uniswap’s launch.

A “fee-switch” proposal has been long debated within the Uniswap community, with previous efforts to implement it often failing at the eleventh hour of governance voting.

“UNI launched in 2020, but for the past 5 years Labs has been unable to meaningfully participate in Uniswap governance, and has been greatly restricted in the ways it can build value for the Uniswap community,” said Uniswap Labs founder and CEO Hayden Adams.

“That ends today!”