Uniswap’s UNIfication Proposal - Buybacks & Competitive Risk

Uniswap Fee Switch Proposal Breakdown

Uniswap put up a fee switch proposal yesterday titled 'UNIfication' which essentially aims to enable a fee switch for the protocol, directing fees generated from the DEX towards buying back the UNI UNI$5.5840 token. The TL;DR on the proposed changes is as follows:

• Protocol Fees: Turn on Uniswap protocol fees and use them to burn UNI.
• Rollout: Gradual - starting with Uniswap v2 and select v3 pools on Ethereum, covering 80–95% of mainnet LP fees.
• Expansion: Later phases to include L2s, other L1s, UniswapX, PFDA (MEV), and aggregator hooks (Uniswap v4).
• Fee Splits:
  • v2 pools: LP fees drop from 0.3% → 0.25%; protocol fee = 0.05%.
  • v3 pools: Protocol fees adjustable per pool.
  • 0.01% & 0.05% pools → protocol fee = ¼ of LP fee.
  • 0.3% & 1% pools → protocol fee = ⅙ of LP fee.
• Unichain Sequencer Revenue: Revenue = sequencer fees − L1 costs − 15% Optimism cut.
• Aggregator Hooks (Uniswap v4): Hooks, introduced with v4, turn Uniswap into an on-chain liquidity aggregator. Fees collected from external sources would also be burned as UNI.
• Treasury Burn: The protocol aims to burn 100 million UNI tokens from its treasury - retroactively applying the proposed fee/buyback mechanism.

In essence, this is not sharing Uniswap protocol fees with UNI token holders but more along the lines of the protocol (and Uniswap Labs) going all in on the UNI token i.e. the protocol's token price will be materially impacted by Uniswap's revenue.

Implied Fees & Buybacks

We can replicate the proposed fee split to generate how much the protocol would be making (for UNI buybacks) and hence, compare the buybacks and relative valuation of the UNI token v/s peers.

CoinDesk Research's dune query here calculates the weekly fees (and hence, revenue in this case) for Uniswap, if we retroactively apply the above proposal fee split. Based on this, Uniswap is currently averaging ~ $300m in annualized revenue.

Even though this is not exactly 'holder' revenue, given all of the fees are expected to go towards UNI burns, we can compare the annualized revenue against other protocol's holder revenue (as defined by DeFillama here) to get a sense of the scale of buybacks/impact on UNI token.

Based on this logic, UNI would rank 3rd in terms of holders revenue i.e. revenue that directly benefits the UNI token - just behind HYPE and PUMP.

Valuation

From a revenue and holder-revenue perspective, the proposal is clearly favourable for UNI. The next question is how Uniswap compares to other spot DEXs from a valuation standpoint.

Based on the implied retroactive revenue for Uniswap, the protocol would rank second on the FDV/annualised revenue metric (~15×) - just above Raydium (~25×) and below Aerodrome (~8×) on a relative valuation basis. This suggests Uniswap trades at a moderate premium, not overvalued but not cheap either.

There is a caveat: these calculations are based on the current proposed fee split. Over time, as additional pools and chains are included, total protocol fees - and therefore buybacks - are likely to increase, assuming trading volumes remain stable or continue to grow.

The core question then becomes whether volumes will stay consistent/grow on Uniswap. This is interesting to answer as Aerodrome - Uniswap's core competitor on Base - is expected to announce the launch of its DEX on the Ethereum mainnet.

When looking at the volume ratio for Aerodrome/Uniswap on Base, Uniswap is currently doing  ~70% of Aerodrome's volumes on Base - a ratio that's been more or less consistent for the past year. This implies that Aerodrome has managed to maintain its dominance on Base for a relatively significant time.

If Aerodrome does launch on the Ethereum mainnet, this might potentially lead to reduction in volumes for Uniswap mostly due to the following:

• The proposed Uniswap fee split reduces LP earnings, incentivising migration to platforms offering higher LP fees.
• Aerodrome's mechanism is solely incentive driven - and hence, very pro-AERO LPs and token holders.

Overall, from a sole buyback and revenue perspective - this is clearly a big deal for UNI, with the added caveat of a potential increase in competition on the mainnet. The buybacks alone may not be sufficient in justifying being bullish on UNI as a token.

Lastly, looking at UNI/AERO price ratio, its reflective of the above. The broader trend has been of relative weakness since the start of 2025, but with a potential bounce off weekly lows and a rejection at current weekly resistance (red horizontal line - chart below).

The lack of a technical breakout (currently) also favors the above thesis that Aerodrome is likely to continue its dominance over Uniswap - if it does launch on the mainnet.