Uniswap community votes down protocol fees for liquidity providers

A significant portion of Uniswap community turned down a proposal for charging fees from liquidity providers (LPs) on the protocol in a surprising vote, which ended on Thursday.

Over 45% of the community voted for ‘no fee,’ while 42% voted for one-fifth of the fee generated by Uniswap version 3 (V3) pools to be charged to LPs. A much smaller 12% of the community voted for one-tenth of the fees to be doled out, while a nominal 0.04% voted for one-fourth.

LPs are large market makers, with millions or more in locked-up assets, that facilitate user trading on Uniswap and in turn earn a cut of fees in each trade. LPs are currently not charged anything by the platform for using the platform.

An early temperature check for such a feature in December concluded that users were positive about the change but remained cautious – as it meant lesser earnings for LPs and risk of capital flight.

Results of the poll could likely mean a formal poll expected for later this year incorporates community sentiment and changes parameters to keep community members satisfied.

But a GFX Labs' proposal floated earlier this year strived to change that. “Uniswap is in a strong position to turn on protocol fees and prove that the protocol can generate significant revenues,” the developer firm said in early May.

“We need to reaffirm that liquidity providers are protocol users and do not need full rebates. The LPs making the most money off Uniswap are not retail traders. They are professional market makers, just like the ones seen on traditional exchanges,” the firm added at the time.