Uniswap executes historic UNI burn after governance approval, reducing supply, activating protocol fees, and strengthening the token’s deflationary model.
Uniswap has completed a landmark token burn that reshapes its economic structure. The protocol burned 100m UNI. The value was almost $596 million. Confirming data on the blockchain proved the transaction early in the morning of December 28. As a result, Uniswap made one of DeFi’s biggest supply cuts.
Uniswap Activates Fee-Burn Mechanism With Major Token Burn
According to analyst EmberCN, the burn took place around 4:30 am UTC. The transaction permanently took UNI out of circulation. It was the first instance of the large-scale execution of a decision recently made in governance. Therefore, the protocol went from proposal to implementation in a matter of days.
The burn came after the approval of the Uniswap fee burn proposal. This plan ends up permitting future protocol fees to finance continued UNI burns. As a result, it started Uniswap created a structural deflationary mechanism. Market participants considered this a significant change.
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Governance information revealed overwhelming support for the proposal. The initiative was called “UNIfication” and passed with 99.9% approval. More than 125 million UNI tokens cast their favor. Only 742 UNI opposed the measure. Thus, there was almost a unanimous token holder consensus.
Several prominent figures in the industry supported the proposal. Supporters included Jesse Waldren at Variant. Infinex and Synthetix’s Kain Warwick also voted in favour. They were joined by Ian Lapham, a former Uniswap Labs engineer. Their support helped to boost market confidence.
The burn had a significant effect on reducing UNI’s supply. Total supply plunged from one billion tokens. Circulating supply has now reached a point close to 730 million UNI. This reduction firmed scarcity expectations. As a result, UNI began a new deflationary phase.
Market Response and Structural Changes Take Effect
After the burn, the market performance for UNI improved. The token traded near $6.01. It increased approximately 0.82% as of the last 24 hours. Moreover, UNI has increased by well over 5% after the burn. It was also up almost 19% during the previous week.
Analysts credited the rally to better token economics. In the past, the Uniswap protocol fees were not active. Liquidity providers made the bulk of the trading revenue. Now, protocol fees are used to support the value of the tokens through burn. This brings Uniswap in line with value-accruing DeFi models.
The proposal also activated idle fee switches. These apply to Uniswap v2 and select v3 pools. A portion of trading fees will be burned on UNI indefinitely. Therefore, increased trading volumes could decrease supply even further.
Organizational changes were also introduced by UNIfication. Most teams under the Uniswap Foundation will be rolled under Uniswap Labs. This consolidation is to achieve improvement in operational efficiency. Additionally, Uniswap Labs will cease calling interface fees. The move favors protocol growth.
With the elimination of the fees on the interface, Uniswap is hoping to achieve its goal of wider adoption. Lower costs may attract more traders and developers. Increasing activity could help increase protocol revenue. Over time this results in strengthening of the burn mechanism. Growth and deflation may feed on each other.
The completion of the transaction was confirmed by the data on Etherscan. The UNI tokens then were sent to an unrecoverable address. Once burned, they are not eligible for recirculation. This permanence helps in building long-term confidence.
As decentralized finance develops, sustainable token models become important. Uniswap’s approach is in line with this trend. By a combination of fee activation, deflation, and adoption focus, the protocol gains strength and badges in the DeFi market.
Source: https://www.livebitcoinnews.com/uniswap-burns-100m-uni-worth-596m-after-fee-burn-approval/
