The $UNI token economic model has always been a "joking point" in the DeFi industry. Two days ago, @mjayceee published his ideas on improving the $UNI token economic model in the @Uniswap forum.

But I will give another idea and improvement plan through the three sections of this article:

a. Uniswap’s token dilemma

b. Uniswap’s most profitable business

c. Ways to break the impasse

a, $UNI token dilemma

First of all, at present, the $UNI token only has one governance right.

Whether to open the Fee Switch is also the most controversial issue in the Uni community, because once the Fee Switch is opened, it will inevitably affect the income of the LP side, thereby reducing the overall liquidity of Uni, leading to a decline in trading volume, and then LP income will be further reduced. In this way, it will enter a death spiral.

b. Uniswap’s most profitable business

In terms of mainstream currency transactions, Uniswap has several major competitors:

1. Transaction aggregator. It diverts a large part of C-end traffic, and once the liquidity of Uniswap itself decreases, a large part of the transaction volume may be diverted to other DEX platforms.

2. Curve. Whether it is Curve’s dominant position in stablecoin transactions or the increase in Curve V2 transaction volume, it is a direct competitor of Uni.

However, there is only one category of asset transactions where Uniswap has an absolute dominant position. That is the transaction of newly issued assets:

1. MEME/Dogecoin

2. Blue chip project tokens issued directly on the chain, such as Blur and ARB

There are several reasons for this phenomenon:

1. Due to Uniswap's historical status and brand effect, it is still the most recognized DEX by the public, and there are almost no doubts about its security.

2. Uniswap V2's relatively brainless xy=k full-price range LP addition method makes it the preferred way for almost all Dogecoins to add liquidity on the chain.

3. Uniswap V3's centralized liquidity LP also provides some advanced traders with a more capital-efficient LP adding method, so that they can obtain high APR LP returns in the early stages of coin issuance when trading volume is high.

However, the Uniswap platform and $UNI itself cannot gain any benefits in the early stage of ultra-high trading volume of this type of new project. And there is almost no competition. Therefore, I propose the following solution and some simple data analysis:

C. Solution

For every transaction pair that has a time limit of less than 720 hours (30 days), the Fee Switch will be automatically turned on, and an additional handling fee of 0.3% (the specific ratio can be determined through governance) will be charged as an external cash flow source for the $UNI system.

At the same time, the transaction fees for the same newly issued token and $UNI token can be reduced by half, increasing the utility of UNI.

After 720 hours, Fee Switch automatically turns off.

Some simple data: From @dexscreener's data we can know:

1. Uniswap’s transaction volume on the ETH mainnet in the past 24 hours was $670M.

2. Among them, the trading volume of trading pairs with less than 720 hours in 24 hours is $140M, accounting for 21%. Through the trading of these new assets, $UNI can provide $0.42M in cash income within 24 hours.

And this is even in the context of low on-chain transaction volume during the bear market.

Compared to Curve's estimated one-year revenue of $14.26M, $UNI's revenue from this improvement is approximately $150M.

If some veTokenomics designs are added to the $UNI token itself, the interests of the $UNI token and the platform LP can be more strongly bound. (Of course, this is difficult to achieve due to the limitations of the Uniswap Labs US team)

However, we can find that by allowing Uniswap to add a certain Fee Switch fee to its most competitive business, $UNI can generate very competitive cash flow income in the industry, so there is huge room for imagination for subsequent plans based on this.

Subsequent research directions:

1. Whether the additional transaction fees for new trading pairs will affect Uniswap’s moat effect on this type of assets.

2. More detailed data analysis to calculate more accurate expected cash flow returns.

3. If this solution is feasible, how will DAO manage the large amount of cash flow income it obtains in the future: buyback? airdrop? or through ecological fund management, etc.

Note: This article is not a rigorous research discussion, it is written purely out of the blue.

If there are any data or logical errors in it, thank you in advance for leaving comments to correct them and welcome discussion.