Arbitrum [ARB] AirDrop has benefited the protocol and its users, but it has also benefited other protocols such as Uniswap [UNI]. According to Uniswap’s 28 March tweet, 92% of all ARB holders used Uniswap to swap their received token rather than other DEXs. This revealed that the Uniswap protocol was preferred by the majority of crypto community members.

UNI experienced a similar rise of activity. According to Santiment data, the number of active addresses using UNI has increased in recent days, while its price has continued to fall. Santiment indicated that this was a bullish divergence and that the token’s price may grow.

However, traders expecting the UNI price to rise should be wary of the dropping long/short ratio, which indicates a decrease in the number of long-term holders. Short-term token holders are more inclined to sell their stakes when prices rise, which can drive the token’s price down in the short run.

Also, the MVRV ratio of UNI has risen in recent days, implying that many investors may soon turn profitable and that selling pressure on the coin may intensify. Even if UNI may have a bright future, the Uniswap protocol should be improved. According to Token Terminal data, Uniswap fees have dropped by 29% in the previous few months, despite an increase in active users on the protocol.

The large quantity of bot activity on the Uniswap protocol could explain the drop in fees collected. According to Dune Analytics, MEV bots accounted for 41.1% of total volume on the DEX. MEV bots can have a negative impact on the DEX by front-running transactions, which implies inserting their own transaction before another’s in order to profit from the price shift. This can result in the initial transaction failing or the trader receiving a lower-than-expected price, which can discourage trading on the DEX and undermine Uniswap’s image.

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Uniswap has proposed a new fee mechanism that has bolstered UNI’s value by 12.31%. Alongside this proposal, the Uniswap Foundation has disclosed holdings totaling $41.41 million in fiat currency and 730,000 UNI tokens. 
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If the proposal is approved, ownership of the mainnet UniswapV3Factory will transfer to a new instance, marking a significant development in Uniswap’s governance and operational structure.

Uniswap’s Proposal for Autonomous Fee Collection and Governance

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The Uniswap Foundation has unveiled a significant proposal to implement an autonomous fee collection and distribution system within Uniswap V3 pools. This initiative aims to bolster the protocol’s financial sustainability and governance structure. If approved, ownership of the mainnet UniswapV3Factory will transition to a newly deployed instance named V3FactoryOwner.
However, it’s important to note that this vote will not immediately activate the fees, which will require a subsequent proposal for implementation.
Earlier in February, the Uniswap Foundation introduced a fee reward mechanism to incentivize governance participation among UNI token holders. Despite potential legal challenges from the U.S. Securities and Exchange Commission (SEC), this proposal garnered strong initial support. Traditionally, all fees generated by Uniswap were directed to liquidity providers (LPs) supplying assets to the platform.

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The new proposal aims to distribute protocol fees among staked and delegated UNI token holders, encouraging active engagement within the ecosystem.
Uniswap’s Financial Transparency and Legal Developments
According to CryptoFees, Uniswap generated approximately $3.2 million in fees within the last 24 hours, averaging $3.4 million weekly. The protocol handles about 30% of decentralized finance trades. Simultaneously, the Uniswap Foundation disclosed holdings of $41.41 million in fiat and stablecoins, along with 730,000 UNI tokens as of the first quarter’s end. During this period, $4.34 million was committed to new grants, with $2.79 million disbursed from previous commitments.

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Fiat and stablecoins are designated for grants and operations, while UNI tokens are reserved for employee rewards. This disclosure aims to enhance stakeholder confidence ahead of the upcoming vote on the new fee mechanism.
Uniswap responded to the SEC’s Wells notice in their ongoing legal dispute, disputing claims of violating securities laws by operating as an unregistered securities exchange and broker. The firm asserts that current legal classifications do not grant the SEC jurisdiction over its decentralized protocol.
Despite legal challenges, Uniswap’s proposal for a new fee mechanism has bolstered UNI’s market value, reflecting strong investor confidence. With clear governance and fee distribution plans, Uniswap aims for sustainable growth. However, ongoing SEC proceedings pose potential risks requiring careful monitoring by stakeholders. Transparency and active participation will be crucial as the vote approaches to ensure the protocol’s continued success.

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Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.

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