I'm not saying reject the proposal, I want the fee switch on, but this experiment will exaggerate the effects of turning on the fee switch which may actually hurt progress towards turning on the fee switch. I think we need to think carefully about conducting the expiriment in a way that minimizes spillovers for example we should do the experiment on an entire chain of pools, since bridging is expensive and can be considered enough of a moat to contain most of the spillovers.

I would recommend turning on fees on Arbitrum system wide for all pools and all fee tiers.

Going back to the casino starting to rake pools, imagine you own a chain of casinos. you want to figure out how raking will affect your attendance and the sale of ancillary stuff like hotel rooms and drinks/food. So instead of turning on rake on a few tables in every casino, you turn on the rake in a few casinos. As long as there is sufficient geographic distance, you will have contained the spillovers pretty well.

I think markets are pretty localized here so for example it wouldn't make any sense to have a market for a bunch of arbitrum tokens exist on polygon or visa versa.

Hey everyone, I'm from Fluidity and we have experimented with an alternative solution to this, which uses both the fee switch and our Transfer Reward Function (TRF). Fluidity works by rewarding users for spending their crypto, including swaps on DEXs. For every reward that is paid out, it is split between sender and receiver, which means that the Uniswap treasury would earn yield every time somebody performs a transaction on Uniswap using fluid assets.

We have done some calculations with this, and they have shown that Fluidity would generate approximately the same amount of revenue for the three pools that have been chosen for the test run. Because of this, we propose a hybrid model that uses both fluid assets and the fee switch, where fluid assets would be used on pools that have lower LP fees and where it would otherwise become unprofitable for LPs to provide liquidity. For pools where this is not the case, the fee switch can be activated. With this, Uniswap would prevent liquidity leakage while still generating revenue for the treasury that can be used to incentivise token holders. It also discounts any increase in trading volume due to incentivising utility.

For example, we can assume around 200,000 daily transactions on Uniswap V3. If Fluidity captures only 5% of this volume, we can estimate the mean daily revenue for the treasury to be $1,100, or $400,000 annually. If we compare this to the DAI-ETH-0.05% pool, it would have earned the treasury an average of $136 daily in the last 7 days.

For some reason I can’t include images in this post, but we have written an extensive blogpost on how this would work as well as this thread.

This is first and foremost meant as a thought experiment and not an official proposal, nevertheless we would love to hear your thoughts on this!

Edit: embedded links

Hello all, excellent discussion so far. Some thoughts as a humble Uniswap tourist.

1. I don't quite get why LPs are particularly concerned with this experiment on a limited set of pools. Either (a) the margins on the pools are really low and they leave, (b) margins are high for some LPs and they stay while others leave, or (c) LPs leave the pools that have the fee switch turned on en masse. In any case, LPs can vote with the purse, and I don't buy that turning the switch on is an irreversible transgression against LPs.
2. @Game_Theorist, you and I share a name and a passion for algo game theory! Your approach aligns perfectly with a rational-self-interested-agent approach, which is where my dispositions lie as well. But I see the point of this proposal being to test just how efficient liquidity provision is on Uni V3. I love hypothesizing from theory as much as the next guy, but to fully reject this proposal on your grounds, one would need to assert that these markets are efficient. And who the hell would dare rest their name on a claim that crypto markets are efficient?
3. I think there's been precious little said about the legal concerns with this. I'm no lawyer, but I at least know there's stuff I don't know, and it'd be great to get someone who knows one to start thinking about the intricacies of the fee switch legally. This seems much higher priority than squabbling about LPs' opportunity costs for a short period of time on a limited number of pools.
4. In a way, the fact that so much debate has occurred already on the fee switch is perhaps a valuable prior for understanding the probability that turning on the fee switch (for some pools) is "good". When optimal parameters are not known, it is necessary to search the param space to hone in on optimal parameters. Of course, if this exploration is extremely high-cost, e.g. in the form of securities backlash or bitter LPs, then there's reason for pause. But if LPs' capital allocation is nearly as rational as the naysayers claim, then their equilibrium strategy will be to return their liquidity once the experiment concludes, same as before (assuming these LPs don't have enough power to grim-trigger the pools, which I think is a fair assumption). Under a consequentialist framework, which seems to be the one most agreeable to economics, taking no action is an action itself. And if legal concerns are resolvable, the search for optimal fee switch obviously requires turning some on.

As I said, I am but a tourist, and I'm likely missing context here. But if this experiment is tractable legally, the conversation should be on how it should be conducted, rather than if it should be conducted, due to the apparent lack of clarity that the community currently has regarding the effect of a fee switch.

Posted this on twitter but going to repost here because I think this direction is a huge mistake. I absolutely want fee teirs on but turning it on on a few pools to "collect data" seems incredibly stupid to me.

Imagine you are in a casino that doesn't charge rake. The casino is thinking about charging rake so it turns on the rake on a few tables. What happens?

Everyone will leave the newly raked tables to go to the non raked tables. The casino concludes that they should avoid rake because everyone would stop playing if there was a rake. But this is wrong because at casinos that have every table raked people still play.

TLDR the data that comes from "turning on a few pools to test" will be completely useless and lead to false conclusions bc of spillover effects. We know that exchanges can exist with rake, just add it on everything.

Posting a reply to my tweet since it was also relevant:

Mihai: or add it to all pools of a certain pair, so there's no rake-less pool to go to (on uniswap)

My reply:

Yes this is good but there is still the issue of bypassing since Uniswap is a network For example, if you rake DAI ETH, you can go DAI -> USDC via DAI/USDC 0.01% fee their and then USDC -> ETH via USDC/ETH so you bypass the rake for only a 0.01% fee.

This is particularly a problem for orders that are routed using a smart router, since you will see flow tend to bypass the pool which creates a vicious cycle that can basically make the pool obsolete.

no hard feelings towards @guil-lambert, OP, or anyone else who is advocating for this approach but IMO this is completely the wrong way to go about this. The data we gather will be incredibly misleading.

Hello guys, I have an idea, but first I need to tell that UNI only current utility which is governance is weak, it needs to capture value somehow, governance doesn't capture value, maybe it captures value In the treasury but not in the UNI hodlers pockets, so it makes sense the fee switch to actually give UNI hodlers the value they deserve, and giving fees to UNI hodlers, will increase the demand for the UNI token and give passive income to UNI hodlers.

Instead of paying dividends to UNI hodlers, there are other ways to capture value for UNI hodlers, here's my idea:

Essentially we need to align the interests of UNI hodlers and LP's and at the same time increase demand for the token.

So, Instead of paying 0.25% to LP's, and 0.05% to UNI hodlers, we need to make LP's THE UNI hodlers, so how we do that?

Don't take the option from lp's to keep earning the 0.3% from fees, give them two options:

• first option is they will only earn 0.25% if they do not wish to hodl UNI tokens

• second option is, they will be entitled to earn the full 0.3% If they hodl a portion of the capital they are putting to provide liquidity in UNI tokens

For example: If they put $1,000,000 of capital in ETH/USDC pair, to earn the full 0.3% of fees, they need to lock or stake 16.66% (1/6) of the 1M in UNI tokens, so in this example they will need $500,000 in ETH, $500,000 in USDC and if they want to earn the full 0.3% of that 1M, $166,600 in UNI they will need to lock, otherwise they will earn only 0.25% of the fees.

This will inevitably create demand for the token and UNI hodlers and LP interests will be finally aligned, and also... this will be considered a utility and not a security under the eyes of the SEC.

Really happy to see this discussion take place. I'll share my current thoughts:

Firstly, restating the important and obvious: Currently, all initiatives (costs) are paid by UNI holders by diluting the token price. The only upward pressure to UNI price comes from investors expecting a return in the future. Thus, the first conclusion is that something needs to be done to generate revenue or alternatively run an unsustainable operation to zero.

I'd like to echo @tobyshorin's first point. I've previously had the intuitive sense that activating the fee switch would supercharge Uniswap governance. Toby's first point argues that having a treasury of stables would make governance participation more attractive. It should also result in more financial discipline in the DAO. The external positive effects seem understated in the discussions.

I believe there is a wide false sense of "having a lot of money to spend" from the UNI treasury (= genesis allocation). This capital should be treated with the same level of rigour as corporate equity. Uniswap needs stables to its treasury to have better understanding of real costs and to always carefully consider when to dilute the UNI token. The fee switch is probably the best bet of accumulating this treasury.

As for the execution, I support @guil-lambert's direction of testing out the fee switch in various "sister" pools. I do see the risks involved to run the tests on the most important pools as outlined by @BP333.

I'd also encourage people to dive into @rfritsch's model. The main purpose of running the fee switch test should be to get an understanding of Uniswap's real market position and possible moat (Modeled by sticky volume & sticky liquidity). We could then use this information to estimate the behavior in other pools.

@MattOnChain's idea of compensating LPs with vested UNI tokens for possible losses is interesting, but I am against this. Having this type of "bailout" mechanism could distort the test behaviour of LPs, leading to results not beneficial to future use. Furthermore, any protocol revenue generated this way would not count as net revenue. Liquidity mining programs could be run at some point again but should be kept separate from this test.

Disclaimer: The authors of this post do not currently hold UNI tokens or provide liquidity to the protocol, although they have in the past. We are an unbiased third party.

This post was co-authored by Matt Fiebach and Dan Smith from Blockworks Research. In our opinion, the protocol fee switch should be activated for a trial period at the minimum 1/10 protocol fee with revenue flowing to the Uniswap treasury address 0x1a9C8182C09F50C8318d769245beA52c32BE35BC.

Uniswap's most valuable pool is USDC/ETH 0.05% as it single-handedly generates ~50% of protocol volume. Therefore, including it in the trial risks liquidity outflows that jeopardize Uniswap volume dominance.

Selecting the remaining highest volume pools limits the risk of the trial while accurately measuring its impact on LPs. Including one USDC, USDT, and DAI pool allows LPs who are not happy with the fee switch to move to different pools for the same assets.

The following pools should be included in the trial set:

• DAI/ETH 0.05% • USDT/ETH 0.30% • USDC/ ETH 1.00%

1. We agree with “guil-lambert” that LP shuffling is an essential factor in determining which pools to include in the trial set. The repercussion of implementing the protocol fee across the board is very different than for only 1 fee tier as the protocol fee is effectively dispersed across pairs.

2. Prior to activation, we strongly suggest agreeing on a "circuit breaker" level that discontinues the fee switch if Uniswap stable/ETH volume market share decreases by X% for Y length of time. However, this metric can be maliciously influenced by LPs. If a circuit breaker is not determined prior to the activation of the fee switch, the protocol risks losing market share while governance debates potential options.

It is worth noting that if this test goes successfully without a liquidity drain, it does not necessarily imply that the same would be true if the fee were imposed on all stable/ETH pools.

In the scenario that the trial period is deemed a failure and the fee switch is discontinued (i.e. leads to a negative impact on Uniswap’s stable/ETH volume), we believe LPs should be compensated using treasury held UNI. We propose LPs are repaid, in UNI, for the 1/10 protocol fee they forfeited. To prevent immediate UNI dumping (negative UNI price impact), creating a vesting contract that would look something like LPs getting the protocol fee back in 2 year locked 6 month vested UNI. This essentially acts as a Uniswap treasury swap to diversify assets without the same implications as market selling UNI.

I'm not saying reject the proposal, I want the fee switch on, but this experiment will exaggerate the effects of turning on the fee switch which may actually hurt progress towards turning on the fee switch. I think we need to think carefully about conducting the expiriment in a way that minimizes spillovers for example we should do the experiment on an entire chain of pools, since bridging is expensive and can be considered enough of a moat to contain most of the spillovers.

I would recommend turning on fees on Arbitrum system wide for all pools and all fee tiers.

Going back to the casino starting to rake pools, imagine you own a chain of casinos. you want to figure out how raking will affect your attendance and the sale of ancillary stuff like hotel rooms and drinks/food. So instead of turning on rake on a few tables in every casino, you turn on the rake in a few casinos. As long as there is sufficient geographic distance, you will have contained the spillovers pretty well.

I think markets are pretty localized here so for example it wouldn't make any sense to have a market for a bunch of arbitrum tokens exist on polygon or visa versa.

Hey everyone, I'm from Fluidity and we have experimented with an alternative solution to this, which uses both the fee switch and our Transfer Reward Function (TRF). Fluidity works by rewarding users for spending their crypto, including swaps on DEXs. For every reward that is paid out, it is split between sender and receiver, which means that the Uniswap treasury would earn yield every time somebody performs a transaction on Uniswap using fluid assets.

We have done some calculations with this, and they have shown that Fluidity would generate approximately the same amount of revenue for the three pools that have been chosen for the test run. Because of this, we propose a hybrid model that uses both fluid assets and the fee switch, where fluid assets would be used on pools that have lower LP fees and where it would otherwise become unprofitable for LPs to provide liquidity. For pools where this is not the case, the fee switch can be activated. With this, Uniswap would prevent liquidity leakage while still generating revenue for the treasury that can be used to incentivise token holders. It also discounts any increase in trading volume due to incentivising utility.

For example, we can assume around 200,000 daily transactions on Uniswap V3. If Fluidity captures only 5% of this volume, we can estimate the mean daily revenue for the treasury to be $1,100, or $400,000 annually. If we compare this to the DAI-ETH-0.05% pool, it would have earned the treasury an average of $136 daily in the last 7 days.

For some reason I can’t include images in this post, but we have written an extensive blogpost on how this would work as well as this thread.

This is first and foremost meant as a thought experiment and not an official proposal, nevertheless we would love to hear your thoughts on this!

Edit: embedded links

Hello all, excellent discussion so far. Some thoughts as a humble Uniswap tourist.

1. I don't quite get why LPs are particularly concerned with this experiment on a limited set of pools. Either (a) the margins on the pools are really low and they leave, (b) margins are high for some LPs and they stay while others leave, or (c) LPs leave the pools that have the fee switch turned on en masse. In any case, LPs can vote with the purse, and I don't buy that turning the switch on is an irreversible transgression against LPs.
2. @Game_Theorist, you and I share a name and a passion for algo game theory! Your approach aligns perfectly with a rational-self-interested-agent approach, which is where my dispositions lie as well. But I see the point of this proposal being to test just how efficient liquidity provision is on Uni V3. I love hypothesizing from theory as much as the next guy, but to fully reject this proposal on your grounds, one would need to assert that these markets are efficient. And who the hell would dare rest their name on a claim that crypto markets are efficient?
3. I think there's been precious little said about the legal concerns with this. I'm no lawyer, but I at least know there's stuff I don't know, and it'd be great to get someone who knows one to start thinking about the intricacies of the fee switch legally. This seems much higher priority than squabbling about LPs' opportunity costs for a short period of time on a limited number of pools.
4. In a way, the fact that so much debate has occurred already on the fee switch is perhaps a valuable prior for understanding the probability that turning on the fee switch (for some pools) is "good". When optimal parameters are not known, it is necessary to search the param space to hone in on optimal parameters. Of course, if this exploration is extremely high-cost, e.g. in the form of securities backlash or bitter LPs, then there's reason for pause. But if LPs' capital allocation is nearly as rational as the naysayers claim, then their equilibrium strategy will be to return their liquidity once the experiment concludes, same as before (assuming these LPs don't have enough power to grim-trigger the pools, which I think is a fair assumption). Under a consequentialist framework, which seems to be the one most agreeable to economics, taking no action is an action itself. And if legal concerns are resolvable, the search for optimal fee switch obviously requires turning some on.

As I said, I am but a tourist, and I'm likely missing context here. But if this experiment is tractable legally, the conversation should be on how it should be conducted, rather than if it should be conducted, due to the apparent lack of clarity that the community currently has regarding the effect of a fee switch.

Posted this on twitter but going to repost here because I think this direction is a huge mistake. I absolutely want fee teirs on but turning it on on a few pools to "collect data" seems incredibly stupid to me.

Imagine you are in a casino that doesn't charge rake. The casino is thinking about charging rake so it turns on the rake on a few tables. What happens?

Everyone will leave the newly raked tables to go to the non raked tables. The casino concludes that they should avoid rake because everyone would stop playing if there was a rake. But this is wrong because at casinos that have every table raked people still play.

TLDR the data that comes from "turning on a few pools to test" will be completely useless and lead to false conclusions bc of spillover effects. We know that exchanges can exist with rake, just add it on everything.

Posting a reply to my tweet since it was also relevant:

Mihai: or add it to all pools of a certain pair, so there's no rake-less pool to go to (on uniswap)

My reply:

Yes this is good but there is still the issue of bypassing since Uniswap is a network For example, if you rake DAI ETH, you can go DAI -> USDC via DAI/USDC 0.01% fee their and then USDC -> ETH via USDC/ETH so you bypass the rake for only a 0.01% fee.

This is particularly a problem for orders that are routed using a smart router, since you will see flow tend to bypass the pool which creates a vicious cycle that can basically make the pool obsolete.

no hard feelings towards @guil-lambert, OP, or anyone else who is advocating for this approach but IMO this is completely the wrong way to go about this. The data we gather will be incredibly misleading.

Hello guys, I have an idea, but first I need to tell that UNI only current utility which is governance is weak, it needs to capture value somehow, governance doesn't capture value, maybe it captures value In the treasury but not in the UNI hodlers pockets, so it makes sense the fee switch to actually give UNI hodlers the value they deserve, and giving fees to UNI hodlers, will increase the demand for the UNI token and give passive income to UNI hodlers.

Instead of paying dividends to UNI hodlers, there are other ways to capture value for UNI hodlers, here's my idea:

Essentially we need to align the interests of UNI hodlers and LP's and at the same time increase demand for the token.

So, Instead of paying 0.25% to LP's, and 0.05% to UNI hodlers, we need to make LP's THE UNI hodlers, so how we do that?

Don't take the option from lp's to keep earning the 0.3% from fees, give them two options:

• first option is they will only earn 0.25% if they do not wish to hodl UNI tokens

• second option is, they will be entitled to earn the full 0.3% If they hodl a portion of the capital they are putting to provide liquidity in UNI tokens

For example: If they put $1,000,000 of capital in ETH/USDC pair, to earn the full 0.3% of fees, they need to lock or stake 16.66% (1/6) of the 1M in UNI tokens, so in this example they will need $500,000 in ETH, $500,000 in USDC and if they want to earn the full 0.3% of that 1M, $166,600 in UNI they will need to lock, otherwise they will earn only 0.25% of the fees.

This will inevitably create demand for the token and UNI hodlers and LP interests will be finally aligned, and also... this will be considered a utility and not a security under the eyes of the SEC.

Really happy to see this discussion take place. I'll share my current thoughts:

Firstly, restating the important and obvious: Currently, all initiatives (costs) are paid by UNI holders by diluting the token price. The only upward pressure to UNI price comes from investors expecting a return in the future. Thus, the first conclusion is that something needs to be done to generate revenue or alternatively run an unsustainable operation to zero.

I'd like to echo @tobyshorin's first point. I've previously had the intuitive sense that activating the fee switch would supercharge Uniswap governance. Toby's first point argues that having a treasury of stables would make governance participation more attractive. It should also result in more financial discipline in the DAO. The external positive effects seem understated in the discussions.

I believe there is a wide false sense of "having a lot of money to spend" from the UNI treasury (= genesis allocation). This capital should be treated with the same level of rigour as corporate equity. Uniswap needs stables to its treasury to have better understanding of real costs and to always carefully consider when to dilute the UNI token. The fee switch is probably the best bet of accumulating this treasury.

As for the execution, I support @guil-lambert's direction of testing out the fee switch in various "sister" pools. I do see the risks involved to run the tests on the most important pools as outlined by @BP333.

I'd also encourage people to dive into @rfritsch's model. The main purpose of running the fee switch test should be to get an understanding of Uniswap's real market position and possible moat (Modeled by sticky volume & sticky liquidity). We could then use this information to estimate the behavior in other pools.

@MattOnChain's idea of compensating LPs with vested UNI tokens for possible losses is interesting, but I am against this. Having this type of "bailout" mechanism could distort the test behaviour of LPs, leading to results not beneficial to future use. Furthermore, any protocol revenue generated this way would not count as net revenue. Liquidity mining programs could be run at some point again but should be kept separate from this test.

Disclaimer: The authors of this post do not currently hold UNI tokens or provide liquidity to the protocol, although they have in the past. We are an unbiased third party.

This post was co-authored by Matt Fiebach and Dan Smith from Blockworks Research. In our opinion, the protocol fee switch should be activated for a trial period at the minimum 1/10 protocol fee with revenue flowing to the Uniswap treasury address 0x1a9C8182C09F50C8318d769245beA52c32BE35BC.

Uniswap's most valuable pool is USDC/ETH 0.05% as it single-handedly generates ~50% of protocol volume. Therefore, including it in the trial risks liquidity outflows that jeopardize Uniswap volume dominance.

Selecting the remaining highest volume pools limits the risk of the trial while accurately measuring its impact on LPs. Including one USDC, USDT, and DAI pool allows LPs who are not happy with the fee switch to move to different pools for the same assets.

The following pools should be included in the trial set:

• DAI/ETH 0.05% • USDT/ETH 0.30% • USDC/ ETH 1.00%

1. We agree with “guil-lambert” that LP shuffling is an essential factor in determining which pools to include in the trial set. The repercussion of implementing the protocol fee across the board is very different than for only 1 fee tier as the protocol fee is effectively dispersed across pairs.

2. Prior to activation, we strongly suggest agreeing on a "circuit breaker" level that discontinues the fee switch if Uniswap stable/ETH volume market share decreases by X% for Y length of time. However, this metric can be maliciously influenced by LPs. If a circuit breaker is not determined prior to the activation of the fee switch, the protocol risks losing market share while governance debates potential options.

It is worth noting that if this test goes successfully without a liquidity drain, it does not necessarily imply that the same would be true if the fee were imposed on all stable/ETH pools.

In the scenario that the trial period is deemed a failure and the fee switch is discontinued (i.e. leads to a negative impact on Uniswap’s stable/ETH volume), we believe LPs should be compensated using treasury held UNI. We propose LPs are repaid, in UNI, for the 1/10 protocol fee they forfeited. To prevent immediate UNI dumping (negative UNI price impact), creating a vesting contract that would look something like LPs getting the protocol fee back in 2 year locked 6 month vested UNI. This essentially acts as a Uniswap treasury swap to diversify assets without the same implications as market selling UNI.

Thanks for the feedback!

market makers should buy some UNI

I totally agree with incentivising LPs to buy (more) UNI and directing governance, however, that shouldn't be the only strategic answer here. Too easily manipulated. So it's important to have accurate numbers and hard facts to inform the democratic process.

think about how easy it is to become a market maker with UNI v3, and a profitable one, with each its own parameters.

To become a market-maker and earn tokens in liquidity fees is agreeably very easy. Are you sure, however, that to do so on a consistently profitable basis is equally easy?

We have been researching hedging strategies against impermanent loss over quite a long period of time. We ended up with a complex delta-neutral hedge operation, involving automation of multiple dex and cex positions linked to each LP.

This FYI is the main point of our own Civilization protocol - to offer broad access. And if our fund is still in pre-launch mode 1 year later, this is only due to the complexity of an operation that saw other providers attempting a similar development in the past suffering either zero profits, hacks (or both).

For sure, such hedging strategies are beyond reach of the average retail investor. If I remember correctly, even the white paper of Uniswap v3 suggested that devs expected this not to be a retail-friendly system.

Unsurprisingly, some 2021 research suggested that many LPs operate at a loss. Now I do not trust that piece of research at face value, as it was partial and funded by other protocols with conflicting interests.

However, the complexity of running a consistently profitable operation at scale (vis-a-vis buy-and-hold or simple staking) does match my field experience. If my hypothesis was indeed correct, then a 10% tax could make the whole difference between profit and loss, or even sustainable profit vs unsustainably razor-thin margins, even for professional operators.

Do you have personal experience with easily profitable LP strategies on v3 at scale?

If so, I would love to chat further: our decentralised protocol offers immediate incentives to anyone helping to improve our service to the broader DeFi and crypto community.

Making v3 liquidity provision consistently profitable would be a huge step toward mass adoption in TradFi, wouldn't it? So let's make it right :slight_smile:

What if we added 5-10% to the fees for the end users.

Instead of 0.3% we would charge 0.33% and those that hold a certain amount of Uniswap and have it staked will not have to pay the extra fee + other incentives.

**** Important **** I would want to see the fees generated being used to also provide liquidity for major pairs acting as a treasury for Uniswap holders where we can compound the rewards in major stable pairs like DAI/USDC further deepening liquidity for the protocol and protecting against those leaving LP.

Wanted to try to give some constructive feedback as a UNIv3 LP and how the fee switch would affect profits and even the decision to LP at all or move liquidity elsewhere.

As a constructive idea that will make this easier for LPs:
The #1 aspect that affects LP profit is trading volume. What if there is a way to have fee switch dialed up/down (0% to 100%) based on a pairs recent trading volume. When volume is down, LP profits are down and the fee switch will be 'felt' more for LPs, when volume is up respective to some recent time frame, the fee switch could be dialed up to max and an LP may be fine with a portion of fees being deducted.

Not quite sure how the time frame would work to decide how much to dial up/down fee switch, but just something that could help ease the LPs mind.

So the last community call got me thinking about the fee switch and ways to overcome all the obsticles there are in creating this outside of a contract

The idea of testing this out with V3 having full control over which pools have this fee switch and how much

my proposal is that we create a Staking contract in conjunction of the fee switch contract receiver, and also adding on a ERC20 Wrapped UNI where this wrapped Uni is used in a ETH/WUNI pool, allowing this to be unwrapped as well via contract.

This would allow UNI holders to stake the uni and provide that wrapped UNI to the pool to limit loss from the fees lost in the LP, Also having a UNI/WUNI pool would allow routing through this pool with regular UNI token routes

Now the main reason we can bring in UNI LP providers is that in this contract we would want to retain UNI Holder Voting rights, the Vote would need to be done via this contract and have a ipfs site to vote on, but by tracking and setting the users ability to send vote via the contracts holding of their UNI, this would allow them to still Vote, although a different delegate system would also have to be set up

But by reducing the loss in LP fees and allowing UNI holders to keep their voting power, I do believe this would be enough incentive for LP providers of UNI token at least

Obviously this would be a very complicated contract, but I do believe that this would offer a good incentive to open a Fee Switch Testing pool

Thank you for this proposal. I agree that we must explore this design space.

However, I think that you are not giving enough credit and consideration to the unique potential of UNI holders passively accruing fees simply by staking UNI. This possibility should neither be written off nor disregarded. Please consider this more carefully. The Uniswap protocol touches just about every compelling asset in cryptocurrency landscape by enabling permissionless liquidity provision. Now imagine staking UNI and passively accruing an entire portfolio of assets (volume-weighted by trading volume on uniswap).

UNI, in this sense, could become the ultimate Web3 "fixed-income" asset. Holders of UNI can passively accrue every asset that trades on the protocol. This is incredibly powerful and unprecedented. Wealth managers across the world would pile into UNI simply to have this exposure, and accrue exposure for their clients to all Web3 assets trading on the Uniswap protocol. Nothing like this has ever been done before. It's magical, in a way. Eventually, we can assume that tokenized equities, fixed income assets, tokenized real estate, tokenized fiat currencies, tokenized derivatives/options/swaps/etc and much more may trade on Uniswap v3. And simply by holding the UNI token, one can slowly accumulate exposure to all these different assets... Imagine that. WoW! Incredible...

You say at the beginning of your proposal: "I see an assumption that using the fee switch = money going to UNI token holders. I think this is limiting."

I disagree strongly. I don't think this line of thinking is limiting at all. In fact, it is fascinating! I believe this is what UNI was in part destined to be.. the primary asset that allows holders to accumulate and accrue a vast and diversified portfolio of positions across every Web3 asset that trades on the Uniswap protocol.

To me, a veteran of traditional finance, this is simply an incredible opportunity for the UNI asset - and it should not be ignored.

Disclaimer: I work at Pantera Capital but views expressed are my own

TLDR:

• You can't create protocol fees for free
• Either traders or LPs have to pay, and in practice both will
• A protocol switch will result in worse net pricing for traders

@guil-lambert's post is excellent but could be slightly misleading - there isn't, of course, any way to create protocol fees 'out of thin air' without the 'tax' being paid by someone.

Guillaume suggests that liquidity reshuffling between fee tiers would create an equilibrium of LP fees per unit of liquidity provided, which is in theory completely correct. However, this equilibrium would either be:

• a) Lower than the previous equilibrium - i.e., the protocol fee is 'spread' across all fee tiers (and 'sister pools' in theory) and still paid by LPs, albeit by each pool in a smaller amount;

• b) The same/similar, but transaction routing moves trades to tiers with worse net pricing as a result of liquidity reshuffling, and so traders pay the fee;

• c) Some combination of a) and b), which is what would happen in reality.

A key insight from a) is that a lower equilibrium fee switch, i.e., below the 1/10 minimum, could be applied to all LPs by only turning on the fee switch in select pools (as is being suggested for testing).

To think about this differently, the current liquidity distribution is, of course, optimizing for LP revenue, which in turn is optimizing for maximum daily volume per unit of liquidity in each pool, which in turn is optimizing to give traders the best net pricing experience across the pools. Turning on a switch in any fee tier will alter the liquidity distribution and result in sub-optimal/worse net pricing across all tiers for a given pair/collection of 'sister' pairs.

The traders who would have been trading in that pool on the margin will then either continue with their trade anyway (i.e., scenario b) or halt their trade entirely (scenario a).

The extent to which scenario a or b occurs will be determined by the price sensitivity of the traders, which in turn will be determined by the availability of strong alternative protocols.

What an exciting conversation!

Our community (Civilization) have been working over the past 12 months on building a decentralised hedge fund, with an initial priority focus on v3 liquidity mining. So we have collected a significant body of evidence, research and technical expertise. Rather intimate knowledge of the mechanisms surrounding concentrated liquidity.

This proposal directly affects and changes our ability to generate a return for our community, and I feel it's worth sharing my perspective for everyone's benefit (in case anyone cares to follow up, please feel free to give me a shout @civ100 on Telegram).

In my view, the "fee switch" is equivalent to a "revenues-based income tax", similar to European-style VAT, whereby the government earns a % of revenues before anything is paid into the seller's account. There are some technical differences, in who pays how much and how, but substantially the outcome is the same, minus the important "recover VAT on purchases" element, which makes VAT sustainable.

As an income-generating entity, the LP provider will only get 90% of their earnings, whereby 10% is paid to the "government" (UNI governance).

In this way, the "government" effectively can accrue a benefit equivalent to having up to $400mln of TVL invested = 10% of current total TVL of >$4 billion, assuming the fee will be switched on for all pools, which eventually would likely be, post-experiments.

Crucially, the "government" doesn't suffer any entrepreneurial risk, no impermanent loss, and doesn't actually need to invest those $400mln.

Is this beneficial, desirable and survivable for both Uniswap and UNI?

Yes, for sure. Uniswap has a strong enough brand and technology lead for sustaining this over the medium term, beyond the initial experiment. The concentrated liquidity research was pioneering and market-defining, and I am sure Uniswap will continue to lead the rest of the DEFI market by a wide margin. However painful this will be for LP, who already contend with extremely razor-thin profits after hedging, this is unavoidable.

Today, v3 is the only protocol with a chance of going mainstream. Also, this must be tested and implemented well ahead of the 2-year code-lock expiring, so it feels like the time has come. Writing and maintaining protocols is complex and expensive, and after all, there must be rewards for their authors, it's only fair.

But - will this be sustainable long-term? It depends.

If the comparison reference is to the government's VAT tax, then a 10% tax is relatively cheap when compared to a 20% VAT rate, or even higher in some countries.

If the comparison is the government's "revenues tax" levied by some countries on e.g. technology companies, then 10% is a lot: 2-3% is more common.

However, crucially, if the comparison was to TradFi, I can't begin to imagine how exporting Uniswap technology beyond DeFi could sustain this type of monopolistic margins. A traditional market-maker charged 10% of their revenues to access a platform just feels unreal. Market-making will need to be more profitable and easier than would be the case for v3 LPs after the fee switch, so the new technology can be equally beneficial to all parties.

Long story short: I think the fee switch is inevitable, but in Uniswap v4 it better be brought to a lower level than 10%. This brilliant tech will then get the mainstream adoption it fully deserves!

It is difficult to gauge the likely impact on LPs from a fee switch without understanding the state of profitability for LPs in various pools.

The "Impermanent Loss in Uniswap v3" paper released in Nov'21 sampled pools representing ~50% of TVL and found that those LPs, in aggregate, are operating at a -30% margin.

If this is still the case today, I don't think it would suggest a lot of room for the protocol to extract revenue.

To that end, has anyone seen a more updated version of this study or seen / has conducted similar analysis on LP profitability?

Disclaimer: this comment was co-authored by Alana Levin and Derek Walkush, investment partners at Variant. Variant is an investor in the UNI token and Uniswap Labs, Inc.

TLDR:

1. In favor of experimentation
2. The experiment should test non-core pools for data points that map to the rest of Uni pairs; strong candidates include WBTC/USDC, DAI/ETH, and USDC/ETH
3. The first fee switch worth testing may be one that generates non-UNI assets for the treasury; these funds should be used to incentivize ecosystem growth among other Uni stakeholders

Derek and I are in favor of experimentation with fee splits, and think the proposal outlined is incredibly thoughtful and a strong step in the right direction.

Pool Analysis We agree that the biggest risk, as pointed out by several commentators, is a liquidity drain among core pools. As such, there’s likely a good middle ground of pools to test – ones that are not core pools (e.g., USDT/USDC and USDC/ETH, as pointed out by Monet Supply) but are still sufficiently large to gather data points that map to the rest of Uni pairs. Having relevant data points will help better understand the potential impact of broader / more widespread fee switch implementations.

The optimal pool should satisfy the following conditions:

• Relatively high Volume / TVL (APY) so LPing still remains profitable
• Relatively deep liquidity to not potentially drain important liquidity
• Ideally relatively similar valued assets to avoid potential IL increases

Below is an analysis of Uni V3 pools 11th-20th in TVL: From the analysis, WBTC/USDC, DAI/ETH, and USDC/ETH (1% tier) seem to be suitable pools for experimentation.

Fee Switch Design We’re supportive of directing a portion of the fees toward building non-UNI reserves in the treasury (with funds potentially stored in stables), in line with Toby's comment. We agree that those funds should be invested in continued growth, e.g., funding grants, incentivizing integrations, and whatever else the community determines may help Uniswap grow.

Thanks for the feedback!

market makers should buy some UNI

I totally agree with incentivising LPs to buy (more) UNI and directing governance, however, that shouldn't be the only strategic answer here. Too easily manipulated. So it's important to have accurate numbers and hard facts to inform the democratic process.

think about how easy it is to become a market maker with UNI v3, and a profitable one, with each its own parameters.

To become a market-maker and earn tokens in liquidity fees is agreeably very easy. Are you sure, however, that to do so on a consistently profitable basis is equally easy?

We have been researching hedging strategies against impermanent loss over quite a long period of time. We ended up with a complex delta-neutral hedge operation, involving automation of multiple dex and cex positions linked to each LP.

This FYI is the main point of our own Civilization protocol - to offer broad access. And if our fund is still in pre-launch mode 1 year later, this is only due to the complexity of an operation that saw other providers attempting a similar development in the past suffering either zero profits, hacks (or both).

For sure, such hedging strategies are beyond reach of the average retail investor. If I remember correctly, even the white paper of Uniswap v3 suggested that devs expected this not to be a retail-friendly system.

Unsurprisingly, some 2021 research suggested that many LPs operate at a loss. Now I do not trust that piece of research at face value, as it was partial and funded by other protocols with conflicting interests.

However, the complexity of running a consistently profitable operation at scale (vis-a-vis buy-and-hold or simple staking) does match my field experience. If my hypothesis was indeed correct, then a 10% tax could make the whole difference between profit and loss, or even sustainable profit vs unsustainably razor-thin margins, even for professional operators.

Do you have personal experience with easily profitable LP strategies on v3 at scale?

If so, I would love to chat further: our decentralised protocol offers immediate incentives to anyone helping to improve our service to the broader DeFi and crypto community.

Making v3 liquidity provision consistently profitable would be a huge step toward mass adoption in TradFi, wouldn't it? So let's make it right :slight_smile:

What if we added 5-10% to the fees for the end users.

Instead of 0.3% we would charge 0.33% and those that hold a certain amount of Uniswap and have it staked will not have to pay the extra fee + other incentives.

**** Important **** I would want to see the fees generated being used to also provide liquidity for major pairs acting as a treasury for Uniswap holders where we can compound the rewards in major stable pairs like DAI/USDC further deepening liquidity for the protocol and protecting against those leaving LP.

Wanted to try to give some constructive feedback as a UNIv3 LP and how the fee switch would affect profits and even the decision to LP at all or move liquidity elsewhere.

As a constructive idea that will make this easier for LPs:
The #1 aspect that affects LP profit is trading volume. What if there is a way to have fee switch dialed up/down (0% to 100%) based on a pairs recent trading volume. When volume is down, LP profits are down and the fee switch will be 'felt' more for LPs, when volume is up respective to some recent time frame, the fee switch could be dialed up to max and an LP may be fine with a portion of fees being deducted.

Not quite sure how the time frame would work to decide how much to dial up/down fee switch, but just something that could help ease the LPs mind.

So the last community call got me thinking about the fee switch and ways to overcome all the obsticles there are in creating this outside of a contract

The idea of testing this out with V3 having full control over which pools have this fee switch and how much

my proposal is that we create a Staking contract in conjunction of the fee switch contract receiver, and also adding on a ERC20 Wrapped UNI where this wrapped Uni is used in a ETH/WUNI pool, allowing this to be unwrapped as well via contract.

This would allow UNI holders to stake the uni and provide that wrapped UNI to the pool to limit loss from the fees lost in the LP, Also having a UNI/WUNI pool would allow routing through this pool with regular UNI token routes

Now the main reason we can bring in UNI LP providers is that in this contract we would want to retain UNI Holder Voting rights, the Vote would need to be done via this contract and have a ipfs site to vote on, but by tracking and setting the users ability to send vote via the contracts holding of their UNI, this would allow them to still Vote, although a different delegate system would also have to be set up

But by reducing the loss in LP fees and allowing UNI holders to keep their voting power, I do believe this would be enough incentive for LP providers of UNI token at least

Obviously this would be a very complicated contract, but I do believe that this would offer a good incentive to open a Fee Switch Testing pool

Thank you for this proposal. I agree that we must explore this design space.

However, I think that you are not giving enough credit and consideration to the unique potential of UNI holders passively accruing fees simply by staking UNI. This possibility should neither be written off nor disregarded. Please consider this more carefully. The Uniswap protocol touches just about every compelling asset in cryptocurrency landscape by enabling permissionless liquidity provision. Now imagine staking UNI and passively accruing an entire portfolio of assets (volume-weighted by trading volume on uniswap).

UNI, in this sense, could become the ultimate Web3 "fixed-income" asset. Holders of UNI can passively accrue every asset that trades on the protocol. This is incredibly powerful and unprecedented. Wealth managers across the world would pile into UNI simply to have this exposure, and accrue exposure for their clients to all Web3 assets trading on the Uniswap protocol. Nothing like this has ever been done before. It's magical, in a way. Eventually, we can assume that tokenized equities, fixed income assets, tokenized real estate, tokenized fiat currencies, tokenized derivatives/options/swaps/etc and much more may trade on Uniswap v3. And simply by holding the UNI token, one can slowly accumulate exposure to all these different assets... Imagine that. WoW! Incredible...

You say at the beginning of your proposal: "I see an assumption that using the fee switch = money going to UNI token holders. I think this is limiting."

I disagree strongly. I don't think this line of thinking is limiting at all. In fact, it is fascinating! I believe this is what UNI was in part destined to be.. the primary asset that allows holders to accumulate and accrue a vast and diversified portfolio of positions across every Web3 asset that trades on the Uniswap protocol.

To me, a veteran of traditional finance, this is simply an incredible opportunity for the UNI asset - and it should not be ignored.

Disclaimer: I work at Pantera Capital but views expressed are my own

TLDR:

• You can't create protocol fees for free
• Either traders or LPs have to pay, and in practice both will
• A protocol switch will result in worse net pricing for traders

@guil-lambert's post is excellent but could be slightly misleading - there isn't, of course, any way to create protocol fees 'out of thin air' without the 'tax' being paid by someone.

Guillaume suggests that liquidity reshuffling between fee tiers would create an equilibrium of LP fees per unit of liquidity provided, which is in theory completely correct. However, this equilibrium would either be:

• a) Lower than the previous equilibrium - i.e., the protocol fee is 'spread' across all fee tiers (and 'sister pools' in theory) and still paid by LPs, albeit by each pool in a smaller amount;

• b) The same/similar, but transaction routing moves trades to tiers with worse net pricing as a result of liquidity reshuffling, and so traders pay the fee;

• c) Some combination of a) and b), which is what would happen in reality.

A key insight from a) is that a lower equilibrium fee switch, i.e., below the 1/10 minimum, could be applied to all LPs by only turning on the fee switch in select pools (as is being suggested for testing).

To think about this differently, the current liquidity distribution is, of course, optimizing for LP revenue, which in turn is optimizing for maximum daily volume per unit of liquidity in each pool, which in turn is optimizing to give traders the best net pricing experience across the pools. Turning on a switch in any fee tier will alter the liquidity distribution and result in sub-optimal/worse net pricing across all tiers for a given pair/collection of 'sister' pairs.

The traders who would have been trading in that pool on the margin will then either continue with their trade anyway (i.e., scenario b) or halt their trade entirely (scenario a).

The extent to which scenario a or b occurs will be determined by the price sensitivity of the traders, which in turn will be determined by the availability of strong alternative protocols.

What an exciting conversation!

Our community (Civilization) have been working over the past 12 months on building a decentralised hedge fund, with an initial priority focus on v3 liquidity mining. So we have collected a significant body of evidence, research and technical expertise. Rather intimate knowledge of the mechanisms surrounding concentrated liquidity.

This proposal directly affects and changes our ability to generate a return for our community, and I feel it's worth sharing my perspective for everyone's benefit (in case anyone cares to follow up, please feel free to give me a shout @civ100 on Telegram).

In my view, the "fee switch" is equivalent to a "revenues-based income tax", similar to European-style VAT, whereby the government earns a % of revenues before anything is paid into the seller's account. There are some technical differences, in who pays how much and how, but substantially the outcome is the same, minus the important "recover VAT on purchases" element, which makes VAT sustainable.

As an income-generating entity, the LP provider will only get 90% of their earnings, whereby 10% is paid to the "government" (UNI governance).

In this way, the "government" effectively can accrue a benefit equivalent to having up to $400mln of TVL invested = 10% of current total TVL of >$4 billion, assuming the fee will be switched on for all pools, which eventually would likely be, post-experiments.

Crucially, the "government" doesn't suffer any entrepreneurial risk, no impermanent loss, and doesn't actually need to invest those $400mln.

Is this beneficial, desirable and survivable for both Uniswap and UNI?

Yes, for sure. Uniswap has a strong enough brand and technology lead for sustaining this over the medium term, beyond the initial experiment. The concentrated liquidity research was pioneering and market-defining, and I am sure Uniswap will continue to lead the rest of the DEFI market by a wide margin. However painful this will be for LP, who already contend with extremely razor-thin profits after hedging, this is unavoidable.

Today, v3 is the only protocol with a chance of going mainstream. Also, this must be tested and implemented well ahead of the 2-year code-lock expiring, so it feels like the time has come. Writing and maintaining protocols is complex and expensive, and after all, there must be rewards for their authors, it's only fair.

But - will this be sustainable long-term? It depends.

If the comparison reference is to the government's VAT tax, then a 10% tax is relatively cheap when compared to a 20% VAT rate, or even higher in some countries.

If the comparison is the government's "revenues tax" levied by some countries on e.g. technology companies, then 10% is a lot: 2-3% is more common.

However, crucially, if the comparison was to TradFi, I can't begin to imagine how exporting Uniswap technology beyond DeFi could sustain this type of monopolistic margins. A traditional market-maker charged 10% of their revenues to access a platform just feels unreal. Market-making will need to be more profitable and easier than would be the case for v3 LPs after the fee switch, so the new technology can be equally beneficial to all parties.

Long story short: I think the fee switch is inevitable, but in Uniswap v4 it better be brought to a lower level than 10%. This brilliant tech will then get the mainstream adoption it fully deserves!

It is difficult to gauge the likely impact on LPs from a fee switch without understanding the state of profitability for LPs in various pools.

The "Impermanent Loss in Uniswap v3" paper released in Nov'21 sampled pools representing ~50% of TVL and found that those LPs, in aggregate, are operating at a -30% margin.

If this is still the case today, I don't think it would suggest a lot of room for the protocol to extract revenue.

To that end, has anyone seen a more updated version of this study or seen / has conducted similar analysis on LP profitability?

Disclaimer: this comment was co-authored by Alana Levin and Derek Walkush, investment partners at Variant. Variant is an investor in the UNI token and Uniswap Labs, Inc.

TLDR:

1. In favor of experimentation
2. The experiment should test non-core pools for data points that map to the rest of Uni pairs; strong candidates include WBTC/USDC, DAI/ETH, and USDC/ETH
3. The first fee switch worth testing may be one that generates non-UNI assets for the treasury; these funds should be used to incentivize ecosystem growth among other Uni stakeholders

Derek and I are in favor of experimentation with fee splits, and think the proposal outlined is incredibly thoughtful and a strong step in the right direction.

Pool Analysis We agree that the biggest risk, as pointed out by several commentators, is a liquidity drain among core pools. As such, there’s likely a good middle ground of pools to test – ones that are not core pools (e.g., USDT/USDC and USDC/ETH, as pointed out by Monet Supply) but are still sufficiently large to gather data points that map to the rest of Uni pairs. Having relevant data points will help better understand the potential impact of broader / more widespread fee switch implementations.

The optimal pool should satisfy the following conditions:

• Relatively high Volume / TVL (APY) so LPing still remains profitable
• Relatively deep liquidity to not potentially drain important liquidity
• Ideally relatively similar valued assets to avoid potential IL increases

Below is an analysis of Uni V3 pools 11th-20th in TVL: From the analysis, WBTC/USDC, DAI/ETH, and USDC/ETH (1% tier) seem to be suitable pools for experimentation.

Fee Switch Design We’re supportive of directing a portion of the fees toward building non-UNI reserves in the treasury (with funds potentially stored in stables), in line with Toby's comment. We agree that those funds should be invested in continued growth, e.g., funding grants, incentivizing integrations, and whatever else the community determines may help Uniswap grow.

This is the crux of where you and I disagree. As an LP, why would I want to be taxed without any explanation as to where my taxes are going?

LPs are here to trade IL risk for fees.

Theoretically, UNI holders hold UNI because they are aligned with UNI's goals (which aren't even explicitly "make the value of UNI go up"). If UNI leadership wants more eth/usdc in the treasury to prove out UNI's ability to allocate capital efficiently towards UNI's goals in a way that is net-positive to LPs, I think they should sell enough UNI to reach that number.

Only then, with some track record for LPs to look at, should the ask for capital be directed to LPs

There are two ways to get non-UNI funds into the treasury.

1. Sell UNI from the treasury, which impact UNI holders (by decreasing the price)
2. take a portion of LP fees, which impacts LPs (by taxing them)

Assuming LPs are providing liquidity out of pure economic interest, to impose #2 on LPs, the case has to be made "this tax will improve your economics in the long run".

I have looked through everything I can find from/on Uniswap, and I cannot find a stated goal or mission.*

I agree that having some amount of ETH or USDC in the treasury might attract more proposals. But without having a more clear goal or mission for UNI holders and arguably more importantly, for LPs to get behind, the fee switch is a hard case to make.

A world in where I see turning on some fees working:

1. State the goal of UNI is to create the deepest liquidity and thus the best to trade in the universe
2. Pick a number: $5m, $10M, and turn fees on for less important pools until that number is reached, and then turn them off. It's a seed round.
3. Fund individuals / teams that are directly aligned with the stated goal of UNI.

Long term, I think fees on top of LP fees instead of taking a portion of the LPs' fees is more sustainable. It affects LPs less, and doesn't directly drive liquidity to other AMMs.

• Which can or may be separate from Uniswap Lab's goal or mission. Since it's a C-corp, by default it is "make a return on investment for shareholders". And I'm sure they have their own way(s) they plan on doing that, separate from the fee switch.

I just created an account to voice my concerns as liquidity provider about this idea.

It's an absolute bad idea to me. Taking 10% of the fees away from LP's is an enormous cut. That 10% is often the difference between making a gain or a loss. If the Fee Switch would be 1-2% I could live with it as liquidity provider.

In the case that the 10% fee would be introduced I would remove my liquidity and use my capital somewhere else.

The purpose of this post is make clear UNI governance has two very different decisions to make 1). should a fee switch be turned on? and 2) how should fees be utilized?

I agree these are separate decisions. I think they are being asked in the wrong order.

The first decision should be the business decision: What is Uniswap looking to fund, and to who's benefit? Only then should we think about the financing decision: How are we going to fund what we want to fund?

Said another way: By taxing LP's fees by 10%, you're implicitly saying "Uniswap governance knows what to do with this 10% of these fees better than you do".

I agree with @Buckerino's point that it's not the most important question. I think the most important question is "What is goal/mission of Uniswap and its treasury?" Until that question is answered, along with how funds would be allocated to further that goal, it doesn't make sense to divert fees from LPs to the treasury.

This is the smallest portion the code allows, it’s impossible to set it lower.

Is that a feature or a bug? It seems kind of silly to be limited to such a large increment increase. Can this be changed?

The whole point of my post is that I am suggesting NO PLAN for how these accrued tokens might be used. I’m explicitly trying to separate the testing of value accrual from how / if that value is disbursed.

But this plan does propose how these funds might be used, by suggestion and omission. The glaring one is no distributions to UNI holders. I get what you're saying, but any fee switch is inevitably going to discuss the trade-offs from taking said fees. Just like a tax increase, someone has to pay for this, and someone gets to spend the money on something. I think that is the most important part of a fee switch scenario.

If this is just a test in prod of how the fee switches will affect liquidity, the LPs, and determine fee generation/mechanics, I would suggest conducting a controlled test over a specific period of time. Then stopping to assess the test.

Would love to see a DeFi protocol act more as a protocol than a business personally. Most protocols are charging their TradFi analogue level fees currently.

A small %ge over a looooong period of time (hundreds or thousands of years if all plays out well for Ethereum/Humanity) is a better realization of the capital efficiency crypto promises than taking larger middle-men level cuts.

Unpopular opinion probably but meh. That's what one random guy on the internet thinks.