Uniswap’s Tokenomics Shift: Bullish or Self-Destructive?

In the 24 hours since Uniswap announced its proposed tokenomics changes, the UNI token price has jumped by 25%. Clearly, the market believes these changes have a strong chance of being approved. Yet even competitors like Aerodrome warn that this could be a strategic mistake.

So what’s really going on here? The proposal from the Uniswap Foundation and Uniswap Labs that’s up for a vote includes two key updates.

The first one - the part that caught the market’s attention - is a reduction in total token supply. The plan is to buy back UNI from holders and burn it. Both buybacks and lower maximum supply are textbook bullish factors.

The second part, though, is where things get tricky: where will the money for those buybacks come from? The proposal suggests introducing special fees charged to Uniswap liquidity providers. And here, the CEO of Dromos Labs - the company behind Aerodrome - is absolutely right: with the new fees in place, providing liquidity on Uniswap will become less profitable, and users will likely migrate to competitors.

Ask yourself this: would you agree to pay a fee if you knew that fee would basically be burned? Not literally, of course — but it would go toward buying and burning UNI tokens. As a liquidity provider, you’d get nothing in return. Your money wouldn’t go to developers, but rather to random UNI holders choosing to sell.

Still, the market’s bullish reaction makes sense. After all, it’s not liquidity providers who will vote on the proposal — it’s token holders. And it’s in their best interest to reduce the total supply. That means the proposal will almost certainly pass.

What happens next to the Uniswap protocol itself — that’s where Aerodrome’s forecast might deserve more attention.

In any case, you’ll always find the best UNI exchange rates at rabbit.io.