UNI Falls After Uniswap Labs Burns 100 Million Tokens

Uniswap’s UNI token fell by as much as 6% on Monday, Dec. 29, after Uniswap Labs confirmed it had burned 100 million tokens over the weekend, making UNI one of the weakest performers among the top-100 cryptocurrencies today.

UNI is currently trading at $5.95, recovering slightly from earlier lows but still down about 4% on the day. The token burn, announced on Dec. 27, was part of a broader update called “UNIfication,” which included the long-awaited fee switch for the protocol.

As part of the change, interface fees on Uniswap Labs’ frontend were set to zero, while trading fees remain active on Uniswap v2 and some v3 pools on Ethereum mainnet. The update also allows certain protocol fees to be used to buy back and burn UNI over time.

Uniswap remains one of the largest decentralized exchanges (DEXs) in crypto, with about $1.3 billion in trading volume in the past 24 hours, second only to PancakeSwap with $1.5 billion, according to DefiLlama data.

Fee Switch Expectations

Some analysts say the price drop may be tied to how little revenue the new fee switch is generating so far. A popular DeFi researcher who goes by JPN Memelord on X estimated in a post yesterday that the fee switch is currently producing about $30,000 per day from Ethereum activity. “$30k/day is $11m yearly run from Ethereum fees… $22m annual run rate for Uniswap,” the analyst wrote, adding that early results are “not promising.”

The analyst suggests it may take time before fee-driven burns meaningfully reduce UNI’s supply, helping explain why the token fell despite the burn announcement. Another factor could be timing, as UNI has rallied in recent months on earlier developments, in anticipation of the fee switch.

"Wrong, Overeager"

Uniswap founder and CEO Hayden Adams pushed back on the analysis, calling it “wrong, overeager, and misleading” in a post on X. Adams said the initial burn was broadly in line with what would have happened if the fee switch had been active earlier, and noted that only some fee sources are live so far, with more changes expected over time.

He also emphasized that it’s “too early to get meaningful analysis of token jar due to how it works - not yet being efficiently arb’d, fees are collected in thousands of tokens but burns are only 10 at a time, so the first burn doesn’t say much about what the steady state will be.”

Uniswap’s budget, Adams said, is meant to support future developments, “not a necessary expense to pay back LPs for taking all LP fees.”

The update follows a Christmas Day vote by the Uniswap DAO, which approved the long-debated fee switch, as part of the UNIfication proposal, after years of discussion, The Defiant previously reported. Originally, the fee switch proposal included distributing protocol fees directly to UNI token holders, but the final proposal passed in UNIfication instead focuses on a buyback and burn mechanism.

Uniswap is one of the largest fee-generating protocols in DeFi, accruing more than $1 billion in fees over the past year. The Defiant reached out to Uniswap Labs for comment but has not heard back by the time of publication.