So you’ve probably heard of the new Uniswap Labs fee by now. And if you haven’t, the TL;DR is that the Uniswap front-end will have a 0.15% fee that goes to the Uniswap Labs team. Reactions to this have varied from “you’re killing crypto” to “ok…and?”.
My perspective here is that it’s not a really big deal, but it does give us certain answers. First off, I’ve spoken about this before. And I initially did think they would do something like this but dismissed the idea once I dug into the details of Uniswap v4 (see previous AF coverage here). The introduction of a front-end fee is not the end of world. You could use an aggregator like Matcha, 1inch, or CoW and completely avoid the front-end fee. It’s really that simple — and everyone *should* be using aggregators for better trade execution anyway.
Oops?
Second, the introduction of this fee highlights that the entire “fee switch” debacle failing boils down to two things: it being economically unviable (Pro members can view our report on this here) and legal reasons. I think I can confidently say legal reasons were the main reason every fee switch proposal was completely shut down. Some people believe the introduction of this fee means Uniswap doesn’t care about LP profitability and is willing to slap on additional fees for their benefit. I think you can make the argument that the 15 bps interface fee is borne by traders, so they do indeed care about preserving the current state of LP economics at worst.
But it’s not that simple. The new fee will impact on trader profitability and execution quality when using the official front-end. But if Metamask Swap’s egregious 85 bps fee is able to garner $46M in revenue on over $5B of volume, clearly there are retail traders who couldn’t care less about execution quality.
Now, a lot of Metamask swap activity is hopium-filled airdrop hunters. And we probably won’t see a similar phenomenon occur with the Uniswap front-end. But all in all, there is a simple solution. Just don’t use the front-end. In the same way Metamask does not force you to use their Swap product, you are not forced to use the Uniswap front-end.
The point of this fee, in my opinion, is to be a means of monetizing the Uniswap wallet and subsequent consumer-facing apps that the team builds. The Uniswap team are undoubtedly some of the best builders in the space. And they seem to do their best work for the industry behind closed doors. Relying on a never-ending flow of VC money to support this is unsustainable. Specifically because with a completely useless token — if I can be completely candid — the expectation of return for these investors must come from somewhere else.
I think this moves highlights the Uniswap team’s desire to have two effective arms: a protocol building team and a consumer-app building team. And from the looks of it, their goal seems to be an IPO or a similar kind of traditional liquidity event. The positive angle here is that Uniswap Labs can fund itself to continue their ground-breaking innovation on AMM design and build consumer apps that help propel DeFi to more mainstream audiences. The negative is that UNI will likely remain a “valueless governance token” indefinitely.
