Adams says Uniswap v4 fees have not changed LP rates

Uniswap founder response: v4 protocol fees will not reduce LP revenue

On July 28, Uniswap founder Hayden Adams refuted the claim that the newly activated v4 protocol fees on decentralized exchanges will reduce existing revenue for liquidity providers.

Summary

Uniswap Governance activated v4 protocol fees on seven chains after receiving 46.6 million UNI support. Adams said liquidity providers retain existing pool fees, while traders pay separate agreement fees. Taking a 30 basis point pool as an example, the agreement fee will increase by 5 basis points, accounting for 14% of the total fee. He criticized opponents for misunderstanding the fee calculation, after governance had previously approved the change.

The move was a response to the implementation of Proposition 100 on July 27. The proposal received 46.6 million UNI support and 1.27 million UNI oppose it, reaching the legal threshold of 40 million UNI. Fee controller systems have been activated on Ethereum, Arbitrum, Base, BNB Chain, Polygon, OP Mainnet and Robinhood Chain.

Uniswap v4 fees are additional

Adams cited a pool that charges traders 30 basis points as an example. Under the new song line, LP continues to earn 30 basis points, while the agreement adds an additional 5 basis points. Therefore, traders are required to pay a total of approximately 35 basis points. The 5 basis points in the agreement portion only account for 14% of the total fee, not 25% of the LP revenue stream.

Uniswap v4 's public code supports this distinction. The Pool contract describes the total exchange fee as the LP fee plus the agreement fee. It calculates the agreed amounts separately and allocates remaining fee increases to liquidity providers. Specific costs vary based on v4 support hooks and dynamic pool fees.

In addition, the proposal creates a V4FeePolicy contract to classify pools and calculate fees, and a V4FeeAdapter contract to apply governance rules and send collected assets to the TokenJar contract. For normal static pools, the policy uses a curve related to LP costs. The aggregator hook pool uses a separate fixed rate.

Not everyone accepts this design. Panoptic founder Guillaume Lambert argued during governance discussions that charging a fee of 10% to 25% could weaken LP returns and push money towards competitive automated market makers. He called for agreement fees to be based on whether the LP position has become profitable. The criticism views fees as a reduction in LP revenue, while Adams 'response focuses on additional implementations of v4.

Adams also criticized a competitor's Uniswap fork, which shifted all exchange fees away from LP and compensated LP through vote-allocated token issuance. He did not name the agreement in his July 28 post. This comparison has nothing to do with the technical issue of how Uniswap v4 allocates costs.

Uniswap says previous charges did not result in liquidity outflows

Uniswap Labs says previous activation charges on v2 and v3 did not result in mass liquidity exits. Its July 18 governance response states that the 25 largest v3 pools on Ethereum retain 98.5% of their pre-activation liquidity in token computation. Since December, agreement costs have been used to destroy approximately 7.5 million UNI.

The data comes from Uniswap Labs, which has not yet determined how v4 providers will respond. The v4 pool can use custom hooks, dynamic pricing, and different policies, so its economic model is not exactly the same as v3. Labs said that if the new fee is not well accepted, governance can submit another proposal to adjust the rate.

DefiLlama listed on July 29 the total locked position value of Uniswap as approximately US$3.06 billion. The panel also shows total expenses over the past 30 days of $88.4 million, with agreement revenue of approximately $3.36 million. These totals cover multiple Uniswap versions and chains, rather than just newly activated v4 pools.

Next step: More v4 fee activation and monitoring

Fees charged through the new system will be transferred to the TokenJar contract. Searchers can collect these assets by providing and destroying UNI through the agreement's Firepit mechanism. Fees incurred on supported L2 networks will be linked to the destruction of the Ethereum main network.

The broader Unification program begins with the destruction of 100 million UNI treasury and the collection of agreed fees across v2 and v3 deployments. The implemented proposals cover the first v4 deployments. Its text states that Celo, Soneium, World Chain, X Layer and Zora need follow-on proposals because Uniswap's governance contracts limit the number of operations that can be performed in a single vote. A submission date for the second vote has not yet been announced.

The next measurable test will be whether the affected pool can retain liquidity and trading volume after fees begin to accumulate. The governance layer can change the coverage, fee family rules, or underlying policy contracts for individual pools. Adams's post clarified how the expected fee is calculated, but the behavior of the LP will determine whether the model remains competitive.