Uniswap [UNI], one of the largest decentralized exchanges, is looking into the activation of protocol fees. The decentralized network community recently initiated discussions on how to efficiently activate protocol fees.
The introduction of protocol fees means a proportion of transaction fees will go to the protocol. Voting on the activation of protocol fees has taken place multiple times in the past but has been turned down each time.
There’s something big going on right now @Uniswap 👀
The community just approved the biggest step towards turning on protocol fees. Here’s what you should know 🧵👇https://t.co/YAAHJTGoYE
— derek walkush (@Derekmw23) July 27, 2022
Additionally, Uniswap trading fees are usually shared with liquidity providers. However, the activation of protocol fees means some of the revenue collected from fees would be distributed within the protocol.
Such a move would allow UNI holders to benefit, and this explains the latest hype around the UNI token.
UNI traded at $8.25 at press time after a 22.41% uptick in the last 24 hours. Its press time price represents a 143% rally from its lowest price point this year.
Source: CryptoQuant
If the Uniswap community approves the decision to activate protocol fees, then UNI will likely experience a strong demand wave.
The token is still relatively undervalued at its current price especially considering that it has a circulating supply under one billion coins.
Protocol fees, a game changer?
If the protocol fees are activated, then UNI might extend its upside, building on its already impressive performance since mid-June.
The performance has been backed by healthy accumulation after the strong price drop in the first half of 2022. The accumulation pushed up the mean dollar invested age by a substantial margin in the last four weeks.
Source: Santiment
The heavy inflows into UNI resulted in an impressive recovery in profitability. The protocol recovered from a network realized loss of 159.33 million UNI to its current network realized profit of 3.76 million UNI.
Its latest upside resulted in significant profitability, especially for those that purchased at or near the bottom.
Its 30-day MVRV ratio was at 22.26% at press time, compared to its lowest level at -1.58% at the start of July.
Source: Santiment
Uniswap has yet to flip the switch on protocol fees. But if it does, then that might act as a catalyst for its price action. Such a move would also align with its strategic move to leverage growth from layer-2 networks.