Uniswap UNI Fee Switch: Why Holders Earned Nothing for Five Years

Uniswap’s UNI token did not earn any share of the exchange’s trading fees for more than five years. According to founder Hayden Adams, Uniswap processed about $4 trillion in trades while the “fee switch” stayed off. In late December 2025, UNI holders voted to turn it on, burn 100 million UNI and use future fees to destroy more tokens.

The story matters beyond Uniswap. Many holders assumed UNI shared in the app’s success when it did not. The Bullrunners video, hosted by George Lee, uses Uniswap as a lesson in the difference between owning a token and owning a share of what a protocol earns, a question worth asking about any coin you hold.

How did Uniswap start?

Uniswap began after engineer Hayden Adams was laid off from Siemens on July 6, 2017. According to the video, he had barely written any code. A friend who worked on Ethereum, Karl Floersch, told him the layoff was the best thing that could have happened and pointed him to an idea Vitalik Buterin had written about.

The idea was an exchange with no order book and no company in the middle. Instead, a pool holds two tokens, and a simple formula sets the price based on how much of each is left. The video compares it to two jars of fruit at a market stall with no stallholder: take apples out, and each remaining apple costs more oranges. Anyone can add fruit to both jars and collect a small fee on every swap. Those people are called liquidity providers.

Adams built a proof of concept, received a $50,000 grant from the Ethereum Foundation in summer 2018, and launched Uniswap on November 2, 2018 at an Ethereum conference in Prague with about $30,000 of liquidity. He had planned to call it UniGeek until Buterin suggested it sounded more like Uniswap.

During the 2020 “DeFi summer”, Adams said daily trading grew from about $10 million to over $1 billion. Every trade paid a 0.3% fee, and all of it went to liquidity providers. Uniswap itself took nothing.

What is the Uniswap fee switch?

The fee switch is a setting that diverts a slice of every trading fee to the protocol instead of only to liquidity providers. It came with the UNI token.

UNI launched in September 2020 as a response to a “vampire attack” by a copycat called SushiSwap, which offered its own token to anyone who moved money out of Uniswap’s pools. Hundreds of millions of dollars moved across. Uniswap answered by airdropping 400 UNI to every address that had used it before September 2020.

In its launch post, Uniswap said UNI holders would control the fee switch. On version 2, the protocol’s slice was designed to be one-sixth of the fee. Yet the switch stayed off. Jesse Walden, whose firm Variant is an investor in Uniswap, said in a clip shown in the video that the team effectively could not put forward governance proposals for about four years, while admitting that was a slight overstatement.

Why did the fee switch stay off for five years?

According to Hayden Adams, the main reason was legal risk in the United States. In January 2021, Gary Gensler was picked to lead the SEC. Adams described the period as regulation by enforcement, where almost anything a builder did was treated as a problem. The video notes the other side: Gensler’s SEC argued that most crypto tokens were securities and that the industry was ignoring existing rules.

The concern was straightforward. If UNI holders voted to pay themselves trading fees, UNI could look even more like a share in a company, and voters might be held responsible. That fear had a real example. In 2022, the CFTC went after a project called Ooki DAO, arguing that token holders who voted in governance could be personally liable. Adams cited that case when asked about the delays.

The timeline that followed, as described in the video:

1. October 2023: Uniswap Labs, the company, began charging its own 0.15% fee on some swaps through its website and wallet.
2. February 2024: The Uniswap Foundation proposed rewarding UNI holders who staked and delegated their tokens.
3. April 2024: Uniswap Labs raised its interface fee to 0.25%, and the SEC sent it a Wells notice, a formal warning that it planned to bring a case.
4. Late May 2024: The foundation postponed the staking vote after what it called a new issue raised by a stakeholder.
5. February 25, 2025: Under new leadership, the SEC closed its investigation without taking action.
6. September 2025: UNI holders backed a Wyoming legal structure called a DUNA, designed partly to shield governance participants from personal liability.

The company’s fee drew criticism. One delegate with over a million UNI called it “pretty bad for UNI holders”, while others said a company needs a business model. Adams also explained that even when lawyers believe you are right, an investigation has a chilling effect because a judge or jury might misunderstand the case.

What did the unification plan change?

In November 2025, Uniswap Labs and the Uniswap Foundation proposed a joint plan called unification. It turned the fee switch on, directed fees toward destroying UNI, and burned 100 million UNI from the treasury in one go, roughly 10% of the original supply. The vote closed in late December 2025 with about 125 million UNI in favor and 742 UNI against.

The 100 million figure was a nod to the fees that could have been collected over the years. Adams said the team ran several data queries and the answers landed around 100 million, but that there is no perfect number. In the video’s words, it is symbolic, not a precise refund.

The burn mechanism works like a jar. Fees pile up in a smart contract. Whenever the contents are worth a fixed amount of UNI, anyone can burn that amount of UNI and claim the jar. Nobody at Uniswap has to sell anything.

On version 2 pools, traders still pay 0.3%. Liquidity providers now receive 0.25%, and 0.05% goes into the jar.

Why are there many fee switches, not one?

Uniswap has several versions, each with its own contracts, deployed across many chains, so fees must be switched on version by version and chain by chain. Version 3, launched in May 2021, let liquidity providers choose a price range for their funds. Version 4, launched in January 2025, added “hooks”, small add-ons that let developers customize how a pool behaves. Old versions keep running untouched.

According to the video, the rollout went like this:

Date	What happened
First weeks after the vote	Fees on with Ethereum mainnet version 2 and some version 3 pools, running at roughly $26 million a year
May 2026	Adams said fees were live across nine chains
July 2026	Holders voted to switch on fees for many version 4 pools across seven chains, and to add Robinhood’s new chain
Early September 2026	Adams posted a burn pace of over $250 million a year

The video stresses that the September figure was a 7-day pace, a snapshot rather than a promise. Volumes rise and fall, and the burn will too.

What are the risks for UNI holders?

The video lists four trade-offs that the excitement tends to skip:

1. Someone pays. On older pools, protocol fees come out of what liquidity providers used to earn. On version 4, Adams says the fee is added on top, so traders pay a little more. If providers earn less, some may move to rival exchanges, which exist on almost every chain Uniswap runs on. Uniswap is betting new features and deep liquidity keep them. That bet is not settled.
2. New tokens still come out. The same plan set aside a growth budget of 20 million UNI a year from the treasury, which works against the burn.
3. Power is concentrated. The foundation’s team moved into Uniswap Labs, which also dropped its own app fees. Supporters say this aligns the company and the token. Some in the community question giving one company so much say.
4. A burn guarantees nothing about price. Results depend on trading volume, what the market thinks UNI is worth, and how many tokens leave the treasury.

The same gap between a busy network and its token shows up elsewhere, as covered in Bullrunners’ look at whether LINK captures Chainlink’s value and why a Ripple win isn’t automatically an XRP win.

Three lessons for any token you hold

The video closes with a three-point framework you can apply to any coin:

1. A busy protocol and a valuable token are two different things. Uniswap handled trillions in trades and UNI holders took none of the fees. Before you buy any token, ask what you actually get.
2. Read the switches. Many tokens have powers written into them that are off or depend on a vote. Knowing what could be switched on, and who decides, is worth more than a headline.
3. Rules change in both directions. According to its backers, the fee switch stayed off largely because of legal risk and came on when that risk shifted. Watch the rules around your coin, not only the price.

A related approach for coins tied to big institutions is Bullrunners’ test of whether bank money ever reaches the token.

What to watch next

For UNI, the practical numbers to follow are the burn rate over time rather than a single week, how much of the 20 million UNI annual growth budget is actually released, whether liquidity providers stay or move to rivals as fees take a cut, and which further versions and chains holders vote to switch on. For any other token, the useful habit is the same one the video recommends: find out what the token is entitled to today, not what holders assume it earns.