Uniswap Triggers Deflationary Loop with $600 Million Treasury Contraction

Uniswap Labs permanently burned 100 million UNI tokens valued at $600 million on December 27.

The move executed the on-chain portion of a governance plan designed to closely link the protocol’s revenue to the token’s value.

UNI Rallies 6% After Labs Confirms Deflationary Pivot

Uniswap Labs carried out the burn under “UNIfication,” a proposal introduced in November 2025 and approved with overwhelming support on Dec. 25, 2025.

The initiative marks a shift away from the Labs’ prior fee retention model toward a framework built around sustained token burns.

Under the new structure, protocol fees are used to buy and burn UNI, moving the asset toward a deflationary setup. In Uniswap v2, the mechanism allows liquidity providers to earn 0.25% per trade, with 0.05% allocated to the protocol.

On v3, liquidity providers will route either one-fourth or one-sixth of their fees to the protocol, depending on the fee tier.

Supporters of the proposal argue that repeated burns could gradually reduce UNI’s circulating supply, which they say could increase scarcity over time.

Beyond token mechanics, UNIfication also restructures parts of Uniswap’s organizational setup.

As part of the overhaul, employees of the Uniswap Foundation will transition to Uniswap Labs, with funding from the treasury’s growth fund.

Labs framed the move as a consolidation of development and operational work to support the protocol’s expansion.

The firm also signaled that further revenue mechanisms could be proposed later through separate governance processes. Potential future fee sources cited include protocol fees on layer-2 networks, Uniswap v4, UniswapX, PFDA, and aggregator hooks.

The market response to the execution was positive, according to BeInCrypto data. UNI rose more than 6% over the past day to a multi-week high of $6.38 as of press time.

Uniswap leads decentralized exchange trading in the crypto industry and operates across 40 blockchain networks. DefiLlama data show Uniswap processed more than $60 billion in trading volume over the past month.