“LP fees are not getting reduced,” said Uniswap founder Hayden Adams, addressing widespread confusion after the recent activation of the v4 protocol fees on multiple blockchains. The new fee system, approved by a whopping 46.6 million UNI votes, adds a separate protocol charge on top of the existing liquidity provider (LP) fees, rather than subtracting from them.
After governance passed Proposal 100 on July 27, the v4 fee-controller system went live on Ethereum, Arbitrum, Base, BNB Chain, Polygon, OP Mainnet, and Robinhood Chain. Adams explained using a pool with a 30 basis-point fee as an example. Liquidity providers keep their full 30 basis points, while traders now pay an additional 5 basis points as the protocol fee. This means the total fee per trade is about 35 basis points, with the protocol’s cut representing roughly 14% of that total, not 25% of LP earnings as some critics claimed.
The code behind Uniswap v4 clearly separates the LP fee from the protocol charge. The Pool contract calculates and routes these fees independently, supporting complex fee structures like dynamic pools and hooks. Governance also deployed specialized contracts V4FeePolicy to set fee curves and V4FeeAdapter to enforce rules and distribute fees to manage this new system efficiently. Still, not everyone is sold on the change; Guillaume Lambert, founder of Panoptic, argued the extra fees could pressure LP returns and incentivize them to exit.
Amid this debate, Uniswap’s founder insists that the protocol fee adds to revenue streams without diluting LP profits. Traders pay more but liquidity providers continue earning what they did before. For more on how institutional players are adjusting to market shifts, see BlackRock clients offloading bitcoin and Morgan Stanley’s new Ethereum ETF launch.
This content is for informational purposes only and should not be considered financial advice.
