$UNI $UNI5L

An In-Depth Analysis of the Protocol Upgrade by ChatGPT for Reference

Alright, I will approach this from the three perspectives of “protocol design + economic model + governance structure” to truly dissect this upgrade to the core.
You can think of it as Uniswap’s “on-chain prospectus + constitutional amendment.”

I will break it down into 8 levels, from the most fundamental mechanisms to the long-term impact on UNI’s value.

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1. First, a “general framework diagram” (very important)

This upgrade essentially does one thing:
Transform Uniswap from “public infrastructure that only distributes value to LPs”
Into
“A protocol company capable of systematically capturing value and directing it back to UNI”

It’s not a single-point upgrade but a closed-loop flywheel:
Trading volume ↑
→ Protocol revenue ↑
→ UNI burn ↑
→ UNI scarcity ↑
→ Governance rights & safety margin ↑
→ Capital / liquidity / integrations ↑
→ Trading volume again ↑

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2. First layer: Protocol Fee (Fee Switch) — “The engine of value capture”

1️⃣ The true meaning of v2 / v3 fee structure changes

v2 (simplest but most critical)
• Previously:
• LP: 0.30%
• Protocol: 0
• Now:
• LP: 0.25%
• Protocol: 0.05%

📌 Pay attention to a detail:
0.05% seems small, but v2 pools:
• Have deep liquidity
• Are the basis for trading pairs
• Handle a large number of long-tail trades

👉 This is a “stable, anti-cyclical” cash flow source

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v3 (more refined)
• Different pools with different fee rates, protocol takes different cuts
• Takes a portion of LP fees (1/4 or 1/6)

📌 The design here is very clever:
• Does not undermine LP incentives
• Reflects “protocol’s intrinsic value” through efficiency gains + routing advantages

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2️⃣ Why “all used for burning” instead of dividends?

This is the optimal solution considering regulation + economic game theory:
• ❌ Dividends → easily classified as securities
• ✅ Burns → increases the intrinsic value of each UNI

📌 From a financial perspective:
• Burning = implicit dividend
• And it’s:
• Tax-friendly
• Doesn’t require individual actions
• Automated execution

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3. Second layer: TokenJar + Firepit — “A vault where value isn’t misappropriated”

This is a layer many overlook but is extremely important.

1️⃣ TokenJar
• All protocol fees can only go here
• Immutable
• Cannot be directly withdrawn

2️⃣ Firepit
• Only purpose: burn UNI
• No burning → fees cannot be withdrawn

📌 The significance of this design:
Even if governance is hijacked in the future,
It’s very hard to turn protocol income into “payroll / embezzlement / short-term incentives”

👉 This is a “system-level protection” for UNI holders

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4. Third layer: Unichain + Sequencer Fee — “On-chain revenue flowing back to UNI”

This marks Uniswap’s move towards vertical integration.

Previously:
• Protocol operated on someone else’s chain
• Chain earned transaction fees
• Protocol could only benefit indirectly

Now:
• Unichain itself is an L2
• Sequencer rights → fee collection rights
• Revenue → directly burn UNI

📌 The core change:
UNI not only earns from DEX revenue,
but also begins to earn from “chain infrastructure revenue”

This is very close to:
• BNB Chain
• ETH (EIP-1559)

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5. Fourth layer: PFDA (MEV internalization) — “The most underestimated ‘money printer’”

This is the most technically complex part of the entire proposal but least understood by the market.

Where did MEV go before?
• Validators
• Searchers
• Black-box game theory

What does PFDA do?
• Turns MEV into:
• Transparent bidding
• Paid fees
• Protocol revenue

📌 Even more aggressive:
• Auction revenue → buy UNI → burn

👉 This transforms “trading friction” into a “counter-inflation tool for UNI”

And additionally:
• LP yields ↑
• Protocol revenue ↑
• User experience may not necessarily worsen

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6. Fifth layer: v4 + Hooks + Aggregators — “Turning Uniswap into a liquidity OS”

This step isn’t about short-term profit but about locking in the ecosystem position for the next decade.

The true meaning of Hooks:
• Uniswap is no longer just an AMM
• But:
• An aggregator
• A router
• An execution layer

Aggregator Hook:
• Consumes external liquidity
• But:
• Charges fees
• Burns UNI

📌 The result:
Even if Uniswap isn’t the primary liquidity source,
it can still be a “value capture layer”

This is very similar to:
• Operating systems charging app taxes
• Instead of building all applications themselves

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7. Sixth layer: Merging Labs / Foundation — “Governance without internal conflict”

You must understand this point clearly, or you risk misjudging the situation.

Previous issues:
• Foundation:
• Takes money
• Not responsible for results
• Labs:
• Develops products
• Incentives not fully aligned with UNI

Now:
• Labs = execution hub
• Governance = goal setting
• Budget = contract binding

📌 This is a rare “consolidation of authority and responsibility” in Web3

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8. Seventh layer: Burning 100 million UNI — “Restoring trust, not just boosting prices”

Many see this as a positive, but it’s actually:
A correction of UNI’s historical positioning

• Past years:
• Protocol created enormous social value
• UNI did not capture it

👉 Now:
• Using one-time deflation
• To recover the “historical value that rightfully belongs to UNI”

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9. Final summary (investment-grade)

Here’s my non-hype, no-sell call:

If this upgrade is 70% successfully implemented,
then:
• UNI will no longer be just a “governance token”
• But one of the few “system-level cash flow assets” in DeFi

And the truly scarce factors are not:
• Technology
• Market share

But:
A protocol structure constrained by law, code, and governance,
that can only generate long-term value for the token

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If you’re interested, next I can continue with three more “hardcore” steps:

1️⃣ Quantify all revenue sources: approximately how much UNI is burned each year (range model)
2️⃣ Build a “worst-case scenario model”: if certain links fail, how much value remains in UNI
3️⃣ Compare UNI with ETH / BNB / AAVE within the same “value capture framework”

Just choose one, and I’ll keep dissecting it further.