Author | Shijiu Jun
Introduction
Recently, the industry's excitement has shifted due to the rise of the X402 payment track, as well as the panic from Black Monday, Tuesday, Wednesday, Thursday, and Friday, along with the rotation of the privacy sector in the bull market legend.
This world is truly fascinating and also very noisy.
Whether it's a bear market or not, after all, one common mistake smart people make is: trying hard to optimize something that shouldn't exist (from Musk). Now, let's calm down and review the brilliance of past successful products, examining which players in the competition are engaging in ineffective operations, and identifying which are the pigs on the wind, as only when the wind stops can we truly see the long-term value of the future.
If you ask what the representative track trend is this year?
My first choice is Dex. It has been four years since the summer of DeFi, and there are indeed multiple typical products in 2025, occupying a significant voice in the market from concept to execution. The most magical aspect of this track is that just when you think everything that can be done has been done, and the landscape should have settled, you suddenly see certain projects emerging as dark horses from the details. Hyperliquid in Perps is one such example, and fomo in Meme bots is another.
Aside from the challenges posed by new platforms, the evergreen Uniswap in DeFi continues to innovate. This article will deeply analyze two major moves made by Uniswap this week.
Current Market Situation of Uniswap
As of today, Uniswap has processed approximately $4 trillion in trading volume, making it the undisputed leading Dex platform.
As seen in the chart below, even with new challengers emerging in 2025, it still occupies 70-80% of the market share on the Ethereum mainnet.
In October 2025, it had a trading volume of about $138 billion. Excluding monthly fluctuations, it averages a trading volume of $60-100 billion.
Market share of various Dex on Ethereum
However, beneath the surface, there are indeed numerous challengers, as Uniswap's TVL continues to decline, indicating that the market has better staking options. Moreover, despite the continuous launches of v3 and v4 with more performance, GAS, and LP optimizations, it is still competing for a shrinking market.
Market share of various versions of Uniswap on Ethereum
And the entire Dex market is not solely occupied by it.
In the cross-chain swap market, the actual performance of UniswapX is far inferior to the experience optimizations of its competitor PancakeSwap. Since 2024, its market share has been continuously eroded. Now it holds only about 20-30% of the market.
Nevertheless, even so, we cannot underestimate the potential of this market, as Uniswap still has a scale of around $200 billion in monthly cross-chain swap trading volume.
EVM-based cross-chain Dex trading volume
There are clearly a host of issues here. The most criticized is the poor performance of the UNI token itself. The current situation is dismal compared to its peak in 2021.
Can UNIfication help turn the tide?
UNIfication New Unification Proposal
UNIfication, a proposal jointly put forward by Uniswap Labs and the Uniswap Foundation, aims to completely reform the operation of Uniswap—from fee distribution to governance structure to token economic model.
Key actions include:
Activation of Protocol Fees and UNI Burn: Enabling a built-in "fee switch" that allocates a portion of each transaction fee to the protocol (rather than all to liquidity providers). The fees collected by the protocol will be used to burn UNI tokens, thereby permanently reducing the supply of UNI. Thus, in the future, Uniswap's usage will be directly linked to the scarcity of the token.
Unichain Sequencer Fees for Burn: Uniswap now has its own Layer-2 network called Unichain. The fees earned by the Unichain Sequencer (currently with an annual income of about $7.5 million) will also be used for the UNI token burn mechanism. Therefore, every layer of Uniswap (the main exchange and its L2 chain) participates in the same burn mechanism, increasing the scarcity of UNI tokens as usage grows.
Protocol Fee Discount Auction (PFDA): A new mechanism that internalizes maximum extractable value (MEV) and enhances liquidity provider (LP) returns. In short, traders can bid for temporary fee discounts (i.e., trade without paying protocol fees for a short time). The highest bid (paid in UNI) will be used for contract burns. This way, MEV that would have gone to bots or validators will be captured by Uniswap and used to burn UNI.
Burning 100 million UNI tokens (retroactive burn): To compensate UNI holders for the fees they "missed" during the fee conversion shutdown, they propose to burn 100 million UNI tokens from the treasury in one go. This amounts to about 16% of the circulating supply of UNI.
No more interface/wallet fees: Uniswap Labs will stop charging fees for its products (Uniswap official web app, mobile wallet, and API).
Introduction of a growth budget of 20 million UNI per year for Uniswap Labs (allocated quarterly).
How to Understand?
Well, there is indeed a lot of information, so let's think about it from the perspectives of different stakeholders.
1. For LPs
Clearly, the costs will be passed on to the liquidity providers. For example, in the Uniswap v2 version, the trading fee will be adjusted from 0.30% (all to liquidity providers) to 0.25% for liquidity providers and 0.05% for the protocol. Therefore, after the activation of protocol fees, LPs will see a reduction of 1/6 in their earnings per transaction.
Although this proposal also includes the PFDA scheme, which aims to expand the overall pie by internalizing some market execution value (MEV), guiding external liquidity, and charging certain fees, thus increasing overall trading volume.
Some market analyses estimate that this mechanism will increase LP earnings by about $0.06 to $0.26 per $10,000 in trading volume. Considering that LP profits are usually very low, this is significant.
However, I am not so optimistic, as the feedback from MEV gains to LPs and users has always been a major challenge. Moreover, LPs also bear the risk of impermanent loss.
2. For Ordinary Users
First, user fees will be directly reduced. On one hand, high-end users can obtain fee discount coupons through the PFDA mechanism combined with auctions. On the other hand, the fees for using the Uniswap app page will be completely eliminated.
However, UNI will finally benefit from Uniswap's success, which is significant because previously, UNI was merely a governance token and did not share in Uniswap's trading fees (which were all given to LPs).
Furthermore, UNI itself will form a deflationary asset closely related to cash flow, rather than a passive governance token.
This clearly references the governance model of Hyperliquid, where, from a certain perspective, burning and repurchasing are analogous.
3. For Lab Operations
Previously, additional fees from app usage were used to pay employees, but now it will be through a budget of 20 million UNI. Based on the current market price, this amounts to a research and development budget of $140 million, which is quite substantial.
Sometimes I wonder if this whole setup is just for this 20 million UNI, as this scale is far greater than previous fee income.
Moreover, Uniswap Labs and the foundation will merge: the Labs responsible for protocol development and the foundation responsible for grants/governance plan to combine. Most team members from the foundation will join Labs, forming a united team focused on Uniswap's development. From this perspective, it indeed brings a refreshing new atmosphere.
4. Is this mechanism worth a long-term view?
Perhaps due to the recent black swan events, the valuation increase brought by the burn has quickly receded.
Aside from these external factors, I believe that the short-term fluctuations stem from the initial release where everyone quickly understood that it would burn tokens, leading to growth. However, burning is not a source of long-term value.
Uniswap hopes that increased trading volume, MEV sharing, and other incentives will offset the impact of reduced earnings over time. How can they stabilize LP earnings?
In the initial charts, we have already seen that long-term Uniswap LPs are gradually migrating away.
Similarly, competitors (all doing LP) will have to hold a large amount of regular tokens, which often suffer the most losses during black swan events, further amplifying LP's impermanent losses. And what about mainstream platform tokens? Ethereum staking itself offers a clear annual yield of 4%, while those doing Solana can achieve 8% or even higher returns with market and Jito capturing MEV, without worrying about the volatility of altcoins.
Therefore, the exodus of LPs will ultimately affect trading depth, increase trading slippage, and ultimately harm the user base.
Thus, while the UNI transformation is the biggest change since the launch of the UNI token, it addresses the long-standing issue of the lack of direct correlation between UNI token value and Uniswap's actual performance.
In the long run, the competition among decentralized exchanges (DEX) in 2025 is exceptionally fierce, and Uniswap's scale means its liquidity can withstand fluctuations for a while. The timing of this move is reasonable, but it will inevitably bring about turbulence.
CCA (Continuous Clearing Auction)
This is the new protocol CCA recently launched by Uniswap and Aztec, specifically designed for price discovery and liquidity initiation for new assets.
After this auction process concludes, the project team can import the raised funds and tokens into Uniswap v4, directly connecting to the secondary market for trading.
1. Evolution of Asset Pricing Solutions
In fact, how to price assets has always been a grand question. In my previous interpretations of the mechanisms of UniswapX and UniswapV2, I mentioned that objectively speaking, Uniswap's rise was due to seizing the demand for new asset pricing at that time.
After all, the on-chain AMM formula for two tokens, x * y = k, is the easiest way to quickly return to a reasonable price within the performance-limited EVM architecture.
However, this mechanism is not perfect; significant slippage, MEV attacks, and impermanent loss for LPs are all key factors affecting it.
Therefore, fair price discovery and equitable initial token distribution have always been major topics for DEX platforms. Yet today, most versions still feel like behind-the-scenes transactions disguised as "community activities." Insiders gain certainty while others receive leftovers.
Subsequently, various platforms have made many attempts at pricing new assets, such as team airdrops, Dutch auctions, fixed-price sales, LBP, Bonding Curve, Fee mint, fair launches, and so on.
Moreover, the above solutions still have flaws, such as:
- Fixed-price sales can lead to mispricing and priority disputes, resulting in insufficient or unstable liquidity.
- Dutch auctions create time-based games, giving professionals like us an advantage over actual participants.
- One-time auctions reduce demand and often lead to last-minute buying sprees.
- Various Curve models have path dependency and are easily subject to manipulation.
2. Design Philosophy of CCA
Essentially, CCA is a protocol independent of Uniswap v4, serving as a complete framework for issuance and pricing. However, it will leverage Uniswap v4's hooks mechanism to connect with the AMM core. In the entire issuance workflow, it is represented by the CCA Auction module in the diagram below.
It is a configurable auction framework that operates entirely on-chain (which is an improvement over UniswapX). The five stages are: configuration stage → bidding stage → allocation stage → clearing stage → injection stage.
Configuration Stage: The auction initiator first sets the rules on-chain, such as start and end times, how many "rounds" or time periods the auction will be divided into, the proportion of tokens released in each time period, the minimum price (floor price), and additional configurations like whether a whitelist/verification is needed, and how to inject liquidity into Uniswap v4 after the auction ends.
Bidding Stage: During the auction, participants can bid at any time. Each bid includes two parameters: the amount of funds invested and the maximum acceptable unit price.
Allocation Stage: The system automatically allocates a bid across the remaining "release periods." Therefore, the earlier a bid is placed, the more time periods the participant can engage in, allowing for participation in more rounds during the clearing.
Clearing Stage: In each round, the system accumulates all valid bids and then uses a unified rule to find a price that can sell all the tokens to be released in that round, serving as the final transaction price for that round.
Injection Stage: After the auction concludes, participants can claim their acquired tokens and any unspent funds; the protocol will inject the raised assets along with the counterpart assets prepared by the project team into Uniswap v4, officially launching the liquidity pool in the secondary market.
3. How to Understand
In summary, it essentially breaks down a one-time auction into multiple rounds, distributing the game dynamics of the auction process across several instances. This approach aims to resolve the issue of one-time auctions often concluding with a flurry of transactions in the last second (just before the block is mined), turning the auction into a black box.
But is this enough?
Clearly, the complexity may deter many new tokens from launching on this platform. Additionally, efficiency has decreased. Objectively speaking, since the X version, Uniswap's auction logic has not been very successful, and many DeFi protocols have left the complexity to the users.
I believe this is difficult to replicate as the Uniswap V1 version, which successfully rewrote the history of new token issuance and pricing with just 200 lines of code. Moreover, relying on the V4 version, its development, as indicated by the data above, shows a five-fold gap compared to mainstream V2 and V3.
On Asset Growth and Value Discovery
Regarding asset growth, the previous discussion focused on initial pricing platforms. I would like to add some insights on the pricing logic during the mid-to-large development stages.
Although trading financial derivatives, especially perpetual platforms, is the most profitable among all trading links.
Many people have been drawn to this initially, but the true intrinsic value of Perps lies in its ability to assist in pricing mid-sized assets.
Particularly for small assets, they can be listed on Uniswap or meme platforms, and as they grow into mid-sized assets, they can be listed on BN's alpha platform or other mid-sized CEX platforms. However, objectively speaking, before 2025, there was a lack of decentralized pricing platforms as assets transitioned to larger ones.
Thus, during this transitional period, market misjudgments can easily occur, leading to the frequent sight of investors exiting rapidly after assets are listed on exchanges.
This is primarily because Perps are futures; to price an asset in the market, you must place it on the platform, locking its liquidity there, which is detrimental to the asset.
If the asset is too small, borrowing tokens to provide liquidity to market makers can also be challenging. Often, small tokens disappear because they fail to coordinate well with market makers, leading to price manipulation during official sales or purchases.
Consequently, many of these market makers' influences prevent small tokens from gaining traction. As they reach the mid-token stage, liquidity must be placed on the platform to create sufficient depth, which increases costs for the project team, and LP returns become unstable and less apparent, as volatile tokens deter long-term holding.
From this perspective, perpetual platforms, being futures, do not require delivery of anything; you only need to believe in the price, making them excellent pricing platforms for mid-sized assets.
Recently facing a bull-bear transition, I have experienced two cycles. Objectively speaking, platforms that can survive the constant changes between bull and bear markets are those that capture long-term demand.
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