Uniswap v3 Protocol Fee Cuts into LP Returns, Study Finds

Uniswap's v3 protocol fee has been collecting on mainnet pools since December 27, 2025, and on all v3 pools on Arbitrum and Base since March 6, 2026. This fee affects liquidity providers (LPs), who give up a portion of their fees to the protocol. The fee is tiered, with 0.01% and 0.05% pools giving up one quarter of LP fees, and 0.30% and 1% pools giving up one sixth.

The study analyzed positions in 20 Uniswap v3 pool pairings on Ethereum mainnet, Arbitrum, and Base, with at least $100k TVL. The median profitable position gives up 28% of its net return to a 17-25% fee haircut. The protocol has actually collected about $3.6M from these positions since activation.

The study found that the fee's effect is more pronounced on middle-width ranges, where positions are fee-dependent enough to feel the haircut but not wide enough to earn through it. Narrow ranges lose money in both scenarios due to divergence loss. Wide ranges stay clearly positive under the fee on both tiers.