Uniswap's Revenue Growth Leaves Fees in the Dust

Uniswap's revenue growth has outpaced its fee growth in recent months. According to data, protocol fees have risen by 129% over the past 30 days, while protocol revenue has increased even more, by 165%. This discrepancy may seem puzzling at first glance, but it can be attributed to changes in how Uniswap collects fees.

In December of last year, Uniswap activated its fee-sharing mechanism. Now, a portion of trading fees goes directly to the protocol, rather than solely to liquidity providers (LPs). This means that the protocol now captures revenue from each trade.

The revenue collected by the protocol is not distributed directly; instead, it is used to burn UNI tokens. The more active trading on Uniswap becomes, the more protocol revenue is generated, and consequently, more UNI tokens are burned.