Uniswap is one of the largest decentralized exchanges (DEX). Its crypto liquidity model is backed by automated market maker (AMM) technology and liquidity pools. UNI, the native token of Uniswap, traded over $1.08b in the last 24 hours.

Over the weekend, UNI jumped from about $7.18 to $12.62. This is its highest jump in more than a year. And here is what caused this jump.

On February 23, 2024, Erin Koen, the Governance lead at the Uniswap Foundation, made a proposal to upgrade the Uniswap Protocol’s governance system. The upgrade is aimed at rewarding UNI holders who have staked and delegated their tokens.

The Uniswap Foundation is proposing a large-scale upgrade to Uniswap Protocol Governance to incentivize active, engaged, and thoughtful delegation. The Foundation further posted its potential impact, stating that:

“Decentralized, resilient, and engaged governance is imperative to the long-term health and success of the Protocol. We believe this upgrade will strengthen and invigorate Uniswap governance.”

This proposal aims to revive and shake up Uniswap’s governance system. The Uniswap Foundation believes that incentivizing thoughtful and active delegation will eliminate its challenges of free-riding and apathy, which would remain existential risks to the Uniswap Protocol’s sustainability if nothing is done about it. The proposal further stated that “less than 10% of circulating UNI is used to vote on a given proposal. Further, a large portion of the existing delegation is “stale.” As of February 1, 2024, 14 of the top 30 delegates by voting power had not voted over the last 10 proposals, and only 7 of these delegates have ever created a proposal.”

Following this announcement, UNI jumped by 40%  from $7.18 to $10.22 in less than an hour and even up to $12.62 by the next day.

UNI is still at $10.50, which is a 0.98% decrease in the last 24 hours.

Here is a summary of the proposed technical changes to Uniswap.

“The Uniswap Foundation has funded two new smart contracts that are designed to be deployed into and interact with the existing ecosystem of Uniswap contracts operating on-chain. If implemented by this governance proposal, they would:

• Upgrade Uniswap Protocol Governance to enable the permissionless and programmatic collection of protocol fees.
• Distribute any protocol fees pro-rata to UNI token holders who have staked and delegated their votes.
• Allow for governance to continue to control core parameters: which pools are charged a fee, and the magnitude of the fee.”

It is believed that this will drastically bring a positive turnaround for the Uniswap Protocol governance, which may in turn cause a major jump in the price of UNI.