Uniswap Vote Could Turn Arc Fees Into UNI Burns

Arc gained Uniswap markets before gaining a UNI connection

Uniswap launched v2, v3, v4 and UniswapX on Circle’s Arc blockchain when the network went live on September 16. Traders could immediately access Uniswap through its web app, wallet and API.

The deployment expanded Uniswap’s distribution, but it did not make Arc trading economically relevant to UNI. Users do not need the token to swap assets, while the fees generated by those trades ordinarily go to liquidity providers.

Arc was one of the developments surrounding UNI’s September 18 breakout, but its launch did not require traders to buy the token. The new governance proposal would add the supply-side connection that the original deployment lacked.

If approved and implemented, the measure would activate protocol fees for Uniswap v2, v3 and v4 on Arc. A governance-set portion of the existing swap fees would then move into contracts designed to remove UNI from circulation.

Uniswap dominated Arc’s first days of trading

DefiLlama data showed approximately $80 million in tracked decentralized-exchange volume on Arc over 24 hours when checked on September 19.

V4 accounted for close to $40 million of Uniswap’s turnover, followed by approximately $15 million on v3 and $1 million on v2. During DefiLlama’s available launch-period window, the three versions recorded about $264 million of Arc’s $276 million in tracked DEX volume.

The figures show that Uniswap dominated Arc’s opening activity. They do not establish whether that turnover will continue after the network’s first week. Arc had been live for only three days, leaving too little history to separate recurring demand from launch-related trading.

How Arc fees could become a UNI burn

Only part of each swap fee would go to the protocol

The proposal would not introduce a second charge on top of Uniswap’s normal trading fee. It would redirect a governance-set portion of the existing fee from liquidity providers to protocol-controlled collection contracts.

Under Uniswap’s published fee structure, a v2 trade with a total fee of 0.30% can allocate 0.25% to liquidity providers and 0.05% to the protocol. V3 uses different divisions depending on the pool’s fee tier.

V4 requires a separate policy because its pools can use hooks and dynamic fees. A policy contract sets the protocol share for each pool category, while an adapter applies the rule and transfers the collected assets to TokenJar.

DefiLlama estimated that Uniswap’s Arc pools generated approximately $387,000 in gross swap fees over 24 hours. That is not protocol revenue and should not be treated as the amount available for UNI burns. The available launch-period figure of approximately $1.9 million carries the same limitation.

A reliable burn estimate cannot yet be calculated from those totals. The protocol share has not been activated, rates differ between pools and the eventual number of tokens removed would also depend on UNI’s price when the accumulated assets are released.

TokenJar would not conduct a conventional buyback

The planned system would not take Arc’s collected fees to an exchange, purchase UNI and then destroy the acquired tokens. Instead, the assets would accumulate inside TokenJar contracts.

Independent traders or automated bots, known as searchers, could claim those assets by supplying the amount of UNI required by the contract. They would have an incentive to act when the collected assets were worth more than the required UNI and transaction costs.

This represents one economic burn, not two. The synthetic token is the Arc representation of UNI. Destroying it allows the matching canonical UNI on Ethereum to be released only so that it can be sent permanently to the burn address.

The mechanism already operates for protocol fees collected on other supported networks. An earlier v4 fee proposal cited a one-day record of approximately 186,000 UNI burned through the wider system.

The Arc expansion would not give UNI holders a dividend, a claim on protocol revenue or a direct payment. Its main direct effect would be removing UNI from tradable circulation when collected fees are successfully released.

More burns could mean less income for liquidity providers

Protocol fee capture is not free. Every portion redirected to TokenJar is a portion no longer earned by the liquidity providers supplying the assets needed for trading.

Capturing more could increase the burn generated by each trade. It could also reduce the returns available to LPs. If competing exchanges offer better net returns, liquidity may move elsewhere, increasing slippage and making Arc’s Uniswap markets less attractive to traders.

The most productive setting would therefore not necessarily be the highest available fee. Governance must decide how much revenue to redirect without weakening the liquidity on which future fee generation depends.

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The temperature check does not activate the fees

The current Snapshot vote runs from September 18 through September 23. A successful temperature check would still need to be followed by an onchain governance vote before any Arc fee changes could take effect.

The automated-market-maker contracts and governance messaging route between Ethereum and Arc were already deployed when the proposal was published. However, addresses for several parts of the fee system were still marked “TBD.” These included TokenJar, the v3 and v4 fee adapters, the v4 policy contract and components of the Wormhole transfer setup.

The proposal’s authors said the remaining contracts would be deployed before the onchain vote. Their absence from the temperature check does not prevent governance from supporting the general plan, but voters will need the completed addresses before they can evaluate the final execution package.

Governance can build the pipe, not fill it

The proposal would make Arc economically relevant to UNI in a way the original deployment did not. The connection remains indirect: trades must generate fees, governance must capture part of them, searchers must release the collected assets and the corresponding UNI must finally reach Ethereum’s burn address.

Arc does not need to preserve all of its opening volume for the system to function. It does need recurring trading and enough LP income to keep its markets competitive. That—not the temperature-check result—will determine whether Arc becomes a meaningful UNI sink or merely another network with functioning fee contracts.

This article is provided for informational purposes only and does not constitute financial or investment advice. Governance proposals, network data and cryptocurrency market conditions can change rapidly.

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