According to Blockworks Research, Uniswap Labs has generated $764,000 in revenue since it enabled fees on some Uniswap transactions two weeks ago. But it’s not the only DeFi platform toying with turning on the fee switch.
In recent weeks, Osmosis, Blur and Hashflow have also received proposals to introduce trading fees. One industry participant said the growing interest in fees is a sign that DeFi is maturing toward a focus on revenue. However, another speculated that fees may be impractical if trading platforms can be duplicated.
Last month, DeFi giant Uniswap Labs began charging fees for transactions through its interface involving certain asset pairs. The interface fee is in addition to the existing fee charged by Uniswap liquidity providers (LPs).
The new fees are on track to generate tens of millions for the company annually. However, as one researcher noted, only 3% of Uniswap’s total trading volume is subject to the 0.15% fee.
A protocol-level Uniswap rate would tax LPs on almost all transactions, but a protocol rate proposal from GFX Labs stalled this summer. Notably, the compensation funds would go to Uniswap DAO’s coffers instead of Uniswap Labs. A GFX Labs representative said a modified version of the proposal could appear on Uniswap’s forums as early as December.
Decentralized exchange Hashflow enabled its own protocol-level trading fee on Wednesday morning after a board vote approved the update. Hashflow CEO Varun Kumar said DEX’s move could be a symptom of fee FOMO in DeFi.
“I really think this proposal could have been inspired based on other protocols that involved costs. And they said, ‘Ah, Sushi has a fee and Osmosis and Uniswap [are] also adds a fee, so why doesn’t Hashflow add a fee?” said Kumar.
Kumar added that there is growing interest in enabling trading fees, accompanied by a general feeling that protocols should generate revenue. In previous crypto market cycles, compelling whitepapers or functional but unprofitable products were considered sufficient by investors, Kumar said. Now the focus has shifted to actually generating revenue for these protocols.
And crypto trading fees are not an untested concept.
“I draw parallels with the centralized crypto exchanges,” says Marc Taverner, CEO of crypto-financial services provider XEROF. “They have had these transaction fees for the longest time, and the reason for that is to provide sustainable and reliable revenue for the platform providers.”
Still, not everything in the DeFi space is sold for a fee. Superposition is a zero-fee automated market maker (AMM) built on Arbitrum. The project’s CEO, Shahmeer Chaudhry, said the protocol could generate revenue without trading fees if scaled up enough.
And because open source code is common in DeFi, Chaudhry added, trading fees could lead to spinoff projects.
“In crypto it’s always a race to zero, right? Once you have good reimbursements, you will always have a range that has less costs,” said Chaudhry.