The governance token of leading decentralized exchange Uniswap has seen its price surge around 35% over the past week and nearly 150% over the last 30-day period to now trade at a 26-monnth high.

According to CryptoCompare data, UNI is currently trading at $14.7 and has a total market capitalization of $14.7 billion, taking into account the firm accounts for all circulating tokens in its calculation, including coins held in smart contracts or escrow.

UNIUSD Chart via TradingView

This price rise coincides with a proposal from the Uniswap Foundation to revamp the protocol’s governance structure and introduce fee sharing. The proposed upgrade aims to incentivize community involvement by distributing a portion of the protocol’s fees to UNI token holders who stake and delegate their tokens.

The proposal, submitted by the Uniswap Foundation’s governance lead Erin Koen, would reward UNI token holders who have staked and delegated their tokens in a bid to improve Uniswap governance’s “resilience and decentralization.”

Explaining the proposal, Koen noted that the Uniswap Protocol is “immensely useful” after processing trillions of dollars’ worth of token swaps since launch while being “governance minimized.” As a result, he said, the protocol “built a market share lead with a very low level of Governance activity.”

Koen added that maintaining its lead is only going to get harder as liquidity fragments over multiple blockchains as competition grows. As such, he said, “Uniswap Governance needs to use its reputational, financial, and technical capital for good.

The proposal, announced on February 23rd, has garnered widespread support from the Uniswap community, with over 55 million UNI tokens voting in favor of it. Snapshot voting for the proposal began on March 1st and will conclude later today, March 7th.

Analysts attribute the recent rally in UNI’s price to several factors, including the proposed fee-sharing mechanism, increased trading volume on the Uniswap exchange, and whale accumulation of UNI tokens.

If Koen’s proposal is approved by Uniswap’s community, it would enable a permissionless collection of protocol fees that would then be distributed to UNI token holders who have staked and delegated their votes.

Coinbase’s latest Weekly Market Commentary notes, however, that the proposal “ does not itself turn on the fee switch, but instead sets the technical mechanism for how the fee switch would be implemented.” If passed, the proposal will set an initial fee parameter of 0, which “can be adjusted from 1/10 to 1/4 of trading fees in future proposals.”

Coinbase’s analysts add that these fees would be deducted from liquidity providers’ earnings, which could “lead to a reduction in the total value locked (TVL) and MEV-based flows.” However, the proposal’s analysis suggests the impact would be minimal.

The analysts also said the proposal could encourage more active community participation from UNI token holders, as it incentivizes staking and delegating. Its seeming success and apparent approval have already prompted other projects, including Frax, to consider following suit.

Featured image via Unsplash.