Uniswap’s UNI token experiences a 20% increase as the proposal for token rewards moves closer to approval.

Uniswap’s UNI token surged by 20% as a governance proposal aimed at distributing protocol revenues among token holders gained overwhelming support in a preliminary temperature check before the formal voting process. If approved, the initiative could result in annual dividends ranging from $62 million to $156 million for UNI owners, according to estimates. The potential success of Uniswap’s reward-sharing mechanism might serve as inspiration for other DeFi protocols, although regulatory scrutiny could be a concern.

Despite the broader correction in the crypto market, Uniswap’s governance token reached a new 26-month high, propelled by growing support for the proposal among the community. The temperature check, a preliminary step before the official on-chain vote scheduled for March 8, indicated widespread backing for the governance upgrade. Uniswap’s decentralized autonomous organization (DAO) operates through UNI token holders participating in blockchain-based voting.

Over the past 24 hours, UNI experienced a notable 20% increase, reaching $17, its highest level since January 2022, before retracing slightly to $15.7. This performance surpassed Bitcoin’s 3% recovery from the previous day’s decline and the 1% drop in the altcoin-heavy CoinDesk 20 Index (CD20).

Investor enthusiasm for UNI has been driven by the anticipation of a significant governance overhaul that outlines a reward scheme for staked and delegated UNI holders, involving the distribution of a portion of the protocol’s income generated from exchange fees. Based on Uniswap’s protocol earnings, the proposed upgrade has the potential to distribute substantial annual dividends to UNI owners.

Since the submission of the proposal on February 23, UNI has witnessed a 60% surge and more than doubled in price, as indicated by the CoinDesk Uniswap Price Index (UNX).

While Uniswap’s initiative may encourage other DeFi protocols to adopt similar mechanisms, concerns have been raised about potential regulatory scrutiny. Digital asset manager 21Shares cautioned that token reward schemes might face classification as securities, potentially meeting the criteria of the Howey test.