Uniswap governance intends to adopt the DUNA framework to pave the way for activating the protocol fee mechanism

On August 12, 2025, a foundation of a well-known decentralized trading platform proposed a new initiative to register its governance as a decentralized unincorporated nonprofit association (DUNA) in Wyoming, with the entity name "DUNI". This move aims to provide compliance assurance for the platform's decentralized governance and lay the groundwork for a potential fee mechanism for the protocol that may be activated in the future. If successfully implemented, this development could become an important milestone in the DeFi field, marking a significant transformation in protocol governance and value capture mechanisms.

As a leading DEX in the DeFi ecosystem, this platform's action may set a new standard for the compliance process of DAOs. In the context of the crypto industry placing increasing emphasis on compliance, this initiative provides innovative ideas for the protocol to achieve legal operation, risk management, and coordination of off-chain interactions.

In-depth Analysis of the DUNA Framework in Wyoming: A New Path for DAO Compliance

In the past two years, the foundation has been exploring a legal framework that can provide comprehensive liability protection for governance participants, aiming to achieve off-chain interaction while maintaining the governance power of the protocol without introducing centralization risks. After in-depth research and legal consultation, DUNA is considered an ideal choice to meet these needs.

In March 2024, the U.S. crypto-friendly state of Wyoming passed legislation recognizing DUNA as a new form of legal entity, which took effect in July of that year. This legal framework is specifically designed for DAOs and public chains, granting them legal status while preserving their decentralized governance essence.

The core feature of DUNA is its nonprofit nature. Although DUNA can engage in profit-making activities, all profits must be used for nonprofit purposes and cannot be distributed to members or token holders as profits or dividends. However, DUNA can pay compensation or reimburse expenses to those who provide services to it, such as paying salaries to employees, incentivizing node operators or contributors, and reimbursing expenses.

The biggest advantage of DUNA is that it provides limited liability protection for DAO members and token holders, exempting relevant individuals from bearing the obligations, debts, or legal liabilities of the DAO. This effectively avoids the risk of unregistered DAOs being regarded as general partnerships, which would result in members facing joint and unlimited liability.

The establishment of DUNI will enable the platform to perform off-chain operations, such as signing contracts, holding assets, hiring third-party service providers (such as lawyers and auditors), and fulfilling potential regulatory and tax responsibilities. For DeFi protocols, establishing a legal entity is a key step in bridging the gap with the traditional business world. Once it has a legal identity, the platform will be able to collaborate more smoothly with external entities and expand its ecosystem.

To ensure the normal operation and compliance of DUNI, the proposal plans to allocate $16.5 million worth of platform tokens from the treasury as a legal defense and tax compliance budget. The foundation expects that the amount to resolve historical taxes and their penalties will be less than $10 million. In addition, $75,000 will need to be paid to the tax consulting firm as compensation for the compliance administrator.

The platform's foundation's general counsel stated that applying the DUNA framework will pave the way for the activation of protocol fees, and some LP fees can be transferred to the DAO treasury. He pointed out, "Based on this legal framework, the scope of DUNA's activities will be greatly expanded, laying the foundation not only for future protocol fee voting but also formalizing the platform's governance activities while protecting the participants in collective decision-making."

Protocol Fee Mechanism: Potential Benefits and Challenges of Economic Model Transformation

Currently, the platform sets the trading fee at 0.3%, which is fully allocated to LPs (liquidity providers) in proportion. When a trade occurs, the fees are directly deposited into the liquidity reserves, increasing the value of LP-Token, thereby incentivizing LPs.

Both the V3 and V4 versions of the platform include a protocol fee mechanism that can be activated through governance proposals. Once activated, 1/6 of the 0.3% trading fee, which amounts to 0.05%, will no longer flow to LPs but will be collected by the protocol's DAO treasury. The fees paid by traders will not increase, but the earnings received by LPs will decrease.

The construction of the DUNA framework provides the necessary legal basis for the legitimate collection and management of protocol fees. In the absence of a legal entity, protocol fees may face risks related to securities law and tax compliance, whereas DUNI can hold and manage its income with a legal identity.

If the protocol fee mechanism is activated, it is expected to bring substantial revenue to the DAO, which can be used to fund the development and construction of the protocol, security audits, community donations, ecosystem incentives, and other strategic support, benefiting the sustainable development of the protocol and consolidating its innovation and leading position in the DeFi market.

Under the DUNA framework, the activation of the protocol fee mechanism will reshape the platform's business model. Previously, the business model of the protocol was mainly based on transactions, with LP bearing the costs and earning fees, while the protocol itself did not generate direct revenue. The DUNA framework provides a legal basis for DAOs to charge legitimately, defining the platform as a model where the protocol itself creates direct sources of revenue.

Although the non-profit nature of DUNA limits the protocol's ability to directly distribute profits to token holders, the increase in its revenue can indirectly enhance the value of the platform token in various ways, such as the DAO being able to buy back and burn tokens, thereby increasing their intrinsic value. In addition, the revenue can also be reinvested into the ecosystem to build a self-sustaining "non-profit business model" for the DAO and achieve a more proactive expansion of the ecosystem.

However, activating the protocol fee mechanism will also directly affect the LP's returns, which may lead some LPs to withdraw liquidity. Liquidity dilution means that users receive worse prices due to higher slippage when executing large transactions on the platform, which may prompt users to turn to other DEXs, resulting in a decline in trading volume, forming a "negative flywheel effect": fees reduce LP returns → LP withdraws liquidity → slippage increases → trading volume declines → LP returns further decrease. In addition, MEV traders are more sensitive to liquidity, and their activities are expected to decrease as TVL declines.

Once the protocol fee mechanism is activated, the DAO must closely monitor the indicator data to avoid reaching the "point of diminishing returns". This situation also highlights the conflict between protocol value capture and maintaining user experience.

Market Reaction: Community Views Are Polarized

After the proposal was released, the platform token price briefly rose over 8%, reaching $11.86, indicating that the market holds an optimistic attitude towards the news and may interpret it as a long-term benefit for the token's value capture ability.

The proposal is also actively discussed on social media and governance forums. Supporters believe that DUNA is a key step in legalizing DAOs and activating the protocol fee mechanism, which is beneficial for the long-term development of the protocol. By establishing a legal entity, the platform will better interact with the off-chain world.

In contrast, some community members have expressed concerns, such as the timeline for activating the fee switch, centralization risks, transparency, and issues related to cross-border compliance. Therefore, although the proposal has significant long-term implications, there is a substantial number of users who adopt a "wait-and-see" attitude due to their concerns.

These different perspectives reflect the complex trade-offs faced by the DAO community in pursuing innovation and compliance, as well as between short-term benefits and long-term value.