Fee Switch
A setting in a protocol's contracts that, when turned on, redirects part of the fees users already pay toward the protocol or its token holders.
The typical arrangement is that an application charges a fee and passes all of it to whoever supplies the service, such as liquidity providers on an automated market maker. A fee switch is a parameter that diverts a slice of that same fee to a treasury or a staking contract instead. Turning it on is usually a governance decision, and it changes the split between supply-side revenue and holder revenue rather than raising new money from users. The trade-offs are concrete: suppliers earn less and may move to a competing venue, and in several jurisdictions routing protocol income to token holders sharpens the question of whether the token is a security.
En pratique
Uniswap's core contracts include a protocol fee parameter that governance can enable, which would take a portion of the swap fee currently paid entirely to liquidity providers.
Le malentendu courant
Turning on a fee switch does not create new income; it reallocates fees users are already paying away from liquidity providers or other suppliers.