What is Uniswap?

Uniswap is a different kind of exchange that is fully decentralized, which means that it is not controlled by a single company. It uses a new type of trading model called an automated liquidity protocol. Uniswap was created in 2018 using the Ethereum blockchain, which is compatible with all ERC-20 tokens and wallet services.

Uniswap is also open source, so anyone can use the code to create their own decentralized exchanges. It allows users to list tokens on the exchange for free, which is different from centralized exchanges that charge high fees for listing new coins.

Since Uniswap is a decentralized exchange, users maintain control of their funds at all times. This eliminates the risk of losing assets if the exchange is hacked. Uniswap is currently the fourth-largest DeFi platform with over $3 billion worth of crypto assets locked on its protocol.

What is an automated liquidity protocol?

Uniswap solves the liquidity problem of centralized exchanges with an automated liquidity protocol. This means people who trade on the exchange become liquidity providers by pooling their money together to create a fund for executing trades.

Each token listed has its own pool, and prices are determined by a computer algorithm. This means trades can be executed instantly at a known price if there's enough liquidity in the pool.

In exchange for contributing to the pool, each liquidity provider receives a token that represents their contribution. They can redeem this token for a share of the trading fees.

Uniswap charges a flat 0.30% fee for each trade, which goes into a liquidity reserve. When a liquidity provider exits, they receive a portion of the reserve fees relative to their contribution.

After an upgrade, a new fee was introduced that sends 0.05% of every 0.30% trading fee to a Uniswap fund for development. This fee can be turned on or off by community vote, and if turned on, liquidity providers will start receiving 0.25% of pool trading fees.

Quick Facts

• Uniswap is a decentralized exchange for digital assets.

• UNI is the platform's cryptocurrency used for governance and incentives.

• Users can earn UNI by providing liquidity or holding their crypto assets.

• UNI holders govern Uniswap based on their holdings.

How does Uniswap work?

Uniswap is a decentralized exchange where people can trade many types of digital assets without a middleman. The platform uses blockchain-based smart contracts to facilitate the decentralized trading of digital assets. Pairs of digital assets are swapped via liquidity pools, which use smart contracts to automatically rebalance after every trade.

Users can participate in the Uniswap network in several ways. First, users can create new markets by using smart contracts to create new pairs of digital assets.

Second, users can swap assets via decentralized markets that have already been created.

Third, users can provide liquidity by staking—agreeing to not trade or sell—their digital assets. Those who stake their digital currencies on the Uniswap platform are rewarded with UNI.

In addition to these options, UNI token holders are empowered to govern the Uniswap platform. Voting power is distributed in proportion to users' UNI balances. Participating in the Uniswap network requires connecting a compatible digital wallet.

Additionally, because the Ethereum platform collects fees for processing Uniswap transactions, Uniswap users need Ether (ETH) to pay any transaction fees that they incur.

What is UNI used for?

Uniswap created a new token called UNI in September 2020, which is distributed according to a set schedule instead of an initial coin offering or other token sale.

Some users who had previously used Uniswap were given 400 UNI tokens as a reward. In the future, UNI tokens can be earned by staking tokens in certain liquidity pools through a process called liquidity mining or yield farming.

UNI token holders can use the token to vote on Uniswap development decisions, fund grants, partnerships, liquidity mining pools, and other proposals. The Uniswap team will eventually step back, and UNI token holders will make all governance decisions.

Investors can buy UNI tokens from various exchanges, including Binance, Bitfinex, Coinbase Pro, Gemini, Huobi, Kucoin, and Uniswap. The token has been successful, quickly becoming one of the top 50 coin listings shortly after its launch.

Who invented Uniswap?

Hayden Adams was born in the United States on October 21, 1992 and developed an interest in technology and finance at a young age. He graduated from Stony Brook University in 2016 with a Bachelor's in Engineering, where he explored the intersection of computer science and finance.

Adams worked as a software engineer at various tech companies, including Blockstack, Siemens, and Consensys, but was laid off from his position at Siemens. However, this event led him to discover his passion for decentralized systems and smart contracts, which ultimately led him to create Uniswap.

In 2018, Adams used his engineering skills to create a decentralized exchange that allows people to buy and sell various digital assets, including cryptocurrencies like Bitcoin and Ethereum.

Uniswap quickly gained popularity due to its use of smart contracts and its decentralized nature. The use of smart contracts on Uniswap allows for more secure and efficient transactions, without the need for a central authority.

What influences UNI’s price?

Uniswap is a decentralized exchange that operates on the Ethereum blockchain, and its price is influenced by various factors.

1. Overall market conditions

Like all cryptocurrencies, the price of Uniswap can be influenced by the broader market conditions. If the overall cryptocurrency market is performing well, it can increase demand for Uniswap and push up its price.

2. Trading volume

The more trading volume there is on the Uniswap platform, the more demand there will be for Uniswap tokens, and this can drive up the price.

3. Liquidity

Uniswap is based on a unique automated market maker (AMM) system that relies on liquidity pools to set prices. The more liquidity there is in these pools, the more efficient the market will be, and this can increase demand for Uniswap.

4. Governance

Uniswap is a decentralized platform that allows token holders to participate in the governance of the platform. If the governance system is seen as effective and responsive, it can increase confidence in the platform and attract more users, which can drive up the price of Uniswap.

5. Competition

Uniswap faces competition from other decentralized exchanges, and the emergence of new competitors can affect the demand for Uniswap tokens and put downward pressure on the price.

6. Regulation

The regulatory environment for cryptocurrencies and decentralized exchanges is still evolving, and changes in regulations can affect the demand for Uniswap tokens and the overall market sentiment.

Uniswap vs Sushiswap

Uniswap and SushiSwap are both decentralized exchanges (DEX) that operate on the Ethereum blockchain. However, there are some notable differences between them that are important to understand before deciding which one to use.

1. Swap Fees

Uniswap offers a 3-tier fee system with different fees according to the risk taken by liquidity providers, while SushiSwap charges a flat 0.3% fee for all trading pairs. Furthermore, SushiSwap distributes a portion of the fees to its token holders and liquidity providers.

2. Liquidity Mining

While Uniswap once distributed some of its UNI tokens through liquidity mining as incentives for liquidity providers, SushiSwap's liquidity mining program is still ongoing. Liquidity providers can earn governance tokens continuously by staking their tokens in pools to provide liquidity.

3. Liquidity Concentration

Uniswap has a larger liquidity pool for selected trading pairs, which allows users to make larger swaps. SushiSwap, on the other hand, does not have this feature and has not announced any plans to incorporate it into its platform.

4. Lending and Margin Trading

Uniswap focuses exclusively on its role as a DEX by offering options for DEXs. SushiSwap, on the other hand, offers BentoBox, a token locker for decentralized applications (dApps).

5. Reward System for New Tokens

Uniswap does not provide any additional incentives to new tokens listed on its platform. SushiSwap, on the other hand, has an "Onsen Program" that is a liquidity provision strategy for new tokens.

How to buy UNI?

1. Choose a crypto exchange

If you don't already have cryptocurrency, you'll need to choose an exchange that allows you to buy UNI with fiat currency or other cryptocurrencies.

2. Buy UNI

After choosing an exchange and adding a payment method, you can purchase UNI on the exchange's trading platform. It's recommended to use a bank account or debit card instead of a credit card to avoid high fees and interest rates.

3. Store Your UNI

You'll need to store your UNI in a wallet. Options include hardware wallets, paper wallets, software wallets, or some exchanges. It's important to keep your private keys secure and not leave large amounts of UNI on exchanges for extended periods.

Final thoughts on Uniswap

Uniswap, a decentralized exchange (DEX), has its own native token called UNI, which is designed to serve as a governance token. Essentially, this means that UNI token holders have the power to influence the decision-making processes of the Uniswap platform by voting on proposed developments and changes. These changes can include anything from how newly minted tokens are distributed to the community and developers, to modifications to the platform's fee structure.

The UNI token was first introduced in September of 2020, as a strategic move to prevent users from defecting to SushiSwap, a rival DEX that had recently emerged on the scene. SushiSwap, which was originally a fork of Uniswap, had incentivized Uniswap users to transfer their funds to the new platform by offering them SUSHI tokens.

These tokens were unique in that they provided users with both governance rights over the new protocol, as well as a percentage of all transaction fees generated by the platform.

To compete with this new threat, Uniswap quickly responded by creating its own governance token, UNI, which allowed users to have a say in the platform's future direction.

Since its introduction, the UNI token has become an integral part of the Uniswap ecosystem, with thousands of holders using their voting power to shape the platform's development. As the DEX space continues to grow and evolve, it is likely that governance tokens like UNI will become even more important, as users seek to have a greater say in the future direction of the platforms they use.