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Uniswap

Uniswap

Uniswap is an automated liquidity protocol on Ethereum founded in 2018 by Hayden Adams.

Uniswap is AMM a cryptocurrency exchange which uses a decentralized network protocol. Uniswap is also the name of the company that initially built the Uniswap protocol. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts. As of October 2020, Uniswap was estimated to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall by daily trading volume.

History

Uniswap is based on an idea that the Ethereum founder Vitalik Buterin had in 2016.

Uniswap was created on November 2, 2018 by Hayden Adams, a former mechanical engineer at Siemens (he received $100,000 from the Ethereum Foundation to build the DEX).

Until Uniswap became a thing most exchanges handled their trades with an order-book that matched buy and sell orders, but they had a problem with illiquid assets because there was no incentive for market makers to provide their liquidity. Uniswap solves this by allowing everyone to become a market maker by adding their tokens in a pool and it rewards them with the collected trading fees.

The Uniswap company received investments from venture capital firms including Andreessen Horowitz, Paradigm Venture Capital, Union Square Ventures LLC and ParaFi. Uniswap’s average daily trading volume was US$220 million in October 2020. Traders and investors have utilized Uniswap because of its usage in decentralized finance (DeFi).

The first version (V1) of the Uniswap protocol was published in November 2018 as a proof-of-concept for AMMs (Automated Market Makers). Version 2 was launched in May 2020, and Version 3 was launched in May 2021, introducing new options to allocate liquidity within a certain price range.

In April 2020, Uniswap's website was taken down temporarily[quantify] after hackers unsuccessfully attempted to use a reentrancy hack on the exchange.

Since Uniswaps success there has been a big revolution in the entire DeFi market. That is partly because dApps and developers of new projects can utilize a DEX to launch a new token or to let their application make trades while staying completely decentralized. A lending protocol for example can use a DEX to sell the provided collateral of a failed DeFi loan to cover the outstanding debt. Applications can also have a buy back and burn mechanism where a part of their fees is being used to buy their governance token back from a DEX to destroy them. A decentralized exchange is a necessary infrastructure for a DeFi ecosystem.

Overview

Uniswap is a decentralized finance protocol that is used to exchange cryptocurrencies and tokens; it is provided on blockchain networks that run open-source software. This is in contrast to cryptocurrency exchanges that are run by centralized companies.

Changes to the protocol are voted on by owners of a native cryptocurrency and governance token called UNI, and then implemented by a team of developers. UNI coins were initially distributed to early users of the protocol. Each Ethereum address that had interacted with Uniswap prior to September 1, 2020 received the ability to claim 400 UNI tokens (worth approximately $1,400 at the time). The market capitalization for the UNI token is over $500 million as of October 2020.

Protocol

In contrast to centralized exchanges, Uniswap uses liquidity pools rather than serving as market maker, with an aim to create more efficient markets. Individuals and bots—termed "liquidity providers"—provide liquidity to the exchange by adding a pair of tokens to a smart contract which can be bought and sold by other users. In return, liquidity providers are given a percentage of the trading fees earned for that trading pair. For each trade a certain amount of tokens are removed from the pool for an amount of the other token, thereby changing the price. No fees are required to list tokens which allows a large amount of Ethereum tokens to be accessible and no registration is required for users. As open-source software, Uniswap's code can also be forked to create new exchanges.

How Uniswap works

Uniswap runs on two smart contracts; an “Exchange” contract and a “Factory” contract. These are automatic computer programs that are designed to perform specific functions when certain conditions are met. In this instance, the factory smart contract is used to add new tokens to the platform and the exchange contract facilitates all token swaps, or “trades.” Any ERC20-based token can be swapped with another on the updated Uniswap v.2 platform.

Another benefit of Uniswap is the ability to list any token for free. It is enough to launch an ERC20 token on the Ethereum blockchain, and it will immediately be possible to trade through Uniswap. Centralized exchanges use a lengthy listing approval process and may charge a fee for adding a token to their platform.

Where Can You Buy Uniswap (UNI)?

Uniswap’s UNI governance token is available for trading on major exchanges against other cryptocurrencies, stablecoins, fiat currencies and more.

These include Binance, Huobi and Coinbase Pro, along with, naturally, Uniswap’s protocol itself — Uniswap (V2) and Uniswap (V3).

You can read more about how to enter the cryptocurrency market, no matter what token you plan to purchase, here.

Our most recent articles about Uniswap:

Uniswap's UNI token

Uniswaps native token, UNI, is known as a governance token. This gives holders the right to vote on new developments and changes to the platform, including how minted tokens should be distributed to the community and developers as well as any changes to fee structures. The UNI token was originally created in September 2020 in an effort to prevent users from defecting to rival DEX SushiSwap. One month before UNI tokens launched, SushiSwap – a fork of Uniswap – had incentivized users from Uniswap to allow SushiSwap to reallocate their funds to the new platform by rewarding them with SUSHI tokens. This was a new type of token that gave users governance rights over the new protocol as well as a proportionate amount of all transaction fees paid to the platform.

Uniswap responded by creating 1 billion UNI tokens and decided to distribute 150 million of them to anybody who had ever used the platform. Each person received 400 UNI tokens, which at the time amounted to over $1,000.

UNI is supported by every bigger exchange like Binance for example. Of course Uniswap itself offers it too. A Ethereum wallet like MetaMask can store the token and interact with the Uniswap app.

COMMUNITY

The Uniswap community is an ecosystem of users, developers, designers, and educators

Join the conversation.

Uniswap’s global and vibrant community drives the success of the Protocol. Join the conversation on Discord, Twitter, and Reddit to stay up to date on the latest community news.

Timeline

December 22, 2021
Should Uniswap Provide Voltz with v3 Additional Use Grant
June 29, 2021
CoinMarketCap launches token swap feature that uses Uniswap
August 10, 2020
Uniswap raises a $11,000,000 series A round.
December 2018
Uniswap was founded by Hayden Adams.

Funding rounds

Products

Patents

Further Resources

Title
Author
Link
Type
Date

How do LIQUIDITY POOLS work? (Uniswap, Curve, Balancer) | DEFI Explained

Web

July 20, 2020

Introducing UNI

Uniswap

Web

September 16, 2020

Uniswap - What is it?

Web

March 5, 2022

Uniswap - What is Uniswap?

Web

November 16, 2021

Uniswap and Beyond -- How To Buy $BP - Beyond Protocol - Medium

Beyond Protocol

Web

October 1, 2021

News

Title
Author
Date
Publisher
Description
Frank Chaparro
July 28, 2021
The Block
Robinhood Crypto is adding staff and developing new products. It has also held mysterious "exploratory talks" with Uniswap.
Tim Copeland
July 28, 2021
The Block
Uniswap creator Hayden Adams and two Paradigm developers have sketched out a way to make large Ethereum trades on a DEX.
Tim Copeland
July 14, 2021
The Block
A political lobby group run by Harvard's blockchain and fintech initiative sold half of the funding it received from Uniswap within days.
Michael McSweeney
July 13, 2021
The Block
Uniswap said Tuesday that it is moving one step closer to bringing the popular decentralized exchange onto the layer-two protocol known as Optimistic Ethereum.
Yogita Khatri
June 29, 2021
The Block
The Binance-owned crypto market data aggregator CoinMarketCap has launched a new token swap feature on its website.
SHOW MORE

References

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