Uniswap

Uniswap is a well-known decentralized trading protocol that facilitates the automated exchange of decentralized finance (DeFi) tokens. As an automated market maker (AMM), it debuted in November 2018 but saw a significant rise in popularity this year due to the DeFi boom and the resulting increase in token trading volume.

The protocol seeks to maintain fully open, automated token trading for any holder while enhancing trading efficiency compared to traditional exchanges. It achieves greater efficiency by using automated methods to address liquidity challenges, thereby sidestepping the issues that affected early decentralized exchanges.

In September 2020, Uniswap advanced its ecosystem by issuing its governance token, UNI, to previous users of the platform. This move introduced both potential profitability and the capacity for users to influence the protocol’s future direction, a key feature of decentralized organizations.

Uniswap was designed to bring automated market makers (AMMs) on Ethereum to a broader user base. The protocol was created by Ethereum developer Hayden Adams.

While completing the project, Adams worked on other initiatives and received direct guidance from Ethereum founder Vitalik Buterin. Buterin also named the protocol; it was initially called Unipeg.

Adams has stated that his inspiration for Uniswap stemmed from a blog post written by Buterin. His decision to concentrate on Ethereum followed a friend’s advice in 2017 to start studying and comprehending the protocol.

Uniswap aims to generate liquidity for the DeFi sector, thereby facilitating trading and the associated value. As one of the leading automated market makers (AMMs) currently active, the protocol operates on the automated exchange formula X x Y = K. Hayden Adams, the founder, claims to have invented the specific implementation of this formula used by Uniswap.

More than just a decentralized exchange, the platform seeks to address the liquidity challenges faced by earlier services like EtherDelta. By automating market making, the protocol encourages participation by lowering costs and limiting risk for all involved. This mechanism also eliminates the need for user identification and allows technically anyone to establish a liquidity pool for any token pair.

The team states that the UNI governance token was introduced to “officially enshrin[e] Uniswap as publicly-owned and self-sustainable infrastructure while continuing to carefully protect its indestructible and autonomous qualities.”

Uniswap V2 went live on Nov. 2, 2018, bringing features such as ERC-20 pairs, flash swaps, and price oracles. The most recent iteration, Uniswap V3, launched on mainnet on May 5, 2021, offering improved capital efficiency for liquidity providers, better trade execution, and upgraded infrastructure. The price of Uniswap hit an all-time high (ATH) of $44.97 prior to the V3 mainnet launch. Since that launch, there has been significant interest in the UNI to AUD and UNI to EUR trading pairs.

Uniswap’s governance token, UNI, has a total supply of 1 billion units. These tokens are scheduled to become available over a four-year period. After this timeframe, Uniswap plans to implement a “perpetual inflation rate” of 2% to sustain network participation.

The current token distribution is allocated as follows:

• 60% to Uniswap community members (users)
• 21.51% to team members
• 17.8% to investors
• 0.69% to advisors

The allocations for the team, investors, and advisors are subject to a four-year vesting schedule. From the portion designated for users, 15% is claimable by individuals who interacted with Uniswap before Sep. 1, 2020. This eligibility extends to users whose transactions were unsuccessful, granting them 400 UNI.

The UNI token facilitates shared community ownership in the decentralized protocol's growth and development. It enables holders to engage in the governance of the Uniswap protocol and its broader ecosystem in a neutral, trustless way. The adoption and success of Uniswap products are expected to positively influence the UNI price, thereby incentivizing holders to support the ecosystem's self-sustaining development.

In September 2024, four years after the token launch, an annual perpetual inflation rate of 2% is set to take effect. This measure aims to ensure continued participation in the Uniswap ecosystem by discouraging passive holding.

Uniswap operates as a decentralized trading protocol, with UNI serving as its native governance token. Because UNI is an ERC-20 token, it relies on the Ethereum network to function.

The ERC-20 standard primarily establishes rules for tokens, while security largely depends on the robustness of the Ethereum network itself. For instance, network congestion can drive up gas prices for transactions, resulting in delays and unusually high fees that affect all users.

Additionally, smart contracts present security risks that may cause DeFi traders to lose funds. Hackers have already stolen millions of dollars within the brief history of DeFi as of September 2021.

You can trade Uniswap’s UNI governance token on leading exchanges using cryptocurrencies, stablecoins, fiat money, and other assets. Platforms offering UNI include Binance, Huobi, and Coinbase Pro. Naturally, you can also swap it directly through the Uniswap protocol itself, specifically Uniswap (V2) and Uniswap (V3).

More than 310,000 members make up the Uniswap DAO, holding UNI tokens to vote on the DEX’s roadmap, governance, and its $1.6B treasury. While any holder may submit a proposal, it requires 25,000 yes-votes to move to further deliberation. The subsequent consensus check demands the proposer outline core changes and secure at least 50,000 yes-votes. Finally, the governance phase requires 40M yes-votes for adoption. In 2021, Uniswap was the top DEX by trading volume and the highest-ranked DAO by treasury size. Currently, it sits in second place behind BitDAO, which focuses on investing in emerging crypto projects.

Uniswap Labs recently acquired Genie, an NFT aggregator and marketplace, as part of its plan to become a one-stop shop. This move aims to help users achieve universal ownership by integrating non-fungible tokens into the product line. The feature is scheduled to launch on the web application first, with developer APIs and widgets following later.

Genie allows users to find, buy, and sell NFTs across various marketplaces. It also enables purchasing NFTs from multiple sources in a single transaction, which significantly lowers gas fees.

The team plans to distribute a USDC airdrop to early Genie adopters in August 2022. Eligibility extends to anyone who used Genie at least once or held a Genie Genesis NFT by April 15. This claim period will remain open for 12 months.

Genie will stay accessible until the native Uniswap NFT experience launches. The team views NFTs as a vital "web3 gateway" for both mainstream and crypto-native users, believing their DeFi expertise can expand digital ownership. This is not Uniswap’s first NFT effort; in 2019, they released the limited-edition Unisocks collection with liquidity pools backed by real-world assets. Uniswap Labs also continues developing Uniswap v3 NFT positions to improve on-chain generative SVGs.

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