Uniswap (UNI)
Uniswap is a decentralized exchange (DEX) that allows users to trade Ethereum-based assets, including Ether and ERC-20 tokens. It utilizes an automated market maker system, using liquidity pools to facilitate trades. In addition to its DEX, Uniswap has its ERC-20 token, UNI, which serves as both a reward and governance token within the Uniswap ecosystem.
History of Uniswap
Hayden Adams created Uniswap in November 2018 during a bear market in the cryptocurrency industry. However, it gained significant popularity in 2020, as decentralized finance (DeFi) became a major trend in the crypto world. Uniswap launched its second version (v2) in May 2020, followed by the launch of its UNI token and airdrop in September of the same year. Uniswap v3 was released in May 2021.
How Uniswap Works
Uniswap is a DEX that allows users to trade Ethereum-based assets without intermediaries. Instead, it utilizes liquidity pools and smart contracts on the Ethereum blockchain holding pairs of assets. When users want to trade on the Uniswap platform, they interact with the relevant liquidity pool to trade one asset for another.
These liquidity pools are funded by entities that lend their assets to the pool. In return, these lenders earn a percentage of the platform's fees, which the traders pay when they complete a trade. The fees are distributed to the liquidity providers (lenders) in proportion to their contribution to the pool.
Uniswap charges a trading fee to incentivize liquidity providers and Ethereum fees for using the blockchain. The Uniswap project consists of several components, including the Uniswap Protocol (the DEX), the Uniswap Interface (the main website for using the DEX), and Uniswap Governance (the process by which UNI holders vote on changes to the project).
The UNI Token
The UNI token is a governance token used within the Uniswap ecosystem. It is an ERC-20 token, meaning it operates on the Ethereum blockchain. UNI holders can vote on changes to the project, allowing them to shape its future direction. Like many cryptocurrencies, UNI is subject to volatility in its market price.
