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What is Uniswap?

What is Uniswap?

Adrian Graham
Fact Checked
Jan 27, 2023

Uniswap is a decentralized exchange (DEX) built on the Ethereum blockchain. It allows users to buy and sell tokens directly from their wallets without the need for a central authority or intermediary. Uniswap uses a unique liquidity pool model that allows anyone to provide liquidity to the platform and earn a share of the trading fees.

This model allows for high liquidity and low transaction fees, making it a popular choice for traders looking to buy and sell a variety of tokens. Uniswap was one of the first DEXs to launch on the Ethereum blockchain, and it has become a key part of the Ethereum DeFi (decentralized finance) ecosystem.

Table of Contents

Uniswap Platform Highlights

Platform Highlights

  • Largest Decentralized Exchange (DEX) by trading volume, liquidity and protocol revenue
  • Available across multiple chains including Ethereum, Arbitrum, Optimism and Polygon
  • New features including Uniswap V3 (concentrated liquidity) and the Uniswap NFT Marketplace
What is Uniswap
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Audited Proof of Reserves

Who created Uniswap?

Uniswap was created by a team led by Hayden Adams (@haydenzadams on Twitter), a software engineer and entrepreneur from Portland, Oregon. Adams first conceptualized the idea for Uniswap in late 2018 and began working on the project in early 2019. The first version of the platform, Uniswap V1, was launched in November 2019, and it quickly gained traction among Ethereum users and DeFi enthusiasts.

In May 2021, the team released Uniswap V3, which included several significant improvements and new features. Adams continues to lead the development of the Uniswap platform, along with a growing team of engineers and other contributors.

Uniswap
Uniswap Home Page.

Uniswap Features Overview

Uniswap has a number of key features and uses, including:

  • Decentralized trading: Uniswap allows users to trade thousands of tokens directly from their own wallet, without the need for a central exchange. This allows for fast and efficient trading, as well as greater control and security for users.
  • Liquidity pools: Uniswap uses a unique liquidity pool model that allows anyone to provide liquidity to the platform and earn a share of the trading fees. This model allows for high liquidity and low transaction fees, making it a popular choice for traders.
  • Governance: Uniswap has a decentralized governance model that allows token holders to vote on proposals to update or improve the platform. This helps to ensure that the platform is responsive to the needs and preferences of its users.
  • Decentralized finance (DeFi): Uniswap is integrated with the broader DeFi ecosystem, allowing users to access a range of DeFi services and applications directly from the platform.
  • Multiple networks: Uniswap is available on the Ethereum network and other networks that are compatible with Ethereum, such as Arbitrum, Optimism and Polygon (formerly known as Matic). This allows users to access the platform on a variety of networks and take advantage of the unique features and benefits of each network.

What is Uniswap V2 vs Uniswap V3?

Uniswap V2 was the first version of the platform and was launched in May 2020. It uses a unique liquidity pool model that allows anyone to provide liquidity to the platform and earn a share of the trading fees. Uniswap V2 also introduced a new pricing mechanism called the constant product formula, which helps to ensure that the prices of assets on the platform are fair and accurate.

Uniswap V3, on the other hand, was launched in May 2021 and includes several significant improvements and new features. It uses a new pricing model called "Concentrated Liquidity", which gives liquidity providers greater control over what price ranges they can allocate their capital to. It also enables more fee tiers, which gives LPs a chance to earn higher rewards for the degree of risk they are taking.

Uniswap V2 vs V3

Overall, Uniswap V3 is designed to be a more flexible, efficient, and secure platform for decentralized trading.

Uniswap (UNI) Tokenomics Overview

The UNI token is the native cryptocurrency of the Uniswap decentralized exchange (DEX). It was launched in September 2020 and is used to govern the Uniswap protocol and power its various features. Holders of the UNI token can participate in the governance of the platform by voting on proposals to update or improve the Uniswap protocol. They can also earn rewards for providing liquidity to the Uniswap platform, and they can use the token to pay for transaction fees on the exchange.

The UNI token has a total supply of 1 billion tokens, with a portion of the supply allocated to the Uniswap team and early investors, and the rest reserved for distribution to users of the platform. The UNI token has a number of mechanisms in place to ensure its value and utility, such as its use in governance, liquidity rewards, and transaction fees. As more users adopt the Uniswap platform and the demand for the UNI token grows, it is expected that the value of the token will increase.

How does Uniswap Make Money?

Uniswap is a decentralized exchange (DEX) built on the Ethereum blockchain. It uses a unique liquidity pool model to enable trading of ERC-20 tokens. Uniswap makes money by charging a small fee for each trade that is executed on its platform. The fee is known as a "taker fee" and is typically around 0.3% of the total value of the trade. This fee is taken from the liquidity pool and distributed to the liquidity providers who have contributed to the pool. Additionally, Uniswap also charges a small transaction fee to the Ethereum network for each trade, which is paid in Ether (ETH).

Uniswap NFT Marketplace

Uniswap released their official NFT marketplace on December 1, 2022 which allows users to buy, sell and trade NFTs across a variety of marketplaces. The product is an NFT aggregator, which enables users to aggregate NFTs across major platforms to find the best possible price.

Why is Uniswap more secure than a Centralized Exchange?

Uniswap is a decentralized exchange (DEX), which means that it operates without a central authority or intermediary. This is in contrast to a centralized exchange, which is operated by a single company or organization. The decentralized nature of Uniswap offers several advantages in terms of safety and security.

One key benefit of a DEX like Uniswap is that it allows users to retain control of their assets at all times. On a centralized exchange, users are required to deposit their assets into the exchange's own wallet, which means that the exchange has custody of their funds. This can be a potential security risk, as the exchange's wallet could be hacked or the exchange itself could go out of business, resulting in the loss of user funds.

On a DEX like Uniswap, users are able to retain control of their assets by storing them in their own wallet, which is not under the control of the exchange. This means that users can access their assets at any time and are not at the mercy of the exchange's security measures.

Final Thoughts

Overall, Uniswap is an important part of the DeFi ecosystem, and it has played a key role in the growth and development of decentralized trading on the Ethereum network. The platform's unique liquidity pool model and low transaction fees have made it a popular choice for traders, and its integration with other DeFi services has helped to drive the adoption of DeFi as a whole. As the DeFi ecosystem continues to evolve and grow, Uniswap is likely to remain a key player and an important part of the Ethereum ecosystem.

Adrian Graham

Co-Founder & former banker turned Full-Time DeFi analyst and researcher. Left traditional finance to pursue my interest in digital assets and decentralized finance.

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