Summary: Read our in-depth review of Uniswap, the leading DEX built on Ethereum. Discover how Uniswap's unique automated liquidity protocol allows users to trade ERC-20 tokens directly from their wallets, eliminating the need for intermediaries. Learn about its innovative use of smart contracts and its governance token, the UNI token!
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Uniswap History
Uniswap is a decentralized cryptocurrency exchange built on the Ethereum blockchain. The project launched in November 2018 and was founded by Hayden Adams, a software engineer with a background in mechanical engineering.
Uniswap website
Adams saw an opportunity to leverage smart contract on Ethereum to create a decentralised exchange that could democratise trading and enable users to maintain control of their assets.
Uniswap became popular due to its automated market maker (AMM) model, which eliminates the need for the traditional order book.
Instead, liquidity providers pool their funds into smart contracts while users swap tokens directly from these pools.
Uniswap's unique feature is that it enables anyone to become a liquidity provider by committing their assets to the protocol's liquidity pools, earning fees in exchange.
Since its launch, Uniswap has achieved significant milestones and gained widespread recognition in the DeFi space.
It has become one of the most prominent and widely used decentralized exchanges, boasting high trading volumes and liquidity across multiple Ethereum-based tokens.
Uniswap's success has inspired the development of numerous other DEXes using a similar AMM model. Uniswap has secured investments from prominent firms such as A16Z, Paradigm, Union Square Ventures, Version One Ventures, and Ribbit Capital, among others.
What is Uniswap?
Uniswap is a decentralised protocol powered by smart contracts on the Ethereum blockchain that enables users to swap tokens without the need for intermediaries or order books.
Uniswap operates on the Ethereum blockchain and leverages smart contracts written in Solidity, Ethereum's programming language.
These smart contracts govern the behavior of the protocol, including the management of liquidity pools, token swaps, and fees.
Uniswap initially struggled with high gas fees and slower transaction times on the Ethereum network due to its increasing popularity.
To address these challenges, the team behind Uniswap has been actively exploring Layer 2 solutions, such as Optimistic Rollups and other scaling solutions.
How does Uniswap work?
The fundamental working principle of Uniswap is based on automated market making (AMM).
Instead of relying on a traditional order book, Uniswap uses something called liquidity pools. These pools consist of users funds pooled together and locked into smart contracts.
Each liquidity pool comprises two tokens which allows for the swapping functionality. When a user wants to make a token swap on Uniswap, they select the input and output tokens.
The ratio of these tokens in the liquidity pool determines the price and availability of the swap. The Uniswap protocol ensures that the constant product formula is maintained.
This formula is defined as x * y = k, where x represents the balance of one token, y represents the balance of the other token, and k is a constant value.
Uniswap Coin (UNI)
The UNI token has gained significant attention and popularity since its launch in September 2020.
Its distribution method was unique as it was a retrospective airdrop to users who had interacted with the Uniswap platform before the launch of UNI.
This approach helped to distribute the token widely and incentivized user participation in the platform.A
The UNI token has a number of different utilities, including:
Governance: UNI holders can vote on proposals that affect the Uniswap protocol. Staking: Staking rewards are distributed to UNI holders who help to secure the protocol. Fees: UNI is used to pay for fees on the Uniswap protocol.
Uniswap Tokenomics (UNI)
The UNI token has a maximum supply of 1 billion tokens.
At the time of its launch, 15% (150 million) of the tokens were distributed to users of Uniswap.
At the time of writing, Uniswap has a circulating supply of 577 million UNI tokens, a price of $5.61 per UNI token and a market cap of $5.6 billion
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Auteur
Mike Harry
Mike is a passionate crypto enthusiast who bought his first Bitcoin in 2016. With a natural curiosity and a love for learning and tinkering, Mike is always trying out new DeFi applications. Mike excels at breaking down difficult concepts into easy-to-read guides for beginners.
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