Table of Contents
What Is Uniswap (UNI)?
Uniswap is a popular decentralized trading protocol known for its role in facilitating the automated trading of decentralized finance (DeFi) tokens.
An example of an automated market maker (AMM), Uniswap, launched in November 2018 but has gained considerable popularity this year thanks to the DeFi phenomenon and associated surge in token trading.
UNI aims to keep token trading automated and entirely open for anyone who holds tokens while improving trading efficiency versus traditional exchanges.
UNI creates more efficiency by solving liquidity issues with automated solutions, avoiding the problems which plagued the first decentralized exchanges.
In September 2020, UNI went a step further by creating and awarding its governance token, UNI, to past users of the protocol. This added both profitability potential and the ability for users to shape its future — an attractive aspect of decentralized entities.
Who Are the Founders of Uniswap?
Uniswap came about as a plan to introduce AMMs on Ethereum to a broader audience. The platform’s creator is Ethereum developer Hayden Adams.
Adams worked on various projects while finalizing UNI, and his work was informed directly by Ethereum creator Vitalik Buterin. Buterin even gave the protocol its name — it was initially known as Unipeg.
Adams has also said that the original inspiration for the Uniswap platform came from one of Buterin’s blog posts. His original idea to focus on Ethereum came after a friend convinced him to begin researching and understanding the protocol in 2017.
The Uniswap DAO has over 310,000 members that can vote over the $1.6B treasury, governance, and roadmap of the DEX by holding UNI governance tokens. Any UNI holder can submit a proposal. However, it must garner up to 25,000 yes-votes before it can be eligible for further deliberation. The next phase is the consensus check, where the proposer has to highlight the core changes and garner at least 50,000 yes-votes. Finally, the governance phase has to attract 40M yes-votes for the proposal to be adopted. UNI was the most dominant DEX in 2021 in terms of trading volume and the top-ranked DAO in terms of the amount held in the treasury. However, it is currently ranked second behind BitDAO — a DAO focused on funding and investing in emerging crypto projects. Check out our deep dive on Uniswap DAO and other top DAOs and their governance systems.
What Makes Uniswap Unique?
Uniswap exists to create liquidity — and therefore trading and the value that trading provides — for the DeFi sphere.
One of the major AMMs in operation at present, the protocol functions using a formula for automated exchange — X x Y = K. Founder Hayden Adams describes himself as the inventor of the particular implementation of the formula on UNI.
Uniswap is not just a decentralized exchange; it attempts to solve the issues that platforms such as EtherDelta experienced with liquidity. By automating the process of market making, the protocol incentives activity by limiting risk and reducing costs for all parties. The mechanism also removes user identity requirements, and technically anyone can create a liquidity pool for any pair of tokens.
According to UNI, their governance token (UNI) was created to “officially enshrin[e] UNI as publicly-owned and self-sustainable infrastructure while continuing to protect its indestructible and autonomous qualities carefully.”
Uniswap V2 launched on Nov. 2, 2018, and introduced new features like ERC-20 pairs, price oracles, flash swaps, and more. The latest version — Uniswap V3, launched on the mainnet on May 5, 2021. It features greater capital efficiency for liquidity providers, better execution for traders, and enhanced infrastructure. UNI price reached an all-time high (ATH) of $44.97 leading up to the mainnet launch of V3. Since its launch, there has been substantial interest in its UNI to AUD and UNI to EUR price pairs.
How Many Uniswap (UNI) Coins Are There In Circulation?
UNI’s total supply of Uniswap’s governance token is 1 billion units. These will become available over four years, after which UNI will introduce a “perpetual inflation rate” of 2% to maintain network participation.
Token distribution currently consists of the following: 60% to Uniswap community members, i.e., users, 21.51% to team members, 17.8% to investors, and 0.69% to advisors. The latter three distributions will occur according to a four-year vesting schedule.
Out of the majority set to go to users, 15% can be claimed by those who used UNI before Sep. 1, 2020. These even include users who submitted transactions that were never successful — they are eligible for 400 UNI.
The UNI token serves to enable shared community ownership in the growth and development of the decentralized protocol. This allows UNI holders to participate in the governance of the Uniswap protocol and broader ecosystem in a neutral and trustless manner. The success and adoption of UNI products will positively impact UNI price, incentivizing token holders to contribute to the autonomous development of the ecosystem.
Four years after the UNI token launch, in September 2024, a perpetual inflation rate of 2% annually will take effect. This ensures that participation in the Uniswap ecosystem continues by disincentivizing passive holders.
How Is the Uniswap Network Secured?
Uniswap is a decentralized protocol for trading, and UNI is its in-house governance token. UNI is an ERC-20 token, meaning it requires Ethereum to function.
ERC-20 merely defines a set of rules for tokens and security considerations mainly related to the strength of the Ethereum network. For example, congestion can hike the price of gas needed to perform transactions, leading to delays and abnormally high transaction fees, which impact all participants.
Separately, intelligent contracts can cause security issues that could lead to DeFi traders losing funds; in fact, hackers have already succeeded in stealing millions of dollars in DeFi’s short lifetime as of September 2021.
Where Can You Buy Uniswap (UNI)?
Uniswap’s UNI governance token is available for trading on major exchanges against other cryptocurrencies, stablecoins, fiat currencies, etc.
These include Binance, Huobi, Coinbase Pro, and, naturally, Uniswap’s protocol itself — UNI (V2) and UNI (V3).