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Uniswap is a well-known decentralized trading protocol that facilitates automated trading of decentralized finance (DeFi) tokens.
Uniswap, an example of an automated market maker (AMM), launched in November 2018, but has grown in popularity this year as a result of the DeFi phenomenon and associated surge in token trading.
Uniswap’s goal is to keep token trading automated and completely open to anyone who owns tokens, while improving trading efficiency compared to traditional exchanges.
The Automated Market Maker model was pioneered by Uniswap, in which users supply Ethereum tokens to Uniswap “liquidity pools” and algorithms set market prices based on supply and demand (as opposed to order books, which match bids and asks from users on a centralized exchange like Coinbase).
Users can earn rewards while enabling peer-to-peer trading by supplying tokens to Uniswap liquidity pools. Users can contribute tokens to liquidity pools, trade tokens, or create and list their own tokens (via Ethereum’s ERC-20 token protocol). Hundreds of tokens are currently available on Uniswap, and many popular trading pairs are stablecoins such as USDC.
Some of the potential advantages of decentralized exchanges like Uniswap include:
Self-governing: Funds are never transferred to any third party or generally subject to counterparty risk (i.e. trusting your assets with a custodian) because both parties are trading directly from their own wallets.
Global and permissionless: There is no concept of borders, or restrictions on who can trade. Anyone with a smartphone and an internet connection can participate.
Ease-of-use and pseudonymity: No account signup or personal details are required.
Uniswap introduced the UNI token to enable community ownership over the protocol, allowing stakeholders to vote on key protocol changes and development initiatives after years of successful operation and on its path to complete decentralization. When Uniswap released the token in September 2020, it used a novel method of distribution in which 400 UNI tokens were “airdropped” to every Ethereum address that had ever used the protocol. The airdrop, which was worth nearly $1,400 at the time, was distributed to over 250,000 Ethereum addresses. Airdrops have since become a popular way for DeFi apps to reward loyal users – Uniswap has stated that it plans to distribute 1 billion UNI over the next four years.
To use Uniswap, all you need is an Ethereum wallet and a small amount of ETH (to pay for gas fees). Coinbase Wallet and Metamask are two popular options. Access app.uniswap.org via the app or web browser built into Coinbase Wallet or Metamask to begin swapping tokens or providing liquidity.
One issue that users of all Ethereum-based apps, including Uniswap, face is transaction fees (also known as gas), which can vary greatly in price and make using the network expensive. Multiple solutions to this problem are in the works, ranging from the long-planned transition to the ETH2 blockchain (scheduled for sometime in 2022) to the more immediate rollout of Optimism, a “Layer 2” scaling solution, later this year.
Uniswap was created as a way to bring AMMs on Ethereum to a wider audience. Hayden Adams, an Ethereum developer, created the platform.
While finalizing Uniswap, Adams worked on several projects, and his work was directly informed by Ethereum creator Vitalik Buterin. Buterin even came up with the name for the protocol, which was previously known as Unipeg.
Adams has also stated that the Uniswap platform was inspired by one of Buterin’s own blog posts. His initial motivation for focusing on Ethereum came from a friend who persuaded him to start researching and understanding the protocol in 2017.
If you’re wondering where to buy Uniswap at the moment, the top cryptocurrency exchanges for trading in Uniswap stock right now are Binance, BTCEX, OKX, Deepcoin, and BingX.
