A decentralised exchange for the trading of cryptocurrency tokens which operates on the Ethereum blockchain.
Mission
Uniswap was launched in 2018 as an alternative to centralised exchanges such as Coinbase and Binance. Aiming to be less susceptible to the threat of hackers and unpredictable fees, it facilitates automated transactions through the use of smart contracts.
In September 2020, it created its own token, UNI. These were awarded to past users of the platform and intended to help the community govern its future.
Use-cases
Uniswap gives speculators the ability to trade tokens without fees or middlemen. Rather than matching buyers and sellers to decide a price and execute a trade, it relies upon a mathematical equation.
This takes into account the balance between ETH and ERC20 (a standard used for creating and issuing smart contracts on the Ethereum blockchain) tokens in a liquidity pool to determine the price of a particular token. The price of tokens can only change if trades occur – and is based on how much people want to buy and sell them.
Also, while other decentralised exchanges suffer from a lack of liquidity passing through them and therefore creating value, Uniswap’s ‘liquidity providers’ – both individuals and bots – solve this by adding a pair of tokens to a smart contract which can be bought and sold by users. They are rewarded with a percentage of the trading fees.
Founders
Hayden Adams, a former mechanical engineer at Siemens and Ethereum developer, credits a blog post from Ethereum creator Vitalik Buterin as the inspiration for Uniswap.
Economics
Uniswap’s governance token, UNI, has a total supply of a billion units which will become available over the course of four years. After 2024, it will issue a ‘perpetual inflation rate’ of 2% to maintain network participation.
Around 60% of UNI tokens are held by Uniswap community members, with 21.51% issued to team members, 17.8% to investors and 0.69% to advisors.