The Automated Liquidity Protocol Utilized for Token Swaps On-Chain.
Uniswap (UNI) Fact Sheet
- Uniswap is essentially a project that fills the role of being a decentralized exchange (DEX) protocol that is built on top of the Ethereum (ETH) blockchain and offers non-custodial trading of any ERC-20-based tokens.
- There have been numerous versions of Uniswap. These include Uniswap V1, Uniswap V2, and Uniswap V3, all of which have brought numerous improvements and updates to the overall functionality.
- Uniswap allows users to swap tokens, add tokens to a pool to earn fees, or even list tokens without trusting any central intermediary. Because all of the transactions are done on-chain and cost fees in the form of gas, Uniswap is one of the most active contributors towards gas usage on Ethereum.
- Uniswap is built on a system known as an Automated Market Maker (AMM), and liquidity is created by pools that have two ERC-20 tokens.
- UNI is the native cryptocurrency that powers the Uniswap protocol, and it is an ERC-20 token based on the Ethereum network.
UNI Historical Data Price Chart in the U.S. Dollars (USD)
What is Uniswap (UNI)?
Understanding all aspects or components of the Uniswap ecosystem is important first.
- Uniswap Labs is the company that is responsible for the development of the Uniswap platform as a whole.
- The Uniswap Protocol is the underlying software of how the decentralized exchange (DEX) actually works and communicates with the Ethereum blockchain.
- The Uniswap Platform, on the other hand, is the application itself that works on both web and mobile, where users are provided with the opportunity to actually execute trades and swaps, and it is built and deployed on top of the Ethereum blockchain.
- The Uniswap Token (UNI) is the native cryptocurrency that allows users to buy, vote with, and trade or swap on cryptocurrency exchanges.
Uniswap has the main goal of incentivizing its network of users to maintain the liquidity of the exchange and provide portions of the transaction fees as well as newly minted UNI tokens for those that participate.
Over time, Uniswap grew to become one of the most popular protocols within the Decentralized Finance (DeFi) space and leverages multiple crypto assets, which include its native UNI token, as a means of providing a service that is nearly identical to a traditional exchange, with the additional benefits that are aligned with its decentralization.
The main goal that Uniswap had when it began development was to essentially rely on liquidity providers, to create liquidity pools, which can then provide liquidity across the platform. This would allow users to seamlessly swap between any ERC-20 tokens without needing to rely on an order book.
Furthermore, due to the fact that the Uniswap protocol is completely decentralized, there is no real listing process such as a centralized exchange would have. This means that any ERC-20 token can be launched for trading on the Niswap platform as long as a pool is available. Due to this, Uniswap does not charge any listing fees, which makes it a solid resource for any project that is based on the ERC-20 token standard.
- Liquidity is the ease at which the asset or the cryptocurrency in question can be converted into cash or another cryptocurrency without affecting its market price. In other words, this is the ease with which tokens can be swapped to other tokens or to FIAT currencies.
- Liquidity Providers are essentially those that provide their crypto assets to a platform as a means of helping with the decentralization of the trading process, and they are also typically referred to as market makers. In return for doing so, they are typically rewarded in the form of the fees which were generated by the trades on the platform, which can be thought of as a form of passive income.
- Liquidity Pools are essentially digital piles of cryptocurrencies that are locked within smart contracts, which have the main goal of enabling liquidity for faster transactions, and a key component within them is automated market makers (AMMs).
- Automated Market Makers (AMMs) let digital assets be traded without permission, and this is a process that can be completed automatically through the utilization of liquidity pools instead of traditional markets for buyers as well as sellers. This is a system that allows cryptocurrencies to be traded automatically and without permission by utilizing liquidity pools instead of a traditional market that is composed of buyers and sellers.
How is Uniswap (UNI) Used?
Uniswap allows anyone the opportunity to essentially become market makers and even swap their own tokens. We had Uniswap V1 in 2018, a proof of concept, then V2, a production release in 2020, and V3, the latest version that launched in 2021.
Uniswap is used by traders to directly swap cryptocurrencies, where they swap from one ERC-20 token to another ERC-20 token.
However, the main way through which it stands out is in the fact that they do not trade with one another directly, however, they trade with a token pool that has both of the tokens within it.
This token pool is known as a liquidity pool. The tokens in the liquidity pool are added by the users, that is called the Liquidity Providers.
Liquidity Providers need to add their tokens within the pool due to the fact that they can earn fees when traders swap their tokens with the Liquidity pool.
All of the liquidity pools within Uniswap are used for the process of trading specific pairs of ERC-20 tokens. Due to the fact that there are many token pairs, Uniswap can route the traders as well as the liquidity providers to the corresponding liquidity pool for their transactions.
Use-Cases of Uniswap (UNI)
Just like within any other decentralized project out there, Uniswap has to feature its own democratic way through which its future development and direction can be pushed forward.
On Uniswap specifically, there are a lot of decisions that need to be made on the future of the project, and this includes swap fees, new features to research as well as how the UNI token gets distributed to the various players within the ecosystem.
As such, the UNI token was issued in 2020, despite the fact that the network was originally launched in 2018. Furthermore, unlike other cryptocurrencies, UNI was not distributed through a pre-sale or through the utilization of an Initial Coin Offering (ICO). However, it was airdropped to users as well as investors on the platform.
Within the first round of the airdrop, 150 million UNI tokens were distributed to anyone that ever used the platform, which at the time accounted for 400 UNI tokens per single person.
Usability & Primary Features of Uniswap (UNI)
Within Uniswap, there are a total of three primary participants or parties that form the overall functionality of the network.
- There are the Liquidity Providers (LPs) that add assets to Uniswap pools, after which they get liquidity shares known as Pool Tokens to be compensated. They can create new pools, add liquidity to any existing pools or even remove tokens from reserves that they contribute to by sending LP Shares.
- There are traders, which are individuals that look to exchange two tokens where they have to pay the swap fee, which is added to the reserve of the pool in question.
- There are Arbitrageurs that monitor any of the price deviations with other trading venues as a means to profit out of it, which enforces a price mechanism at a pool level.
When we look at the protocol structure surrounding Uniswap, any party is provided with the opportunity to earn a commission for the contribution of their tokens within a liquidity pool, which in turn ensures that the tokens become available whenever they are required for trading needs.
A 0.3% fee gets charged whenever a swap gets made on top of Uniswap, and Liquidity Providers (LPs) get these fees as a reward, which is directly based on how much they have contributed to the pool in question. As such, Uniswap relies on a constant product function as a means of determining the market price. The forum utilized here is x * y = k, where x and y are equal to the pair reserve balances, while k is a constant.
The fees get collected for every single swap, and this increases the k constant within the previous formula as after every trade, they are reinvested within the reserve directly.
Many exchanges typically work in an order book mode. Within this model, the market prices get determined by the highest buy price and the lowest sell price.
However, Uniswap differentiates itself by utilizing Liquidity Pools, where the price comes from the ratio of the token to another in a pool. This system works as follows: at the point in time when a trader executes a swap between two tokens, the balance of reserves changes, and this, in turn, results in a new pool price.
The price of a token on Uniswap gets kept in check by arbitrage, and if a token gets priced too low, an arbitrageur can buy it or sell it for a profit on another exchange until its price gets balanced out.
Uniswap is essentially a binary smart contract system, where the core contracts provide fundamental safety guarantees for all of the parties that interact with Uniswap.
Remember that Uniswap is built to enable the swap on ERC-20 tokens, built on top of Ethereum, and Ethereum has smart contract support.
Tokenomics & Supply Distribution
The total supply of Uniswap's native cryptocurrency and governance token, known as UNI, is 1 billion units.
This supply has an allocation that goes as follows:
- 60.00% of all UNI is allocated towards the Uniswap community members.
- 21.51% of all UNI is allocated towards team members and future employees with a 4-year vesting period.
- 17.80% of all UNI is allocated towards investors with a 4-year vesting period.
- 0.069% of all UNI is allocated to advisors with a 4-year vesting period.
Team & History
Uniswap was developed by a team that states that their intent is to not be involved with the future development of the protocol, auditing, or other matters; where instead, the community has the full responsibility and is even encouraged to consult knowledgeable legal as well as regulatory professionals prior to implementing any proposal within the network.
With that in mind, Uniswap’s original development team consisted of:
- Hayden Adams - Founder
- Noah Zinsmeister - Engineer Lead
- Ian Lapham - Engineer
- Moody Salem - Engineer
- Matteo Leibowitz - Strategy Lead
Activities & Community
When we look at the community surrounding Uniswap on the Official Uniswap Twitter page, we can see that the project has a huge following with over 918,300 followers.
Then, when we take a look at the Uniswap Official Discord Page, we can see that there are over 92,566 members in total, indicating that there is quite a large community surrounding this project.
Development Activity and GitHub Repositories
When we take a look at the development activity surrounding Uniswap, we need to take a look at the official Uniswap Labs GitHub Page.
Here, we can see that there are a total of 72 repositories that are a part of the project.
Out of them, there are a total of 6 that are pinned, including:
- V3-core - this is the core smart contract of the Uniswap V3 repository.
- V3-periphery - Peripheral smart contracts for interfacing with Uniswap V3.
- Interface - This is the open-source interface used for the Uniswap protocol.
- V3-sdk - An Software development kit (SDK) for building applications on top of Uniswap V3.
- V2-core - Core smart contracts for Uniswap V2
- V2-periphery - Peripheral smart contracts for interfacing with Uniswap V2
When we look at data from Etherscan, we can see that UNI, as a cryptocurrency, is trading at a value of $6.57.
Furthermore, we can see that there is a maximum total supply of 1,000,000,000 UNI and that there are a total of 321,983 holders of the cryptocurrency, as well as a total of 3,619,872 transfers of the cryptocurrency.
When we take a look at data from Info.uniswap.org, we can see that there is $13.03 billion in total value locked (TLV) and that there is a 24-hour trading volume of $672.68 million.
Additionally, we can see that there are $726.13K in fees in the last 24 hours.
Activities and Partners
- Uniswap launched on Arbitrum - users were provided with the opportunity to trade on the Arbitrum deployment of Uniswap V3 with low gas costs as well as instant transaction confirmations.
- The Introduction of the Swap Widget - Uniswap launched the Swap Widget, which bundled the whole Uniswap experience within a single React component that developers could easily embed within their application with a single line of code.
- Uniswap Acquired Genie - Uniswap announced that they acquired Geniem which is the first non-fungible token (NFT) aggregator which lets anyone discover as well as trade NFTs across numerous platforms.
- Uniswap on Optimism - Uniswap launched Uniswap V3 on the Optimistic Ethereum mainnet.
References & Reports
- Official Uniswap Twitter page
- Uniswap Official Discord Page
- Uniswap Labs GitHub Page
- Uniswap launched on Arbitrum
- The Introduction of the Swap Widget
- Uniswap Acquired Genie
- Uniswap on Optimism
- Introducing UNI
- How Uniswap works - Uniswap Blog
- Uniswap v2 Core - Whitepaper
- What Is a DEX (Decentralized Exchange)? - Chainlink
- What is Ethereum - Ethereum.org
- Smart Contracts - Investopedia
- Uniswap Labs Ventures
- Decentralized Finance (DeFi) Definition - Investopedia
- UNDERSTAND THE ERC-20 TOKEN SMART CONTRACT - Ethereum.org
- What Is Liquidity in Crypto? - Openware
- Core Liquidity Provider - Investopedia
- What Are Liquidity Pools in DeFi, and How Do They Work? - Binance Academy
- What Is an Automated Market Maker (AMM)? - Binance Academy