Uniswap (UNI) is one of the most renowned and leading decentralized exchanges hosted on the Ethereum blockchain space. UNI tokens can be traded through liquidity pools or can be swapped. They also have a secondary use as a tool to vote on the protocol upgrade. To date, UNI stores hundreds and hundreds of UNI tokens available for trading.

How Uniswap Started

UNI runs on the Ethereum network
Source: Pixabay

Established by Siemen’s former mechanical engineer Hayden Adams, Uniswap entered into the cryptocurrency industry on November 2, 2018. Through the funds received from venture capital institutions such as Paradigm Venture Capital, ParaFi, Union Square Ventures, and Andreessen Horowitz, Uniswap has flourished, with an average daily trading volume reaching over US$220 million in just a couple of years since its inception.

On May 5, 2021, the Uniswap v3 was rolled out introducing a concentrated liquidity function. This function exclusive to Uniswap uses NFT’s or non-fungible tokens, allowing liquidity investors to set a price range for liquidity.  Compared to the exchange’s V2 where liquidity providers have no option to specify their investment’s price range, the Uniswap v3 gives an edge over its competitors.

Current UNI pricing
Source: Coindesk

How UNI Works

Uniswap features and holds a collection of smart contracts or liquidity pools. A UNI user or investor can put their digital currency funds on a smart contract to earn interest. Unlike order books that match bids from traders, the smart contract determines the market price of each crypto coin. Rewards are also in store for smart contract investors or liquidity providers who supply tokens to liquidity pools and enable peer-to-peer transactions.  Additionally, UNI users can swap their tokens straight from their Ethereum wallets. This means that custody over investors’ funds isn’t necessary.

Uniswap is a promising decentralized exchange. Aside from being the most liquid cryptocurrency, its V3 takes crypto investing to another level. With Uniswap’s exclusive rights to its concentrated liquidity feature, the V3 would indeed give a huge lead in the decentralized finance industry.

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