Uniswap

UNI (Uniswap) Explained:

Uniswap was launched by Hayden Adams in 2018, and allows users to trade tokens directly on-chain via its automated liquidity pool, as opposed to the order book method that is commonly found on centralized exchanges.

Uniswap is the largest DEX in DeFi, touting a market cap of $6 billion.

1. What is UNI (Uniswap)?

UNI is the governance token for Uniswap, the leading decentralized exchange (DEX) built on Ethereum. The UNI token serves as the governance token of Uniswap, and its holders are able to vote on governance proposals pertaining to the protocol.

2. How does Uniswap work?

Uniswap functions via an automated market maker (AMM), which can also be referred to as a constant function market maker.

In an AMM design users provide liquidity by depositing token pairs into set liquidity pools. These pools allow for traders to swap tokens for one another in and out of these pools. When one token is swapped for another, the price of each token shifts relative to the ratio of tokens in their liquidity pools.

Uniswap is designed to be a permissionless, open source product, meaning that the protocol is available entirely to the public. Anyone can provide liquidity, swap tokens, create new markets and vote on governance regardless of geographical location, or other common restrictive criteria.

3. Should I buy UNI?

Uniswap is one of the most used protocols in all of decentralized finance (DeFi). As DeFi continues to scale, the use of Uniswap is likely to scale alongside it.

Uniswap holders also enjoy governance rights. Being a fully decentralized protocol, holders of the UNI token are able to vote on proposals and governance decisions based on the amount of total tokens held.

4. What are the risks of investing in UNI?

UNI is particularly vulnerable to smart contract and regulatory risks. Any undiscovered vulnerabilities or bugs in Uniswap’s contracts could lead to issues on the platform that could negatively impact the tokens price.

UNI is also under scrutiny of the Securities and Exchanges Commision (SEC), who claim that Uniswap is operating as an unregistered securities exchange.

5. What are the benefits of UNI?

Uniswap and their AMM design are a main driver in DeFi adoption. Its permissionless design makes DeFi accessible to anyone.

Holders are incentivized and empowered to contribute to the growth of Uniswap, as well as its governance decisions.