Uniswap

Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts (liquidity pools) to execute trades. It is an open source project and falls into the category of a DeFi product (Decentralized finance) because it uses smart contracts to facilitate trades. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts. As of October 2020, Uniswap was estimated to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall by daily trading volume.[1]

Uniswap
Developer(s)Hayden Adams
Repositorygithub.com/Uniswap/uniswap-v3-core
Written inSolidity
PlatformEthereum
TypeDecentralized exchange
LicenseGNU General Public License v3.0
Websiteuniswap.org

History

Uniswap was created on November 2, 2018[2] by Hayden Adams, a former mechanical engineer at Siemens.[1]

The Uniswap company received investments from business angel Ric Burton and venture capital firms, including Andreessen Horowitz, Paradigm Venture Capital,[3][4] Union Square Ventures LLC and ParaFi.[1][5] Uniswap’s average daily trading volume was US$220 million in October 2020.[1] Traders and investors have utilized Uniswap because of its usage in decentralized finance (DeFi).[1]

Overview

Uniswap is a decentralized finance protocol that is used to exchange cryptocurrencies and tokens; it is provided on blockchain networks that run open-source software.[1][6] This is in contrast to cryptocurrency exchanges that are run by centralized companies.

Changes to the protocol are voted on by the owners of a native cryptocurrency and governance token called UNI, and then implemented by a team of developers. UNI tokens were initially distributed to early users of the protocol.[7] Each Ethereum address that had interacted with Uniswap before September 1, 2020 received the ability to claim 400 UNI tokens (worth approximately $1,400 at the time). The market capitalization for the UNI token is over US$6.6 billion as of February 2022.[1]

Protocol

Uniswap acts as an automated market maker and uses liquidity pools to fulfill orders, instead of relying on a traditional market maker, with an aim to create more efficient markets.[8][9][1] Individuals and bots—termed "liquidity providers"—provide liquidity to the exchange by adding a pair of tokens to a smart contract which can be bought and sold by other users according to the constant-product rule .[10] In return, liquidity providers are given a percentage of the trading fees earned for that trading pair. For each trade, a certain amount of tokens is removed from the pool for an amount of the other token, thereby changing the price. No fees are required to list tokens which allow a large amount of Ethereum tokens to be accessible and no registration is required for users.[1] As open-source software, Uniswap's code can also be forked to create new exchanges.[11]

References
  1. "DeFi Boom Makes Uniswap Most Sought-After Crypto Exchange". Bloomberg.com. 16 October 2020.
  2. Adams, Hayden (11 February 2019). "A short history of Uniswap". Uniswap.
  3. Gara, Antoine. "From Wall Street's Greatest Trade To The Top Dealmakers And Financial Entrepreneurs: 30 Under 30 In Finance 2021". Forbes.
  4. Castillo, Michael del. "11 Bitcoin And Blockchain Leaders Made Forbes 30 Under 30 List". Forbes.
  5. "Novogratz Plows Ahead In DeFi Amid the 'Gamifying' of Crypto". Bloomberg.com. 29 September 2020.
  6. "Crypto Exchange Gets Millions After Copy-Paste of a Rival's Code". Bloomberg.com. 11 September 2020.
  7. Confidential, Crypto. "Stimulus Checks From A Crypto Exchange; Bitcoin Rebound". Forbes.
  8. Lo, Yuen; Medda, Francesca (3 November 2020). "Uniswap and the rise of the decentralized exchange". Mpra.ub.uni-muenchen.de.
  9. Konrad, Alex. "These Young Investors Are Still Betting Big On Crypto — And Are Taking Harvard And Stanford Along For The Ride". Forbes.
  10. Adams, Hayden; Zinsmeister, Noah (March 2021). "Uniswap v3 core" (PDF). Uniswap.
  11. Osborne, Charlie. "DeFi SushiSwap creator returns $14m in ETH to project after causing token crash". ZDNet.
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