Uniswap(UNI)

The Uniswap protocol is one of the most popular open-source, Decentralized Exchanges (DEX) in the crypto ecosystem. Unlike Coinbase and Binance, Uniswap allows users to buy and sell cryptocurrencies without having centralized control over the platform.

The project was created by Hayden Adams, a former mechanical engineer at Siemens with v1 of the protocol going live in November 2018. Subsequently, v2 was launched in May 2020 and v3 in May 2021, allowing direct swaps between any Ethereum ERC-20 tokens and introducing new options to allocate liquidity. 

In September 2020 Uniswap created and awarded its own governance token, UNI, to past Uniswap users. The protocol airdropped 400 UNI tokens to any one who had used Uniswap even once until then, and additional tokens were awarded to users who had provided liquidity to the protocol. At the peak price of UNI, the Uniswap airdrop was worth over $17,000.

Over the years, Uniswap has become a cornerstone of the crypto trading space, accounting for the majority of the decentralized trading volume. Continued improvements to the protocol aim to lower gas fees, improve liquidity provision and enhance the user experience.

UNI price

According to our UNI live price chat, UNI price saw its first bull run in Q1 of 2021 when its price soared from $3.2 on Dec. 12, 2020 to around $48 by May. 5, 2021, marking a whopping gain of 1400%+, setting an all-time high in the process and putting the token's fully diluted valuation at $48 billion. However, this rally came to a halt as the broader crypto market crashed in May 2021, with coins like BTC and ETH witnessing a significant drop in price. 

This bearish sentiment continued for the next couple of months with UNI dropping as low as $12 in May 2021, a drop of -72% from its all-time high in May, in just 18 days. Its competitor's Balancer (BAL) and Curve (CRV) witnessed similar outcomes as both followed in line with the market’s bearish sentiment.

Despite the considerable drop in price, Uniswap set in motion a new rally in Q3 of 2021 as the market sentiment turned bullish. The token climbed from $16 in June to $33 in September 2021, gaining over 100%. Nonetheless, the token failed to carry this momentum forward as the crypto market showed signs of volatility again, crashing in Q4 of 2021 and continuing to tailspin as it entered 2022. 

In spite of failing to register any noteworthy pumps during the end of 2021, UNI cryptocurrency managed to close 2021 with a gain of just above 460%. UNI continues to be one of the more popular decentralized exchanges (DEX) trading tokens out there compared to PancakeSwap (CAKE) and SushiSwap (SUSHI).

How UNI works

Built on the Ethereum blockchain, the Uniswap platform uses smart contracts to facilitate the trading of digital assets like any basic exchange, but in a decentralized manner. Rather than using a central order book like traditional exchanges, Uniswap instead uses a collection of liquidity pools, where liquidity providers (LPs) contribute to the Uniswap pool by locking in two ERC-20 assets in a smart contract, for instance, DAI and ETH. Users can then trade directly against the assets in the pool by paying a fee that is distributed to all liquidity providers based on their contribution to the pool.

With high trading volumes, it is necessary for Uniswap to ensure that overall reserves in liquidity pools are in equilibrium. To keep an acceptable ratio in pools, prices are set automatically using the combination of smart contracts and the (x*y=k) market maker formula. Here x and y are the liquidity pool balances for each token, and k is the constant price.

Uniswap charges a small fee for each trade made on the network, increasing the total liquidity in a pool, while giving newly minted UNI tokens to liquidity providers, making the system ever so profitable for them. With each trade having a fee, this increases the liquidity in pools, resulting in users who make the same exact trade getting a moderately worse trade rate, keeping the system in balance.  

It is worth noting that anyone can list a token on Uniswap, as long as there is a liquidity pool for traders and the listed token is on the Ethereum blockchain.

UNI news, updates, and highlights

In September 2020 Uniswap became the first decentralized exchange (DEX) to push past $1 billion in daily volume over a period of 24 hours, amid yield farming and vampire attacks. Uniswap V2 was ranked as the third-largest exchange on CoinGecko, behind Binance which had a trading volume of above $6 billion, and OKX with $1.10 billion in daily trades at that time, respectively. This sudden yield farming saw Uniswap emerge as the top decentralized finance (DeFi) protocol in the space.

The Uniswap community, in October 2020, voted on its second-ever governance proposal to distribute 5 million UNI tokens via airdrop to users who interacted with the decentralized exchange (DEX). Uniswap, one of the top DeFi platforms out there would issue 400 UNI tokens each, to 12,619 wallet addresses allocated to users of MyEtherWallet, Dharma, Nuo, Monolith, and many more, if the proposal went through. The proposal was put forward by Dharma, a Compound-based lending and savings protocol, claiming its users felt left out by the opening distribution.

Uniswap v3 was launched in May 2021, with rumors emerging of a DeFi rally as the protocol's total value locked (TVL), boomed from $13.7 million $8.5 billion at the time. Uniswap main emphasis for v3 was concentrated liquidity, flexible fees, and advanced oracles while promising new advanced features and options for yield generation. 

On Sep. 3, 2021, The United States Securities and Exchange Commission (SEC) was reported to be investigating Uniswap according to The Wall Street Journal. The SEC had initiated an investigation into Uniswaps developer, Uniswap Labs, looking for information regarding the company's marketing and investor services. Since then, hype around the project has remained muted.

Frequently asked questions about UNI

• Can you mine or stake UNI?

You cannot mine UNI since it is not a proof-of-work token, but you can stake UNI tokens into Uniswap’s liquidity pools to earn a passive income. 

• What are some of the best UNI wallets?

UNI is an ERC-20 token which means it can be stored on any Ethereum-supported wallet. Uniswap does not have its own wallets but you can use MetaMask, MyEtherWallet, and Atomic Wallet. However, if you are more interested in cold wallets then Ledger Nano S and Trezor One are fantastic options.

• What can you do with UNI?

Users can use their UNI tokens to vote on governance proposals, stake their tokens in Uniswaps liquidity pools to earn a passive income or trade them against other cryptocurrencies like BTC and ETH.

• How to buy UNI?

Uniswap (UNI) can be bought by exchanging your BTC, ETH, and USDT through exchanges like HitBTC and OKX or by using fiat currency with on-ramp services. You can also simply use Uniswap’s own protocol services to swap any ERC-20 tokens you might have for UNI and vice versa.