Uniswap uni

Uniswap is a decentralised exchange (‘DEX’) and automated market maker (‘AMM’) deployed on Ethereum that uses liquidity pools instead of order books to facilitate ERC-20 token swaps. Built by Universal Navigation Inc. (‘Uniswap Labs’, ‘Team’), Uniswap exists to “obviate the need for trusted intermediaries, prioritising decentralisation, censorship resistance, and security.”

Founded in Nov. 2018, the protocol lets liquidity providers (‘LPs’) deposit cryptocurrencies into liquidity pools and provide the underlying capital for swaps to occur. LPs earn fees on any swap that occurs in their position’s range.

Each Uniswap smart contract, or pair, manages a liquidity pool made up of reserves of 2 ERC-20 tokens in equal amounts. Anyone can become an LP for a pool by depositing an equivalent value of 2 ERC-20 tokens in return for liquidity pool tokens. These tokens track pro-rata LP shares of the total reserves and are redeemable for the underlying assets at any time.

How does the Uniswap protocol make money? A protocol fee exists but is set to 0% by default. UNI governance can turn on protocol fees on a per-pool basis and set between 10% and 25% of LP fees.

The Uniswap token (‘UNI’) is an ERC-20 token with a 1B maximum supply. UNI was announced in Sep. 2020, with 15% of the total supply airdropped to historical LPs, users as well as Unisock holders and redeemers prior users. UNI’s distribution is as follows: community (60%), Team (21.27%), investors (18.04%) and advisors (0.69%).

UNI holders manage the Uniswap protocol. UNI holders can vote on proposals or craft and introduce proposals to take actions that include allocating community treasury funds, making license exemptions, and promoting protocol development and adoption.

To see Collective Shift’s analysis, sign up or try our free trial today!