About Uniswap
Uniswap was founded on November 2, 2018, by Hayden Adams, a mechanical engineer. The founder was a fan of Ethereum and had a friend on Ethereum Foundation who persuade him to start learning the programming language of the famous crypto. After learning it and being able to create smart contracts, in early 2018 he created the first version of Uniswap, obviously based on Ethereum. He met Vitalik Buterin, the founder of Ethereum, who liked his project. Some months later he won a grant of 50 thousand dollars from the Ethereum Foundation. He was then able to launch the project. Since then it has raised many millions of dollars from venture capitalists and it has now a team with dozens of the most qualified blockchain experts.
Today everything has changed with the launch of decentralized exchanges like Uniswap that are simple and user-friendly. The platform is controlled by a smart contract and there aren’t any intermediaries. Everyone can use it and it isn’t necessary any verification of the user (KYC) who can remain anonymous.
QUICK FACT
Uniswap is the most popular decentralized exchange (DEX)
How does Uniswap work?
Uniswap works like a normal exchange but has some particular features that distinguish it from the others. One of these features is the absence of the order book. The classic exchanges use an order book to determine the price of an asset, which is stated by the highest price that someone is willing to pay and the lowest price someone is willing to sell. Uniswap doesn’t have an order book, it uses liquidity pools instead.
A liquidity pool is a smart contract that has two tokens in it and creates a market for that pair of tokens, such as USDC/ETH. It then regulates the price of the swap between them thanks to an algorithm.
UNI token
As Uniswap uses liquidity pools it is possible to do liquidity mining. Liquidity mining is adding liquidity to a pool to receive some special tokens(LP tokens). The LP token of Uniswap is UNI, created in September 2020. A major part of the UNI supply wasn’t offered for sale but was assigned to community members and workers of Uniswap. The total supply is 1 billion, 60% was given to community members, 21% to team members, and 1% to advisors, while only 18% was offered for sale. Everyone who used Uniswap before 1st September 2020 received 400 UNI, which were valued 1200$ at the time. However just 17% was airdropped to the community, the rest is held in a treasury.
Another unusual feature of UNI token is that it will suffer from a 2% inflation per year since 2024. Moreover, they announced that everyone who provides liquidity to ETH/USDT, ETH/USDC, ETH/DAi, and ETH/WBTC will receive an extra reward of UNI tokens. Therefore millions of dollars were added by users to these liquidity pools to earn this extra compensation just in September 2020.
How to use Uniswap?
Uniswap is a very simple and easy-to-use platform, but let’s explain exactly how to use it.
Go to the site www.uniswap.org, then click on launch app in the top right corner. To use the platform and starting swapping coins you have to connect a wallet. You can do so just by clicking on “connect a wallet” on the top of the page, and then just by selecting the wallet you want to use among the ones available. Now on the swap screen, you can exchange your crypto with the hundreds of supported ERC 20 coins by Uniswap.
Uniswap Fees
There is a fee of 0.3% for every swap, which is distributed equally to the Liquidity Pool miners, proportional to the contribution made to the pool. The more liquidity you added, the bigger portion of fees you will receive.
The fee is low but other exchanges on the market have a lower one. But most of them have also other kinds of fees such as those on deposit and withdrawals.
Conclusion
Uniswap is a great platform, and at the moment it is one of the best decentralized exchanges in the world. If you aren’t a beginner in the crypto world, Uniswap could be perfect for you. Otherwise, if you are a newbie, it may be better to start from a centralized exchange.