Uniswap

Uniswap

Uniswap's web application interface
Developer(s)	Hayden Adams
Repository	github.com/Uniswap/uniswap-v3-core
Written in	Solidity
Platform	Ethereum
Type	Decentralized exchange
License	GNU General Public License v3.0
Website	uniswap.org

Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts to create liquidity pools for the execution of 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 instead of a centralized exchange. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts. As of October 2020^[update], Uniswap was estimated to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall by daily trading volume.^[1]

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. Uniswap launched without the UNI token, and the token is not needed to trade on the exchange. 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 circa US$7.6 billion as at April 2024.^[8]

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.^[9][10][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 ${\displaystyle \phi (x,y)=xy}$.^[11] 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.^[12]

References