What is uniswap

The DeFi hype is centered around protocols that offer lending solutions, or other traditional centralized financial products on the blockchain in a decentralized manner, with a particular focus on yield-farming protocols. These apps allow users to ‘lend out’ their cryptocurrency assets in return for fixed high yields, and the associated tokens of these platforms have driven a bull market throughout 2020.

As a result, one of the most frequently asked questions from new entrants into the DeFi space is where can you buy the latest DeFi tokens? Well, the easy answer to that question, and indeed the most trusted solution, is Uniswap. But what is Uniswap, and how does it work?.

Interdum et malesuada fames ac ante ipsum primis in faucibus. Pellentesque venenatis dolor imperdiet dolor mattis sagittis. Praesent rutrum sem diam, vitae egestas enim auctor sit amet. Pellentesque leo mauris, consectetur id ipsum sit amet, fersapien risus, commodo eget turpis at, elementum convallis elit. Pellentesque enim turpis, hendrerit tristique lorem ipsum dolor.

Uniswap is a decentralized, peer to peer exchange developed specifically for the Ethereum network, also described as a decentralized protocol for automated liquidity provision on Ethereum. Launched in November 2018 by Ethereum developer Hayden Adams, Uniswap uses an automated market-making system powered by smart contracts to match orders on any ERC-20 token across the entire Ethereum blockchain.

What are Liquidity Pools?

Liquidity pools, which power the Uniswap platform, are essential to decentralized finance. Each liquidity pool is a pool of tokens locked inside a smart contract. These tokens, which are otherwise inaccessible to regular traders, are used to facilitate trading through the provision of liquidity.

Traditionally, most decentralized exchanges rely on these liquidity pools in order to match open orders on their books – as there always has to be a both a buy side and a sell side when a user places an order.

In traditional exchanges, such as stock exchanges and large, well-funded cryptocurrency exchanges like Binance, it is easy to match orders between users, and market makers are also used to ensure that there is adequate liquidity on the exchange at any given time.

However, with decentralized exchanges, who have fewer users, there is no guarantee that there will be someone willing to buy or sell the asset you wish to trade. Likewise, as decentralized exchanges work through the blockchain, using a traditional order book model would be incredibly slow and inefficient – because blockchains still only process a few transactions per second. This has created both lucrative opportunities for yield-farming, enabled better liquidity on decentralized exchanges, and provided passive returns to long-term token holders. Uniswap leverages these pools to allow users to quickly swap between ERC-20 tokens, and as such it has become one of the most popular places to trade new tokens.

How Popular is Uniswap?

LAlthough Uniswap got off to a somewhat slow start as users made their way tentatively into the DeFi space, it’s seen a huge upsurge in activity during 2020, powered in part by the rising interest in Ethereum-based DeFi protocols such as AAVE and DMM DAO.

In 2020, total liquidity on Uniswap reached $300 million, and 24-hour trading volume regularly exceeds over $200 million collectively on various pairings on the platform—even occasionally surpassing Tether in generated gas fees.

On August 30, 2020, Uniswap overtook Coinbase in daily volume, processing some $426 million in a 24 hour period, compared to just $349 million on Coinbase in the same period. Also contributing to Uniswap’s popularity has been the launch of their native token, UNI. Let’s explore UNI below.

The UNI Token

Introduced on the 16th September 2020, the Uniswap token, or UNI, is a governance token that allows users to take part in the future of the Uniswap protocol. Over 60% of the total UNI supply was distributed to community members, making it a fairly decentralized token, with only 21.5% given to team members and roughly 17.8% given to investors.

Around 150,000,000 UNI tokens were claimed by previous liquidity providers on the protocol, and 430,000,000 tokens were retained as governance treasury tokens. Around 5,000,000 community UNI tokens will also be available for yield farmers to claim through various stablecoin yield farming pools.

Uniswap will use the UNI governance tokens to promote community initiatives, provide liquidity mining, and fund other programs for the good of the protocol. If you have used Uniswap, you should be eligible to claim up to 400 UNI tokens just for connecting your wallet.