Uniswap is a leading decentralized exchange (DEX) that allows the trading of different digital assets on the Ethereum network. Established in 2018 by former Siemens mechanical engineer, Uniswap quickly became one of the most widely-used DEX in the crypto market and is now among the pioneers in decentralized finance (DeFi). In fact, according to the latest data by DefiPulse, Uniswap is the fourth largest DEX with nearly USD 4 billion locked in the protocol.
Uniswap has received a lot of support from big venture capitals such as Andreessen Horowitz and Union Square Ventures. In order to make the protocol more decentralized, the project released its own native token, UNI, and every UNI holder gets to have a say in the project’s development.
Basically, on a DEX like Uniswap, users can trade any listed tokens directly with one another without the intervention of another party. And Uniswap uses Automated Market Maker (AMM) algorithm to facilitate this kind of peer-to-peer trading. The algorithm enables users to create liquidity pools, provide liquidity, and swap for any tokens they want. The AMM smart contract will automatically rebalance the liquidity pool of a certain token pair after every trade. There is no need for an order book like on a centralized exchange (CEX) to match bids and asks. Therefore, trading activities on an AMM DEX happen more freely and at a faster pace than on a CEX.
Uniswap takes a small fee of 0.3% for every transaction made using readily available liquidity pools. Those who contribute liquidity to such pools receive a fraction of the fee as rewards.
UNI was introduced in 2020 in an effort to make the Uniswap protocol more decentralized. People can use UNI to trade, participate in Uniswap governance, or fund different initiatives that drive the growth of Uniswap.
The total supply of UNI is 1,000,000,000 and at the time of writing, there are more than 762 million UNI tokens in circulation.
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