Uniswap

UNI (Uniswap) Explained:

Uniswap was launched by Hayden Adams in 2018, and allows users to trade tokens directly on-chain via its automated liquidity pool, as opposed to the order book method that is commonly found on centralized exchanges.

Uniswap is the largest DEX in DeFi, touting a market cap of $6 billion.

1. What is UNI (Uniswap)?

UNI is the governance token of Uniswap, the leading decentralized exchange (DEX) built on Ethereum. Holders are able to vote on governance proposals pertaining to the protocol.

2. How does Uniswap work?

Uniswap functions as an automated market maker (AMM).

In an AMM design users provide liquidity by depositing token pairs into set liquidity pools, which enable traders to swap tokens for one another. When one token is swapped for another, the price of each token shifts based on the ratio of tokens in their liquidity pools.

Uniswap is designed to be a permissionless, open source product, meaning that the protocol is available entirely to the public. Anyone can provide liquidity, swap tokens, create new markets and vote on governance regardless of geographical location, or other common restrictive criteria.

3. What are the risks of investing in UNI?

UNI is particularly vulnerable to smart contract and regulatory risks. Any undiscovered vulnerabilities or bugs in Uniswap’s contracts could lead to issues on the platform that could negatively impact the token's price.

UNI is also under scrutiny of the Securities and Exchanges Commision (SEC), who claim that Uniswap is operating as an unregistered securities exchange.

4. What are the benefits of UNI?

Uniswap and their AMM design are a main driver in DeFi adoption. Its permissionless design makes DeFi accessible to anyone.

Holders are incentivized and empowered to contribute to the growth of Uniswap, as well as its governance decisions.