Uniswap

Quick definition

Uniswap is a decentralised exchange (DEX) that allows users to trade thousands of different cryptocurrency tokens, and the platform’s native token is UNI. 

Key details

  • Uniswap is a decentralised cryptocurrency exchange, meaning it has no central governing body. It is now one of the largest DEXs on the planet. 
  • It is built on top of the Ethereum blockchain, a network that allows developers to build decentralised apps. This means Uniswap is compatible with all ERC-20 tokens. 
  • Rather than using an order book like a conventional exchange (e.g. stock exchanges), Uniswap uses something called an automated liquidity protocol to keep things ticking. 

What is Uniswap?

Founded on 2nd November 2018 by Hayden Adams, Uniswap is one of the most popular decentralised exchanges, facilitating automated transactions between cryptocurrency tokens on the Ethereum blockchain by using smart contracts: pieces of code that execute automatically when set criteria are fulfilled.

Created in September 2020, Uniswap’s native cryptocurrency, UNI, is a governance token that gives holders the right to vote on new developments and changes to the platform. This includes alterations to its fee structure and the distribution of newly minted tokens.

Sticking with the theme of decentralisation, Uniswap is completely open-source and transparent. This means that anyone could copy the code and create their own DEX, and users are even allowed to list their own tokens on the exchange for free. 

A key part of the cryptocurrency/DeFi narrative is the aim to break away from the traditional financial institutions that have some claim to have led to much of the world’s economic unrest. As a result, many Uniswap users enjoy the fact their trades are executed directly on the blockchain, whereas other crypto exchanges require users to give up their private keys to log orders on an internal database. 

Uniswap’s automated liquidity protocol is key to how the platform functions. Rather than the ‘buy’ and ‘sell’ orders you would find in traditional finance, Uniswap uses liquidity pools: separate stores of cryptocurrency tokens provided by liquidity providers (users) for rewards. This means that tokens are available anytime someone wants to make a trade, guaranteeing their liquidity.  

You can buy UNI tokens and store them in a cryptocurrency wallet just like any other token; check out our step-by-step guide to find out how.  

A brief history of Uniswap

Uniswap has developed rapidly in recent years to become one of the leading decentralised exchanges. Below, we take a look at some of the platform’s history. 

  • The idea for Uniswap came from Ethereum founder, Vitalik Buterin, in 2016. He first suggested the idea of a DEX with an automated market maker. Hayden Adams then took this idea and began turning it into a functional product. 
  • Adams received several grants along with $100,000 from the Ethereum foundation to help the concept achieve commercialisation. 
  • By 2020, Uniswap had achieved a daily trading volume in the hundreds of millions.
  • In April 2020, Uniswap’s website was taken down temporarily following a hacking attempt.

Where can I learn more?

If learning more about Uniswap is on your to-do list, check out our hub page; it’s a good place to start your learning process. Alternatively, to learn more about the broader cryptocurrency space, check out any of the courses below by clicking the relevant link.

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Charlie Hancox
Financial writer
Alongside his passion for trading, Charlie has represented Great Britain and won national championships as a water polo player, and as a budding film director, has… read more.