Uniswap

Uniswap is a decentralized exchange (DEX) protocol on Ethereum that uses an Automated Market Maker (AMM) model, enabling trustless token swaps without intermediaries or order books. Created by Hayden Adams in 2018 and funded by the Ethereum Foundation, Uniswap quickly became a cornerstone of DeFi for its open-source and permissionless design.

How It Works

Users add pairs of ERC‑20 tokens to liquidity pools, earning a share of trading fees, while trades follow a constant product formula (x·y=k). Anyone can become a liquidity provider (LP) or swap tokens directly from their wallet.

The protocol has evolved through versions:

• Uniswap V3 (2021): Introduced concentrated liquidity for greater capital efficiency.
• Uniswap V4 (2023): Added customizable Hooks for advanced use cases.
  

The UNI Token & Governance

UNI is Uniswap’s governance token, introduced in September 2020 via a retroactive airdrop to early users. UNI holders vote on proposals affecting protocol updates, fee structures, treasury spending, and cross-chain expansions.

UNI also supports liquidity mining campaigns, enabling LPs to earn additional rewards during incentivized periods.

Adoption & Impact

Uniswap is one of the largest DEX platforms by volume and remains dominant in DeFi. It supports multiple chains—Ethereum, Polygon, Arbitrum, Base—and powers billions in trading volume and liquidity.

Strengths & Risks

Strengths

• Fully decentralized and permissionless trading
• Highly efficient capital usage (V3/V4 upgrades)
• Community-driven governance structure
  

Risks

• High Ethereum gas fees may hinder usability
• Exposure to impermanent loss for LPs
• Regulatory scrutiny: Uniswap Labs received a CFTC settlement in 2024
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