Uniswap is a

decentralized Decentralization or decentralisation is the process by which the activities of an organization, particularly those related to planning and decision-making, are distributed or delegated away from a central, authoritative location or group and gi ...

cryptocurrency exchange A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may acce ...

that uses a set of automated

smart contract A smart contract is a computer program or a Transaction Protocol Data Unit, transaction protocol that is intended to automatically execute, control or document events and actions according to the terms of a contract or an agreement. The objective ...

s to create liquidity pools for the execution of trades. It is an

open source Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use and view the source code, design documents, or content of the product. The open source model is a decentrali ...

project and falls into the category of a DeFi product (

Decentralized finance Decentralized finance (often stylized as DeFi) provides financial instruments and services through smart contracts on a programmable, permissionless blockchain. This approach reduces the need for intermediaries such as brokerages, exchanges, or ...

) because it uses smart contracts to facilitate trades instead of a

centralized Centralisation or centralization (American English) is the process by which the activities of an organisation, particularly those regarding planning, decision-making, and framing strategies and policies, become concentrated within a particular ...

exchange. The protocol facilitates automated transactions between cryptocurrency tokens on the

Ethereum Ethereum is a decentralized blockchain with smart contract functionality. Ether (abbreviation: ETH) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-s ...

blockchain The blockchain is a distributed ledger with growing lists of Record (computer science), records (''blocks'') that are securely linked together via Cryptographic hash function, cryptographic hashes. Each block contains a cryptographic hash of th ...

through the use of smart contracts. , Uniswap is estimated to be the second largest decentralized exchange and the seventh-largest

overall by daily

trading volume In capital markets, volume, or trading volume, is the amount (total number) of a security (or a given set of securities, or an entire market) that was traded during a given period of time. In the context of a single stock trading on a stock exchan ...

History

Uniswap was created on November 2, 2018 by Hayden Adams, a former mechanical engineer at

Siemens Siemens AG ( ) is a German multinational technology conglomerate. It is focused on industrial automation, building automation, rail transport and health technology. Siemens is the largest engineering company in Europe, and holds the positi ...

. Adams is the

founder Founder or Founders may refer to: Places *Founders Park, a stadium in South Carolina, formerly known as Carolina Stadium * Founders Park, a waterside park in Islamorada, Florida Arts, entertainment, and media * Founders (''Star Trek''), the ali ...

and

CEO A chief executive officer (CEO), also known as a chief executive or managing director, is the top-ranking corporate officer charged with the management of an organization, usually a company or a nonprofit organization. CEOs find roles in variou ...

of Uniswap Labs, the company responsible for the development of the Uniswap Protocol, a

exchange Exchange or exchanged may refer to: Arts, entertainment and media Film and television * Exchange (film), or ''Deep Trap'', 2015 South Korean psychological thriller * Exchanged (film), 2019 Peruvian fantasy comedy * Exchange (TV program), 2021 Sou ...

(DEX) built on the Ethereum blockchain. Adams launched Uniswap in November 2018, after working as a

mechanical engineer Mechanical may refer to: Machine * Machine (mechanical), a system of mechanisms that shape the actuator input to achieve a specific application of output forces and movement * Mechanical calculator, a device used to perform the basic operations o ...

and being inspired by a

blog A blog (a Clipping (morphology), truncation of "weblog") is an informational website consisting of discrete, often informal diary-style text entries also known as posts. Posts are typically displayed in Reverse chronology, reverse chronologic ...

post written by

Vitalik Buterin Vitaly Dmitrievich Buterin (; born 31 January 1994), better known as Vitalik Buterin (), is a Canadian computer programmer and co-founder of Ethereum. Buterin became involved with cryptocurrency early in its inception, co-founding ''Bitcoin Ma ...

, the co-founder of

. His goal was to create a decentralized platform for exchanging tokens without relying on

exchanges. Adams had no prior experience in

blockchain technology The blockchain is a distributed ledger with growing lists of records (''blocks'') that are securely linked together via cryptographic hashes. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (g ...

software development Software development is the process of designing and Implementation, implementing a software solution to Computer user satisfaction, satisfy a User (computing), user. The process is more encompassing than Computer programming, programming, wri ...

but taught himself through online resources. His innovative work on Uniswap has played a key role in the growth of

decentralized finance Decentralized finance (often stylized as DeFi) provides financial instruments and services through smart contracts on a programmable, permissionless blockchain. This approach reduces the need for intermediaries such as brokerages, exchanges, or ...

(DeFi) by introducing the

Automated Automation describes a wide range of technologies that reduce human intervention in processes, mainly by predetermining decision criteria, subprocess relationships, and related actions, as well as embodying those predeterminations in machine ...

Market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market *Marketing, the act of sat ...

Maker (AMM) model, which allows users to trade

cryptocurrencies A cryptocurrency (colloquially crypto) is a digital currency designed to work through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. Individual coin ownership records ...

directly from their

wallets A wallet is a flat case or pouch, often used to carry small personal items such as physical currency, debit cards, and credit cards; identification documents such as driving licence, identification card, club card; photographs, transit pas ...

. Uniswap’s average daily trading volume was US$220 million in October 2020. Traders and investors have utilized Uniswap because of its usage in

(DeFi).

Uniswap Labs

Uniswap Labs is a software company in the

(DeFi) space, founded in 2018 by

Hayden Adams Uniswap is a decentralized cryptocurrency exchange that uses a set of automated smart contracts to create liquidity pools for the execution of trades. It is an open source project and falls into the category of a DeFi product (Decentralized fina ...

. The company's early investors included venture capital firms like

Andreessen Horowitz AH Capital Management, LLC (commonly known as Andreessen Horowitz, or a16z) is an American privately held venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. The company is headquartered in Menlo Park, California. As of M ...

Paradigm Operations Paradigm Operations, often referred to as simply Paradigm, is an American investment firm based in San Francisco, California. The firm focuses on investments related to cryptocurrency and blockchain technology. Background In June 2018, Parad ...

Union Square Ventures Union Square Ventures (USV) is an American venture capital firm based in New York City. The firm has backed more than 130 startups, including Twitter, Etsy, Stripe, Coinbase, Zynga, Tumblr, Stack Overflow, Meetup, Kickstarter, MongoDB, ...

LLC and ParaFi. In 2022 Uniswap Labs had raised $165 million, after announcing in 2021 that it was looking to raise between $100 and $200 million and was working with Polychain. Uniswap offers products such as a self-custodial mobile

wallet A wallet is a flat case or pouch, often used to carry small personal items such as physical currency, debit cards, and credit cards; identification documents such as driving licence, identification card, club card; photographs, transit pass, b ...

, a Trading

API An application programming interface (API) is a connection between computers or between computer programs. It is a type of software interface, offering a service to other pieces of software. A document or standard that describes how to build ...

for professional users, and a

web interface In the industrial design field of human–computer interaction, a user interface (UI) is the space where interactions between humans and machines occur. The goal of this interaction is to allow effective operation and control of the machine fro ...

. These tools provide access to liquidity across multiple

s, including

Polygon In geometry, a polygon () is a plane figure made up of line segments connected to form a closed polygonal chain. The segments of a closed polygonal chain are called its '' edges'' or ''sides''. The points where two edges meet are the polygon ...

, and

Optimism Optimism is the Attitude (psychology), attitude or mindset of expecting events to lead to particularly positive, favorable, desirable, and hopeful outcomes. A common idiom used to illustrate optimism versus pessimism is Is the glass half empty ...

. The

company A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...

has also collaborated with traditional

finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

platforms lik
Fireblocks
to integrate DeFi features into traditional financial systems, thereby expanding its reach to institutional clients.

Uniswap Foundation

The Uniswap Foundation was founded in 2022 by Devin Walsh and Ken Ng, after 95% of Uniswap token holders voted in favor of the proposal. The Foundation's mission is to support the decentralized growth and sustainability of the Uniswap Protocol and its supporting ecosystem and community. It facilitates community governance of the Uniswap DAO, development of the Uniswap Protocol, and communication among contributors. Uniswap Foundation's most recent vision and funding proposal—Uniswap Unleashed—outlined a plan to make the Uniswap Protocol the world’s infrastructure for digital value transfer with significant support for Uniswap v4 and Unichain. It passed with overwhelming support.

Overview

Uniswap is a

protocol that is used to exchange cryptocurrencies and tokens; it is provided on

networks that run

open-source software Open-source software (OSS) is Software, computer software that is released under a Open-source license, license in which the copyright holder grants users the rights to use, study, change, and Software distribution, distribute the software an ...

. This is in contrast to cryptocurrency exchanges that are run by centralized companies. Changes to the protocol are voted on by the owners of a native cryptocurrency and governance token called UNI, and then implemented by a team of developers. Uniswap launched without the UNI token, and the token is not needed to trade on the exchange. Tokens were initially distributed to early users of the protocol. Uniswap Foundation Logo

Protocol

Uniswap acts as an automated

market maker A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the difference, which is called the ''bid–ask spread'' or ''turn.'' Thi ...

and uses liquidity pools to fulfill orders, instead of relying on a traditional market maker, with an aim to create more efficient markets.

Individual An individual is one that exists as a distinct entity. Individuality (or self-hood) is the state or quality of living as an individual; particularly (in the case of humans) as a person unique from other people and possessing one's own needs or g ...

s and

bots The British Overseas Territories (BOTs) or alternatively referred to as the United Kingdom Overseas Territories (UKOTs) are the fourteen dependent territory, territories with a constitutional and historical link with the United Kingdom that, ...

—termed " liquidity providers"—provide liquidity to the exchange by adding a pair of tokens to a smart contract which can be bought and sold by other users according to the constant-product rule

\phi(x, y) = xy

. In return, liquidity providers are given a percentage of the trading

fee A fee is the price one pays as remuneration for rights or services. Fees usually allow for overhead, wages, costs, and markup. Traditionally, professionals in the United Kingdom (and previously the Republic of Ireland) receive a fee in contrad ...

s earned for that trading pair. For each trade, a certain amount of tokens is removed from the pool for an amount of the other token, thereby changing the price. No fees are required to list tokens which allow a large amount of Ethereum tokens to be accessible and no registration is required for users. As

, Uniswap's code can also be forked to create new exchanges.

UNI token

UNI is the governance token of the Uniswap protocol, enabling holders to participate in the platform's decentralized

governance Governance is the overall complex system or framework of Process, processes, functions, structures, Social norm, rules, Law, laws and Norms (sociology), norms born out of the Interpersonal relationship, relationships, Social interaction, intera ...

. Introduced in September 2020, UNI was distributed through an

airdrop An airdrop is a type of airlift in which items including weapons, equipment, humanitarian aid or leaflets are delivered by military or civilian aircraft without their landing. Developed during World War II to resupply otherwise inaccessible tr ...

to early users of the platform and allocated to various stakeholders, including the development team,

investor An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital the investor usually purchases some species of pr ...

s, and a

community A community is a social unit (a group of people) with a shared socially-significant characteristic, such as place, set of norms, culture, religion, values, customs, or identity. Communities may share a sense of place situated in a given g ...

treasury A treasury is either *A government department related to finance and taxation, a finance ministry; in a business context, corporate treasury. *A place or location where treasure, such as currency or precious items are kept. These can be ...

. The token allows holders to propose and vote on protocol upgrades, changes to

structures, and other governance-related matters. UNI operates on the Ethereum blockchain following the ERC-20 standard, ensuring compatibility with a wide range of

decentralized application A decentralised application (DApp, dApp, Dapp, or dapp) is an Application software, application that can operate autonomously, typically through the use of smart contracts, that run on a decentralized computing, blockchain or other distributed le ...

s. Its total supply is capped, with a scheduled release over several years to support ongoing development and ecosystem growth. Initial Uniswap token allocation

References

External links

Uniswap Protocol
{{Cryptocurrency exchanges Decentralized cryptocurrency exchanges Ethereum-based protocols Ethereum tokens Decentralized autonomous organizations