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Uniswap Buying Guide 2024
Uniswap is a decentralized exchange built on Ethereum that leverages global liquidity pools to create unique markets for any pair of assets and uses an automated liquidity protocol as its trading model.
The Uniswap Token (UNI), is the token that governs the decentralized exchange, and UNI holders control the community treasury in addition to the governance of the protocol, along with the ability to stake the token and split the fees earned by a liquidity pool. Currently the most popular decentralized exchange in the Decentralized Finance sector, this Uniswap Review will be a combined look at the token and the cryptocurrency exchange itself, but with a focus on the token.
Uniswap Pros & Cons
Pros
DeFi coin with staking and potential protocol fee sharing
Ability to vote on protocol changes
Airdrop to users at launch
Cons
Not as decentralized as it appears
Token is not necessary to use exchange/earn liquidity fees
Uniswap Ratings
Supply
Max: 1,000,000,000 UNI
Network Speed
Rating: Low
Reason: Speed of network is tied to Ethereum and gas fees paid, your transaction will go through faster the more you are willing to pay, but if you only pay the minimum gas fee then the transaction will be extremely slow.
Disbursement
Rating: Low
Reason: The development team allotted 20% of the initial token drop to themselves, meaning that if they want to, they can delegate to whichever proposal they like and likely sway it their way because of how much UNI they hold.
Developer Engagement
Rating: Medium
Reason: The token was not what the protocol was built on, it was an airdrop meant to help it stay competitive with other decentralized exchanges that began offering a fee sharing structure for stakers. The future of the token and exchange are now in the hands of users, but very few holders have enough stake or delegation to actually make propositions at this time.
Liquidity
Rating: High
Reason: Currently the 15th ranked digital asset by market cap, Uniswap is available on all major exchanges and has a 24-hour trade volume of almost $1.5 billion dollars.
History of Uniswap
Uniswap was founded by Hayden Adam, a young yet talented developer/designer in November of 2018. With a $100k grant from the Ethereum Foundation, Hayden and his small team of less than 10 were able to build a compelling decentralized exchange in the form of Uniswap. In April of 2019, Uniswap got a million dollars in seed money and with this they were able to release Uniswap V2 in May of 2020.
In September 2020, Uniswap announced the launch of its token UNI, which would give the community governance over the future of the protocol and the ability to turn on the protocol fee switch after a 180 lock out period. Turning this switch on would mean all those who are staking UNI would receive a portion of the protocol’s fees. This would be in addition to being able to earn a portion of the fees for providing liquidity of an asset.
Uniswap Frequently Asked Questions
Uniswap is not necessarily the best DeFi coin, but it is one of the most popular (currently behind AAVE in market cap) decentralized exchanges to use and the potential to earn a portion of the protocols fees for staking UNI gives it potential.
Uniswap uses an Automated Market Maker (AMM) protocol. AMMs are a class of decentralized exchange that relies on mathematical formulas to set the price of a token, there are no buy or sell orders, and traders don’t need to find someone else to sell their coins to. Instead, a smart contract acts as the maker in an exchange transaction. The concept is similar to quick swap services like ShapeShift and Changelly, but the difference is that the company’s reserves are replaced with liquidity pools based on smart contracts.
A liquidity pool contains two assets in a trading pair. The relative percentage of each token in that pool is what determines the theoretical price of a particular asset. Users that provide liquidity to pools receive a portion of the 0.3% trading fee. The best part of Uniswap’s protocol is you never give up custody of your funds, you earn by providing liquidity, and the asset stays in your wallet.
Currently Uniswap operates without making a profit, all trading fees go to those providing liquidity to the exchange pools. Those who are providing liquidity receive a share of the 0.3% collected by the pool. However, with the launch of the Uniswap Token, there will be the opportunity to vote on whether to turn on the fee switch, which would give UNI stakers the ability to receive a portion of the fees from specific assets (each asset will need to be voted upon).
Uniswap was started by Hayden Adam but it is a decentralized exchange not owned by anyone. The token holders decide on the direction of the exchange and what to do about fees, treasury grants and all other decisions generally left in the hands of the owner of a company. That said, there are concerns about how decentralized Uniswap really is.
This is a subjective question. What are you trying to do? Short hold or a longer one? Swapping coins is not something you are likely to be doing all the time unless you are a day trader. Of course, if you are looking to generate profit by automating trades you can use a crypto trading bot. We have reviewed all the best cryptocurrency trading bots here.
No, Uniswap does not require ID or require any Know Your Customer or Anti-Money Laundering identity verification.
Uniswap has never been hacked but there have been a couple exploits that have resulted in $300k to $1 million worth of minor tokens being stolen. There is no real evidence that they were hacked, they may have just been opportunistic trades. There is also controversy surrounding the ability to list fake tokens on the Uniswap DEX.
