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Let’s learn about Uniswap (UNI)
What is Uniswap?
Uniswap is a decentralized network protocol-based cryptocurrency exchange. The business that created the Uniswap protocol originally went by the name of Uniswap.
The protocol uses smart contracts to enable automated exchanges between cryptocurrency tokens on the Ethereum network. According to daily trading volume estimates as of October 2020, Uniswap was thought to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall.
It is made available on open-source software-powered blockchain networks. This contrasts with centralized company-run bitcoin exchanges.
The owners of UNI, a native cryptocurrency and governance token, vote on protocol changes, which are subsequently carried out by a group of programmers. The first distribution of UNI coins went to the protocol’s pioneers.
The right to 400 UNI tokens was granted to each Ethereum address that had engaged with Uniswap before September 1, 2020. As of February 2022, the UNI token’s market capitalization was over USD 6.6 billion.
Design and structure – UNISWAP
In order to build more efficient markets, Uniswap uses liquidity pools as opposed to acting as a market maker like centralized exchanges do. By adding a pair of tokens to a smart contract that other users can buy and sell, people and automated programs, referred to as “liquidity providers,” add liquidity to the exchange. In exchange,
A portion of the trading commissions generated for that trading pair is distributed to the liquidity providers. Each time a trade is made, a specific number of tokens are taken out of the pool in exchange for a specific number of the other token, affecting the price.
The ability to access a large number of Ethereum tokens is made possible by the lack of listing fees and the need for user registration. Because Uniswap is open-source software, new exchanges can be made using its code.
About Uniswap history and evaluation
A former mechanical engineer at Siemens, Hayden Adams founded Uniswap on November 2, 2018.
Venture capital firms, including Andreessen Horowitz, Paradigm Venture Capital, Union Square Ventures LLC, and ParaFi, made investments in the Uniswap corporation.
In October 2020, Uniswap had an average daily trading volume of $220 million USD.
Because it is used in decentralized finance, Uniswap has been used by traders and investors (DeFi).
As a proof-of-concept for AMMs, the Uniswap protocol’s initial version (V1) was released in November 2018. (Automated Market Makers).
Versions 2 and 3 were released in May 2020 and May 2021, respectively, and each of them added new choices for allocating liquidity within a specific price range.
About Uniswap Security
A decentralized trading platform called Uniswap has its own governance token called UNI. UNI needs Ethereum to function because it is an ERC-20 token.
Token regulations are established by ERC-20, and security-related factors mainly concern the resilience of the Ethereum network. For instance, the cost of gas to complete transactions may soar in the event of network congestion. All users will be impacted by the transaction delays and exceptionally high transaction fees that will follow from this.
Separately, smart contracts may produce security problems that cause DeFi traders to lose money. In fact, by the end of DeFi’s brief lifetime in Fall 2020, hackers had already been successful in stealing millions of dollars.
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