Uniswap is a decentralized exchange (DEX) operating on the Ethereum network that allows anyone to exchange ERC20 tokens without having to trust a third party. It was one of the first decentralized finance applications to gain traction on Ethereum. It is governed by the token UNI.
Market Cap: $$4,831,590,783 (as of March 4, 2023)
So, how does Uniswap work?
What is Uniswap?
Uniswap is a decentralized exchange designed to make exchanging Ethereum (ERC-20) tokens simple. It removes the need for a centralized intermediary, so users can exchange their funds without having to trust a third party.
The platform utilizes a simple mathematic equation for liquidity pools to enable the exchange of tokens. Whenever these are not in equilibrium, Uniswap’s math brings them back into balance. Users are incentivized to bring the pools back into balance.
Benefits
No-intermediary: as Uniswap is decentralized, users’ funds are never sent to a third party, eliminating the third-party risk
Permissionless: Anyone with an internet connection can trade on Uniswap
What is UNI?
UNI was launched in September 2020. UNI is Uniswap’s governance token that allows users to vote on protocol changes.
Strangecoins opinion
Uniswap is the OG decentralized exchange that’s trying to maintain friendliness with regulators. It currently has 0 value accrual for its token. Given that UNI is a governance token though, UNI holders will vote revenue-sharing into existence and that’s when UNI becomes fundamentally valuable.
Risk: there is a regulatory risk of DeFi limiting innovation.
