What is Uniswap (UNI)?
UNI is the governance token of the Uniswap decentralised cryptocurrency trading protocol (also known as a decentralised exchange, or DEX). It was launched on 16 September 2020, with an airdrop to protocol users. As a governance token, it gives holders voting rights for key decisions for the protocol.
Uniswap itself is an Automated Liquidity Protocol, enabling users to trade ERC-20 crypto tokens without any middlemen (like centralised exchange operators). This makes it very efficient and censorship-resistant. Using smart contracts and liquidity pools, Uniswap is set up to ensure that there’s always enough liquidity to enable users to make token trades.
The original version of Uniswap was launched by Hayden Adams in 2018, while Uniswap v2 followed in 2020. Because there are no listing fees, Uniswap is particularly useful for providing start-up ERC-20 token projects access to the market.
Uniswap (UNI) Basics
UNI Blockchain
Uniswap is based on the Ethereum proof-of-stake blockchain, with UNI being an ERC-20 token.
Uniswap (UNI) Staking
When Uniswap v2 launched, tokens were airdropped to existing liquidity providers and users. Subsequently, UNI tokens could be earned by staking ERC-20 tokens in Uniswap’s liquidity pools. This process of earning rewards is often referred to as yield farming or liquidity mining.
Uniswap (UNI) Supply and Tokenomics
The initial supply of UNI tokens was set at 1 billion for the first four years. 60% of these were airdropped to Uniswap liquidity providers and users, while the remaining 40% were split among team members, advisors, and investors. After four years, new tokens will be issued at a rate of 2% per year.
Uniswap (UNI) Adoption & Usability
UNI’s two primary uses are to reward liquidity providers and provide a governance mechanism for the Uniswap protocol. Of course, UNI can also be traded on secondary markets and is becoming a popular crypto in its own right, with some online retailers and service providers accepting it as payment.
Uniswap (UNI) Fees & Speed
All trades on the Uniswap platform are subject to a 0.3% fee – at the moment, this goes entirely to the liquidity providers. As an ERC-20 token, UNI is subject to Ethereum gas fees and network congestion.
Uniswap Security and Safety
As Ethereum-based token, UNI benefits from the security of a large proof-of-stake network. However, as always, crypto tokens are always relatively vulnerable when using third-party platforms, like centralised crypto exchanges and wallets.
Security and safety tips:
- Don’t leave your UNI on-exchange for longer than absolutely necessary. If you are not currently trading, transfer them to a local wallet for short-term storage or staking.
- For long-term storage or staking, keep your crypto in a hardware wallet.
- Always keep your wallet keys in multiple safe places – they cannot be recovered.
- Never tell anyone about your crypto holdings. No matter how secure your storage is, if you or your loved ones are physically threatened, you’ll probably hand over your personal keys.
UNI Volatility
Like most cryptocurrencies, UNI has seen significant price volatility during its life. Though it started trading at around $3.44 in September 2020, the dramatic 2021 crypto bull run saw the price peak at $44.92, before experiencing something of a roller coaster ride through to early 2022. At the time of writing, in November 2022, UNI was trading at around $5.25 (CoinGecko data).
Final Word on Uniswap (UNI)
The long-term success of UNI is intrinsically linked to the success of the Uniswap trading protocol. Considering that Uniswap is already very popular, and the use of DEXs is likely to grow over the coming years, thanks to growing mistrust in centralised platforms, things are looking good for UNI.
However, if looking at UNI as a long-term investment, you should keep in mind that while the supply of tokens is fixed for now, in 2024, plans call for new tokens to be issued again – albeit at a low rate.