Uniswap | Trading Non Stop

What is UNI?

Uniswap (UNI) is a decentralized exchange (DEX) protocol that allows users to trade cryptocurrencies automatically and without needing permission, using pools of funds called liquidity pools.

Automated Market Maker (AMM) – Instead of traditional order books, Uniswap uses liquidity pools to enable token swaps in a decentralized way.
Governance Token (UNI) – Holders of UNI tokens can vote on important decisions about the platform’s future and how its funds are managed.
Open-Source Infrastructure – Uniswap supports secure, non-custodial trading on Ethereum and several other blockchains, powering many decentralized finance (DeFi) applications.

Deep Dive

1. Purpose & Value Proposition

Uniswap addresses the challenge of liquidity in decentralized trading by using an automated market maker (AMM) system. Instead of matching buyers and sellers directly, users trade against pools of tokens provided by other users. This removes middlemen, lowers fees, and allows anyone to add tokens or liquidity to the platform.

At the heart of Uniswap is a constant product formula (X * Y = K), which automatically adjusts token prices based on the amount of tokens in the pool. This ensures there is always liquidity available, even for less popular tokens.

2. Technology & Architecture

Uniswap runs on a set of non-upgradable smart contracts on the Ethereum blockchain and Layer 2 networks like Arbitrum and Polygon. Important upgrades include:

V3 (2021): Introduced concentrated liquidity, allowing liquidity providers to focus their funds within specific price ranges for better efficiency.
V4 (2025): Added “hooks” for customizable pool features and redesigned contracts to reduce transaction costs by about 99%.

Uniswap supports trading across more than 10 blockchains, including Solana, through integrations like Jupiter’s API.

3. Tokenomics & Governance

The UNI token is mainly used for governance, giving holders the power to vote on proposals such as fee changes or how the platform’s treasury is spent. Key points include:

Supply: Limited to 1 billion tokens, with 60% distributed to the community. After four years, a 2% yearly inflation rate begins.
Governance: Proposals need at least 4% of tokens participating to pass and have a 7-day voting window. Recent actions include a $9 million grant to encourage adoption of V4.

Conclusion

Uniswap is a foundational platform for decentralized trading, combining algorithm-driven liquidity with community-led governance. While UNI tokens currently focus on governance, ongoing improvements like cross-chain swaps and fee-sharing plans aim to expand its role in decentralized finance.

What’s next? Uniswap’s growth into Layer 2 networks and partnerships with institutions could reshape it as the key liquidity provider for the future internet.