Uniswap (UNI) is a decentralized finance (DeFi) protocol that facilitates automated trading of decentralized tokens on the Ethereum blockchain. Launched in November 2018 by Hayden Adams, Uniswap stands out for its use of an automated liquidity protocol, eliminating the need for traditional order books and instead relying on liquidity pools that allow tokens to be exchanged automatically. The native governance token of the Uniswap protocol, UNI, was introduced in September 2020 as a means of decentralizing the governance of the protocol and allowing the community to steer its development through collective decision-making.
Uniswap's employs an automated market maker (AMM) model to decentralized trading, which allows for the automatic determination of prices based on supply and demand, facilitating trades directly between users' wallets without the need for centralized intermediaries.
UNI tokens grant holders governance rights, allowing them to participate in the decision-making process for protocol upgrades, changes, and the utilization of the Uniswap treasury. This aligns with the broader DeFi ethos of creating transparent, open, and community-driven financial products and services.
UNI tokens were initially distributed to users of the protocol, liquidity providers, and the Uniswap team and advisors, through an airdrop and ongoing liquidity mining programs. This distribution method aimed to incentivize participation in the protocol and ensure a wide and fair distribution of governance rights among its most active users and supporters.
Uniswap V2 was launched in May 2020, which introduced new features such as ERC20/ERC20 liquidity pools, flash swaps, and improved security measures. In May 2021, Uniswap V3 was launched, bringing concentrated liquidity and multiple fee tiers to the platform, allowing liquidity providers to achieve higher capital efficiency and earn fees proportional to the risk they take on.
