What is Uniswap (UNI)?

Deep Dive

1. Purpose & Value Proposition

Uniswap solves decentralized liquidity challenges by replacing traditional order books with liquidity pools. Users trade tokens directly from their wallets, eliminating intermediaries and identity checks. Its AMM model uses a constant product formula (x * y = k) to set prices algorithmically, ensuring continuous liquidity even for less popular tokens.

2. Technology & Evolution

Launched in 2018, Uniswap has iterated through multiple versions:
- V1/V2: Introduced ETH/ERC-20 swaps and flash loans.
- V3 (2021): Added concentrated liquidity, letting providers allocate funds to specific price ranges for higher efficiency.
- V4 (2025): Introduced “hooks” for customizable pool logic and reduced gas costs via singleton contracts.

The protocol operates on Ethereum and Layer 2 networks (e.g., Polygon, Arbitrum), enhancing scalability.

3. Tokenomics & Governance

The UNI token, distributed in 2020, primarily governs the protocol. Key mechanics:
- Supply: 1 billion max, with a 2% annual inflation after 2024.
- Utility: Voting on proposals (e.g., fee structures, treasury use). Recent initiatives like the “UNIfication” proposal aim to burn tokens and redirect fees to strengthen tokenomics.

Conclusion

Uniswap redefines trading by prioritizing decentralization, liquidity efficiency, and community-led governance. As DeFi evolves, can UNI’s governance model balance innovation with sustainable token value?