What Is Uniswap (UNI)?

Uniswap is a decentra🍷lized protocol that acts as an automated market maker for peer-to-peer cryptocurrency transactions. The Uniswap platform enables users to provide liquidity and swap cryptoc👍urrencies. Its own cryptocurrency, UNI, is used for protocol governance.

The Uniswap blockchain is hosted on the Ethereum platform and governed by UNI holders. The Uniswap blockchain is also open source, meaning anyone can view and contribute to the blockchain's code.

Uniswap's Design and Uses

The Uniswap platform can support the exchange of any digital token that adheres to the Ethereum ERC-20 technical standard (the blockchain's smart contract standard format). Uniswap uses smart contracts, which are enabled by blockchain technology, to function as automated 澳洲幸运5开奖号码历史查询:market makers. Its users can ♕securely create liquidity pools, provide li﷽quidity, and swap a variety of digital assets.

As a decentralized exchange, Uniswap uses a permissionless design. The Uniswap protocol is available for anyone to use, and the platform has no ability to selectively restrict access. Anyone who chooses can use Uniswap to trade digital assets, provide liquidity, or create a new market in which to exchaไnge digital assets.

The automation provided by smart contracts can make trading assets more efficient. Uniswap uses smart contracts to avoid liquidity issues that traditionally affect centralized exchanges. The elimination of any 澳洲幸运5开奖号码历史查询:rent-seeking third party, such as a centralized exchange or financial institution, also 💦reduces transaction processing f♛ees.

How Uniswap Works

The Uniswap platform uses blockchain-based smart contracts to facilitate the decentralized trading of many different digital assets. Pairs of digital assets are swapped via liquidity pools, which use smart contracts to automatically rebalance after every trade. The Uniswap blockchain, which functions like aܫn electronic ledger, is continually updated to reflect the trading activity occurring among Uniswap users.

Uniswap operates using the Ethereum blockchain, which currently uses the 澳洲幸运5开奖号码历史查询:proof-of-stake operating method. (Ethereum transitioned from the 澳洲幸运5开奖号码历史查询:proof of work method in 2022.)

Uniswap users can participate in the decentralized exchange in several way﷽s:

• Create new markets: Uniswap users use smart contracts to create new markets for exchanging new pairs of digital assets.
• Swap assets via existing markets: Uniswap users can use the platform to swap digital assets via decentralized markets that have already been created.
• Provide liquidity and earn rewards: Uniswap users can provide liquidity by staking—agreeing not to trade or sell—their digital assets. Those who stake their digital currencies on the Uniswap platform are rewarded with UNI.
• Participate in Uniswap governance: UNI token holders are empowered to govern the Uniswap platform, with voting power distributed in proportion to users' UNI balances.

Participating in the Uniswap network requires connecting a compatible 澳洲幸运5开奖号码历史查询:digital wallet. In addition, because the Ethereum platform collects fees for processing Uniswap transactions, Uniswap users need ether (ETH) to pay any transaction fees that they incur.

Advantages and Disadvantages of Uniswap

Uniswap vs. PancakeSwap

Uniswap and PancakeSwap are both decentralized exchanges tꦇhat facilitate digital asset trading. Both use tokens—UNI and CAKE, respectively—to incentivize users to provide liquidity.

PancakeSwap and Uniswap operate on different blockchain platforms. Uniswap uses the Ethereum platform, whereas PancakeSwap uses the Binance Smart Chain. Uniswap supports the exchange of Ethereum-compatible tokens that adhere to the ERC-20 standard, while PancakeSwap enables the exchange of Binance-compatible tokens that comply with Binance's BEP-20 technical standard.

The Bottom Line

Uniswap is a decentralized trading pr🌺otocol and automated market maker with a web interface that facilitates cryptocurrency liquidity and trading. It is one of the most popular decentralized 🧸protocols.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our 澳洲幸运5开奖号码历史查询:warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency.