One of the most common use cases that people go to crypto for is to make money. There are many ways to do this but the most common method is to trade different coins and tokens. There's an inherit risk to keeping crypto and trading them on an exchange, you don't fully control your keys so the coins can be taken from you without you being able to do anything. Wallet storage is much more safer, but how would you go about trading crypto on your wallet without going to an exchange? This is where swaps & Uniswap come in.

Background

Uniswap company (not the app) was founded in New York late 2017 by Hayden Adams. The protocol was built using a 65.000$ grant, which returned a platform worth over 14 billion dollars. Hayden didn't fully know how to code since he had background in mechanical engineering, this didn't stop him as he was able to write the Uniswap smart contracts himself after two months of getting to know the basics of Javascript, Ethereum and its smart contract language Solidity.

The initial launch was shaky as Hayden had been unemployed for 5 months, luckily Pascal Van Hecke reached out to Hayden after attending one of Hayden's friend's devtalk. This is where he got the grant and managed to polish Uniswap to a more similar version most of us know today (you can read about Hayden's journey with creating Uniswap here).

Uniswap is constantly being updated and upgraded, V2 released in 2020 and V3 released during summer this year. Changes include to the swapping & liquidity mining functionality of the app as well as security upgrades. The smart contracts it uses from different tokens in its liquidity mining has had loopholes that were exploited in the past, one such incident was when the imBTC pool was attacked and a hacker emptied the pool for 300.000$, this was thanks to exploiting the ERC-777 protocol the wallet used which meant he could perform a trade several times before his pool had updated. Recently the platform has also started implementing changes to get more approval and follow traditional finance regulations.

Network

Uniswap is built ontop of Ethereum and allows trades for any and all tokens that are hosted on the network. Anyone can access and use it without needing KYC (at the moment) and a wallet to simply swap tokens. There is a 0,3% fee that the platform takes and splits it up amongst the liquidity providers and the gas fee for the network transaction. Liquidity mining is simply letting users use your coins for a split of the transaction fee and thus you can generate passive income by holding your coins locked to Uniswap's pool.

Any changes made to the platform are voted for by holders of the Uniswap token, 1% of total supply is needed to create a proposal and 4% is needed in order to have a proposal go through (keep in mind that the "yes" must outweigh the "no"). This change, once implemented, cements Uniswap as a public-owned decentralized exchange. The biggest benefit to the exchange is that any wallet that can hold ERC-20 based tokens can use Uniswap. Some wallets have the swap built in into the wallet itself, such as the popular trustwallet.

Use cases

What the token is used for is solely for voting on changes on the exchange. This means that the token's value is directly correlated with how successful and widely used the platform is as well as Ethereum. The platform itself can be used as described previously; swapping tokens and mining liquidity. The idea behind the project is simple and is executed near flawlessly. A perfect platform for investors that want to keep full control of their crypto or investors wanting to make a bit of extra money by borrowing their crypto to the DEX.

Uniswap Today

The platform is still strong today but there are some overhanging clouds. The platform is catering more towards TradFi, this includes regulating and controlling which tokens they add aswell as possibly implementing a KYC. This would cause issues for users and investors that want to support decentralized projects as anonymity and privacy is a big key there. If you use your wallet in a place or platform where KYC is required, that directly ties you to that wallet adress and thus making your wallet a whole lot less anonymous.

There is a bad incentive for investors to buy Uniswap as the platform is purely non-profit. This is perfect for users but people wanting to make money of the platform would benefit more if there was some added value to the token itself, such as a rewards system or part of the fee being paid to Uniswap holders/the app. Despite this, Uniswap is still the largest decentralized exchange, a safe bet for investors interested in these types of projects or users who want to swap.

Pros:

• No KYC
• Your own keys
• No lockups

Cons:

• Only ERC-20 tokens
• Doesn’t take profit (investor negative)
• Started to cater towards TradFi