Uniswap: The Rise Of Decentralized Exchange Platforms

Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.



“Not your keys, not your coins”

One of the most popular sayings in the crypto communities has been “not your keys, not your coins.” While at first sight, this saying might seem exaggerated, it proved correct over and over. Indeed, throughout the years one of the most successful businesses that got built in the crypto space were exchange platforms (like Coinbase or the defunct Mt. Gox). Yet those platforms helped the ecosystem further develop, by providing access to crypto to more and more people. They also exposed one of the major threats to crypto, which is having a key held by someone else. Indeed, these platforms over the years have improved by much the level of security linked to holding the keys of users on the platforms. However, those are still centralized platforms (Mt. Gox crash was one of the greatest lessons the crypto space learned). Among the most popular like Binance, Coinbase, Gemini, and many others, the need for a fully decentralized exchange has become so urgent that Uniswap became one of the most successful blockchain projects in the bull run of 2021. As we’ll see decentralized exchanges are critical to enabling liquidity to the system without having central players that might manipulate the crypto market, also with ad hoc pump and dump schemes (as the market is still highly unregulated). And indeed, a fully decentralized exchange is also in line with the idea of a decentralized economy.  

As previously stated, The company Uniswap created the Uniswap platform in 2018 on the Ethereum blockchain, the world’s second-largest cryptocurrency project by market capitalization. As such, the Uniswap protocol is interoperable with all ERC-20 tokens and infrastructure like MetaMask and MyEtherWallet.

Moreover, Uniswap is also open-source, allowing virtually anyone on the platform to copy the code and use it to build their decentralized exchange. Users can even list tokens on the exchange for free — a significant feat as most centralized exchanges are profit-driven and demand exorbitant fees to list new cryptocurrencies.

Furthermore, users preserve ownership of their funds since Uniswap is a decentralized exchange (DEX). A decentralized exchange differs from a centralized exchange that necessitates traders surrendering their private keys to log orders on an internal database. Instead, Uniswap allows the retention of private keys, eliminating time-consuming and costly processes and the risk of losing assets if the exchange security is ever compromised.

According to the most recent statistics, Uniswap is the fourth-largest decentralized finance (DeFi) network, with over $3 billion in crypto assets stored on its platform.

Value Model

Uniswap runs on two smart contracts: an “Exchange” contract and a “Factory” contract. When particular criteria are satisfied, these automatic computer programs perform special functions.

Specifically, the factory smart contract introduces new tokens to the platform in this case, while the exchange contract handles all token swaps or “trades.” Furthermore, the updated Uniswap 2.0 platform allows the swapping of any ERC20-based token with another.

How Token Price is Determined

Another essential aspect of this system is how each token’s price is determined. Uniswap employs an automated market maker system instead of an order book method, which determines the price of each asset based on the highest buyer and lowest seller.

Specifically, a long-standing mathematical equation is used in this alternate method to alter an item’s price based on supply and demand. It operates by changing the price of a coin based on the number of coins in the pool.

Blockchain Model

Uniswap issued UNI, the network’s governance token, in September 2020. The protocol airdropped 400 UNI tokens to any wallet address engaged with the Uniswap protocol before September 1.

In the first 24 hours after the airdrop, Uniswap claimed about 66 million UNI tokens out of a total distribution of 150 million. After allocating 40% of the tokens in the first year, distribution will decrease by 10% annually until all tokens get distributed.

Moreover, over the next four years, Uniswap expects to distribute a total of 1 billion UNI, with 60 percent going to the community, 21.5 percent to Uniswap employees, and the remaining 18.5 percent will go to investors and advisers.

As a governance token, holders of UNI have a vote in how the protocol gets managed, and they have direct ownership of Uniswap governance, the UNI community treasury, the protocol fee switch, eth ENS, the Uniswap Default List, and SOCKS liquidity tokens. Because of this, the token was listed quickly on the Coinbase Pro exchange. Soon after, a listing on the central Coinbase platform followed suit.

The launch of Uniswap’s token might be a response to SushiSwap, a clone of the protocol that added a token to incentivize adoption. However, SushiSwap also attempted to drain Uniswap’s liquidity using a practice known as “vampire mining” in a more direct challenge.

It is important to distinguish between Uniswap v1, which as explained in its White Paper is “an on-chain system of smart contracts on the Ethereum blockchain, implementing an automated liquidity protocol based on a “constant product formula.”

And Uniswap v2, that has new features, like the creation of arbitrary ERC20/ERC20 pairs (instead of having ERC20 pair with Ethereum, thus having to use Ethereum as mandatory bridge  currency for liquidity across tokens) or perhaps “flash swaps” (which as highlighted in the White Paper is “where users can receive assets freely and use them elsewhere on the chain”).  

Distribution Model

As highlighted on the Uniswap website “the Uniswap protocol empowers developers, liquidity providers and traders to participate in a financial marketplace that is open and accessible to all.” Therefore, the three key plates (developers, liquidity providers and traders) all play a key role in the development, maintenance and development of the distribution network. Most of Uniswap distribution then is engineered based on the integrations it develops. Perhaps by connecting Uniswap with applications like MetaMask or by synching it up with other wallets (like Coinbase) you can start trading and exchanging cryptocurrencies. 

Economic Model & Commercial Applications

Aside from the applications of being a decentralized, open-source protocol that allows users the retention of their private keys, here are some commercial use cases of Uniswap that further establish its value:

Uniswap 3.0

Uniswap 3.0 is a big step forward and a significant advancement for the Uniswap protocol. 

The Uniswap company revealed Version 3 of the Uniswap protocol in late March. Now, the Automated Market Maker (AMM) releases it amid a crypto bull run that has driven ether (ETH) to new peaks. The native token of Ethereum, where DeFi was born and where most of the action still takes place, is ETH, the second-largest cryptocurrency by market capitalization.

The principal innovation and the most significant change in this new release are what the company refers to as “concentrated liquidity.” For all users, concentrated liquidity makes the basic functionality of an Automated Market Maker more powerful. Precisely, market participants can deposit two tokens into any liquidity pool using a basic AMM. After that, each pool sets a price for both tokens. Simply put, the ratio of the two tokens determines the price.

Token Listing on Uniswap

QANplatform is one of the slew of new crypto startups taking advantage of the cryptocurrency boom to build out their own “sovereign blockchain” for a large user base. The company has chosen to focus on a niche market that seeks to protect the blockchain industry from quantum-computer attacks.

In a variety of ways, QANplatform’s 5G-friendly blockchain platform surpasses Ethereum’s limitations. QANplatform’s 5G-friendly blockchain not only protects data from quantum-computer attacks but also significantly decreases energy consumption in an environmentally friendly way.

In addition to the security of funding, QANplatform has recently announced that its native token will get listed on the Uniswap exchange protocol on May 21st.


The crypto industry has seen significant advancements in recent years, culminating in the proliferation of a growing number of cryptocurrencies, including Uniswap. As a well-known decentralized, open-source crypto exchange established on the Ethereum blockchain, Uniswap holds great potential to flourish in the crypto market in the long run.

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Read Also:  Proof-of-stakeProof-of-workBitcoinDogecoinEthereumBlockchainBATMoneroRippleLitecoinStellarDogecoinBitcoin CashFilecoinTRON BlockchainChainlink, ETHO Coin.

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Related Blockchain Business Frameworks


Web3 describes a version of the internet where data will be interconnected in a decentralized way. Web3 is an umbrella that comprises various fields like semantic web, AR/VR, AI at scale, blockchain technologies, and decentralization. The core idea of Web3 moves along the lines of enabling decentralized ownership on the web.

Blockchain Protocol

A blockchain protocol is a set of underlying rules that define how a blockchain will work. Based on the underlying rules of the protocol it’s possible to build a business ecosystem. Usually, protocol’s rules comprise everything from how tokens can be issued, how value is created, and how interactions happen on top of the protocol.

Hard Fork

In software engineering, a fork consists of a “split” of a project, as developers take the source code to start independently developing on it. Software protocols (the set of rules underlying the software) usually fork as a group decision-making process. All developers have to agree on the new course and direction of the software protocol. A fork can be “soft” when an alteration to the software protocol keeps it backward compatible or “hard” where a divergence of the new chain is permanent. Forks are critical to the development and evolution of Blockchain protocols.

Merkle Tree

A Merkle tree is a data structure encoding blockchain data more efficiently and securely. The Merkle tree is one of the foundational components of a Blockchain protocol.


The nothing-at-stake problem argues that validators on a blockchain with a financial incentive to mine on each fork are disruptive to consensus. Potentially, this makes the system more vulnerable to attack. This is a key problem that makes possible underlying blockchain protocols, based on core mechanisms like a proof-of-stake consensus, a key consensus system, that together the proof-of-work make up key protocols like Bitcoin and Ethereum.

51% Attack

A 51% Attack is an attack on the blockchain network by an entity or organization. The primary goal of such an attack is the exclusion or modification of blockchain transactions. A 51% attack is carried out by a miner or group of miners endeavoring to control more than half of a network’s mining power, hash rate, or computing power. For this reason, it is sometimes called a majority attack. This can corrupt a blockchain protocol that malicious attackers would take over.

Proof of Work

A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.

Application Binary Interface

An Application Binary Interface (ABI) is the interface between two binary program modules that work together. An ABI is a contract between pieces of binary code defining the mechanisms by which functions are invoked and how parameters are passed between the caller and callee. ABIs have become critical in the development of applications leveraging smart contracts, on Blockchain protocols like Ethereum.

Proof of Stake

A Proof of Stake (PoS) is a form of consensus algorithm used to achieve agreement across a distributed network. As such it is, together with Proof of Work, among the key consensus algorithms for Blockchain protocols (like the Ethereum’s Casper protocol). Proof of Stake has the advantage of security, reduced risk of centralization, and energy efficiency.

Proof of Work vs. Proof of Stake


Proof of Activity

Proof-of-Activity (PoA) is a blockchain consensus algorithm that facilitates genuine transactions and consensus amongst miners. That is a consensus algorithm combining proof-of-work and proof-of-stake. This consensus algorithm is designed to prevent attacks on the underlying Blockchain.

Blockchain Economics

According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum).

Blockchain Business Model Framework

A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.


Blockchain companies use sharding to partition databases and increase scalability, allowing them to process more transactions per second. Sharding is a key mechanism underneath the Ethereum Blockchain and one of its critical components. Indeed, sharding enables Blockchain protocols to overcome the Scalability Trilemma (as a Blockchain grows, it stays scalable, secure, and decentralized).


A decentralized autonomous organization (DAO) operates autonomously on blockchain protocol under rules governed by smart contracts. DAO is among the most important innovations that Blockchain has brought to the business world, which can create “super entities” or large entities that do not have a central authority but are instead managed in a decentralized manner.

Smart Contracts

Smart contracts are protocols designed to facilitate, verify, or enforce digital contracts without the need for a credible third party. These contracts work on an “if/when-then” principle and have some similarities to modern escrow services but without a third party involved in guaranteeing the transaction. Instead, it uses blockchain technology to verify the information and increase trust between the transaction participants.

Non-Fungible Tokens

Non-fungible tokens (NFTs) are cryptographic tokens that represent something unique. Non-fungible assets are those that are not mutually interchangeable. Non-fungible tokens contain identifying information that makes them unique. Unlike Bitcoin – which has a supply of 21 million identical coins – they cannot be exchanged like for like.

Decentralized Finance

Decentralized finance (DeFi) refers to an ecosystem of financial products that do not rely on traditional financial intermediaries such as banks and exchanges. Central to the success of decentralized finance is smart contracts, which are deployed on Ethereum (contracts that two parties can deploy without an intermediary). DeFi also gave rise to dApps (decentralized apps), giving developers the ability to build applications on top of the Ethereum blockchain.

History of Bitcoin

The history of Bitcoin starts before the 2008 White Paper by Satoshi Nakamoto. In 1989 first and 1991, David Chaum created DigiCash, and various cryptographers tried to solve the “double spending” problem. By 1998 Nick Szabo began working on a decentralized digital currency called “bit gold.” By 2008 the Bitcoin White Paper got published. And from there, by 2014, the Blockchain 2.0 (beyond the money use case) sprouted out.


An altcoin is a general term describing any cryptocurrency other than Bitcoin. Indeed, as Bitcoin started to evolve since its inception, back in 2009, many other cryptocurrencies sprouted due to philosophical differences with the Bitcoin protocol but also to cover wider use cases that the Bitcoin protocol could enable.


Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.

Ethereum Flywheel

An imaginary flywheel of the development of a crypto ecosystem, and more, in particular, the Ethereum ecosystem. As developers join in and the community strengthens, more use cases are built, which attract more and more users. As users grow exponentially, businesses become interested in the underlying ecosystem, thus investing more in it. These resources are invested back in the protocol to make it more scalable, thus reducing gas fees for developers and users, facilitating the adoption of the whole business platform.


Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.


In essence, Polkadot is a cryptocurrency project created as an effort to transform and power a decentralized internet, Web 3.0, in the future. Polkadot is a decentralized platform, which makes it interoperable with other blockchains.


Launched in October 2020, Filecoin protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data). Filecoin (⨎) is an open-source, public cryptocurrency and digital payment system. Built on the InterPlanetary File System.


BAT or Basic Attention Token is a utility token aiming to provide privacy-based web tools for advertisers and users to monetize attention on the web in a decentralized way via Blockchain-based technologies. Therefore, the BAT ecosystem moves around a browser (Brave), a privacy-based search engine (Brave Search), and a utility token (BAT). Users can opt-in to advertising, thus making money based on their attention to ads as they browse the web.

Decentralized Exchange

Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.

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