What Is Uniswap (UNI)?
Uniswap is one of the world's largest decentralized exchanges (DEX), with more than $1.8 trillion in all-time trading volume and over 229 million trades completed. Holders of its native governance token, UNI, govern Uniswap.
UNI holders also own the Uniswap treasury and can receive income based on the transaction fees generated by the protocol. UNI has the potential to be a valuable investment option, as the entire ecosystem of Uniswap utilizes it as the primary token.
Key Takeaways
- Uniswap is one of the world's largest decentralized exchanges.
- The exchange uses blockchain technology to operate and has its own cryptocurrency, UNI.
- Uniswap uses an algorithm to set cryptocurrency prices on its trading platform.
History of Uniswap
Launched in September 2020, Uniswap is a decentralized exchange that allows users to trade different cryptocurrencies without an intermediary overseeing the transactions.
Uniswap has had a series of significant developments. In October 2022, Uniswap Labs, the company behind Uniswap, announced a successful Series B funding round, raising $165 million and valuing the company at an impressive $1.66 billion.
Then, in March 2023, Uniswap Labs announced the launch of its own self-custody wallet.
In April 2024, Uniswap received a Wells notice from the Securities and Exchange Commission, identifying it as one of the latest targets in the Commission's campaign against exchanges. Wells notices are the first notice the SEC sends to businesses when it is planning legal action against them.
Uniswap has several distinct features that separate it from other DEXs. One of them is its Automated Market Maker (also called Constant Function Market Maker), a mathematical algorithm that determines the price of different cryptocurrencies.
How to Buy Uniswap
Crypto exchanges allow you to buy and sell cryptocurrencies, like Bitcoin (BTC), Ethereum, Dogecoin (DOGE), and UNI, among others. Similar to traditional online brokers like E*TRADE or Interactive Brokers, these cryptocurrency exchanges enable users to buy and sell digital currencies.
Here are the steps required to buy UNI on a cryptocurrency exchange:
- Sign up for a reputable cryptocurrency exchange, such as Kraken, Coinbase, or Binance, by creating an account. During this step, you'll be required to verify your identity via a government-issued ID.
- The next step is to link a payment method to your account. This allows you to add funds in order to purchase UNI tokens. Different exchanges may accept different payment methods; it's important that you check what is accepted by the exchange in your jurisdiction.
- After funding your account, the next step is to search for the UNI token, check its current market price, and then make the purchase. Typically, it takes only a few minutes to complete the order. Once it's completed, you can transfer your UNI tokens to other cryptocurrency wallets.
Alternative Ways to Buy Uniswap
Another way to buy UNI tokens is through peer-to-peer (P2P) trading platforms that allow buyers and sellers to connect directly with each other and trade cryptocurrencies without the need for a centralized crypto exchange. These P2P platforms act as an escrow to ensure the safety of the trade for both parties.
You can also buy UNI or other cryptocurrencies through decentralized exchanges (DEXs) like Uniswap itself. These platforms allow you to trade your cryptocurrency for the preferred one. To buy UNI, simply connect your wallet with a DEX and swap your crypto with UNI.
Unlike traditional brokerage firms, cryptocurrency exchanges are not members of the Securities Investor Protection Corporation (SIPC). Unless user terms specify otherwise, investors with cryptocurrency assets commingled on a custodial cryptocurrency exchange could potentially lose their funds as unsecured creditors.
What You Need to Open a Cryptocurrency Exchange Account
To open an account on a centralized crypto exchange like Kraken or Coinbase, you need to meet certain requirements. Here's what you need.
Personal Information
To complete the onboarding process for crypto exchanges, you need to provide the following personal information and documentation to help these platforms complete the “Know Your Customer (KYC)” process:
- Full Name
- Email address or mobile number
- Home address
- Proof of address
- Government-issued ID
Minimum Deposits
The minimum amount you are required to deposit varies depending on the exchange and the currency you are using. It's possible to start buying or trading with just a small amount of fiat currency, such as $10. Some exchanges, like Robinhood and Coinbase, will allow you to begin with just $1.
Types of Cryptocurrency Exchanges
Centralized Exchanges (CEXs)
Centralized exchanges (CEXs) are online platforms that are controlled by a single entity or organization, which is responsible for managing the exchange's servers, security, and user accounts. They also often allow users to buy their preferred crypto with fiat currencies.
They are the most commonly used platforms for buying and selling cryptocurrencies as they are easier to use than decentralized or hybrid exchanges.
Decentralized Exchanges (DEXs)
Decentralized exchanges (DEXs) operate on a decentralized blockchain network without the need for an intermediary to manage security, servers, and users. Instead, DEXs use smart contracts to automate the process of trading cryptocurrencies. This also means that users are always in control of their funds. While DEXs offer advantages over CEXs, like increased security, privacy, and self-custody, they have some disadvantages, such as poor user interface (UI) experience and low liquidity.
Hybrid Exchanges
Hybrid exchanges combine elements of both CEXs and DEXs. They typically use a centralized order book and matching engine but also offer self-custody to their users.
Best Cryptocurrency Exchanges for UNI
Factors to Consider When Opening a Cryptocurrency Exchange Account
There are several crucial factors to consider when opening a cryptocurrency exchange account, including:
- Security: Security is paramount when selecting a crypto exchange. Ensure you use an exchange with robust security measures and a long and strong track record of protecting users' funds and personal information.
- Fees: Fees have a significant impact on your trades. Therefore, it is important to consider the exchange's deposit and withdrawal fees before creating an account.
- Number and quality of supported cryptocurrencies: As you are looking to buy UNI, make sure the exchange you choose supports the asset. While popular exchanges offer multiple assets on a single platform, it's crucial that you also check for the liquidity of the asset you are trading.
- Wallet quality/safety: The security of your wallet is as imperative as your funds. Make sure to choose an exchange that offers a secure wallet with multi-layer security measures and a strong reputation for security.
- Storage and custody: To ensure your assets are protected against hacking or theft, check whether the exchange uses security measures like cold storage, two-factor authentication, third-party audits, or even insurance in some cases.
- Centralized vs. decentralized: While CEXs are subject to stringent regulatory requirements and have high security standards, they are a centralized point of failure. On the other hand, DEXs are less vulnerable to security breaches but have poor UI and are not subject to regulatory standards.
In terms of protecting against events like exchange hacks or unethical practices, it is crucial that users remain in control of their crypto keys and funds, even if they are using centralized and regulated exchanges.
What Is Uniswap Used for?
Uniswap is a decentralized exchange that provides a platform for traders. Its cryptocurrency, UNI, is used for platform payments and can be purchased on several exchanges.
Is Uniswap Real or Fake?
Uniswap is a real and decentralized exchange. As proof, look no further than the SEC's Wells notice, received by the exchange in April 2024.
Is It Safe to Invest in Uniswap?
It's important to remember that crypto assets are high-risk investments. Therefore, conducting thorough research is essential before adding UNI to your crypto portfolio.
The Bottom Line
Uniswap is a decentralized cryptocurrency and NFT exchange that provides liquidity for traders. The platform also has a native token, UNI, that is used to pay transaction fees.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency.