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If you ever wanted to invest in Uniswap within your Crypto IRA retirement account, the time has arrived.
What is Uniswap?
Uniswap was invented by Hayden Adams from the Ethereum community. He envisioned a world where anyone would be able to trade an asset without requiring a centralized company to facilitate the trade or take possession of the asset. This vision sat true to the heart of crypto, which is simply users interacting with protocols without worrying about trusting anyone except auditable and open source code.
This was technically possible through the creation of Automated Market Maker (AMM) technology. This functions by allowing users to deposit their assets into liquidity pools, which is known as providing liquidity (or being a liquidity provider). Before the invention of Ethereum and Smart Contracts, the only people in the world who were able to provide liquidity and help make markets (market making) were large institutions that had to go through red tape regulations.
Users of Uniswap are trading against these pools, which programmatically rebalance based on tight mathematical equations rooted in cryptography.
Why are Decentralized Exchanges important?
Decentralized Exchanges are important because they democratize access to financial services. This means that anyone in the world, as long as they have an internet connection, can buy/sell/trade assets 24/7 without requiring permission from anyone. While this might not seem special for those living in the United States, a large portion of the world does not have access to modern banking systems, let alone exchanges where they can buy, sell and trade cryptocurrencies. This gives more power to the people, and helps build a true peer to peer future.
Uniswap not only consistently does more volume than Coinbase, but has zero downtime.
What is Uniswap V3?
Uniswap V3 was the most recent release of the Uniswap protocol. It was under research and design for over 18 months, with major help from Dan Robinson. Uniswap V3 makes the protocol much more capital efficient while substantially improving the user experience. This is done through what is known as “concentrated liquidity position” which allows liquidity providers to define custom formulas on how their assets should function within the AMM pool. This is substantially different from Uniswap V1 and V2, which were simply 50/50 static pools.
The easiest way to think about Uniswap V3 is simply the next step in the evolution of decentralized exchanges.
What is UNI the token?
UNI is the Uniswap token, which is a governance token for the Uniswap protocol. It was originally created through a democratized distribution to users and stakeholders of the protocol, which allows for a decentralized ownership community. People who used Uniswap before the snapshot date each received 400 UNI. Eventually, UNI governance will vote in a fee capture mechanism which will mean Uni holders will likely receive cash flows / dividends from the revenues that Uniswap generates. A simple way to look at UNI is that the more people use and adopt Uniswap, the more fees will be paid to UNI holders. If you want to track the fees paid to Uniswap from real users, check out cryptofees.info.
This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
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