Uniswap is a popular, fully decentralized cryptocurrency exchange that runs on the Ethereum Network. Unlike centralized exchanges, a decentralized exchange never holds your crypto. Instead, it utilizes smart contract algorithms to perform an automated exchange. Uniswap has undergone several generations of change and is currently operating on its third version.
Uniswap became popular for pioneering a trading concept called liquidity pools. Previous decentralized exchanges used the order book method, which meant that for a buy or sell order to go through, a waiting seller or buyer that could help complete the order is needed. Additionally, both the price and the quantity must match.
After operating for about a year, Uniswap created a governance token called UNI. A large amount of UNI tokens were distributed in an airdrop to anyone who had used the Uniswap platform before the snapshot date in September of 2020. As UNI tokens are governance tokens, they allow holders to vote on governance changes and funding proposals on the platform.
The importance of decentralized exchanges is projected to grow as the crypto space matures. More trading and transactions will likely become automated, and decentralized smart contract-powered platforms like Uniswap will be positioned perfectly to absorb this new potential source of trading revenue.
