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UNI is the native token of Uniswap.
Uniswap V2 is a decentralised exchange built on Ethereum that allows users to swap any two Ethereum tokens with each other thanks to the use of user-funded liquidity pools.
|Circulating supply (approx. as of November 2020)||214 million|
|Maximum supply||1 billion|
How does the Uniswap exchange work?
Uniswap allows users to swap any Ethereum ERC-20 token for any other token directly from their wallets. It does so through the use of the Ethereum blockchain, which makes it a decentralised exchange (DEX) – but it's a DEX with a difference.
Uniswap is unique to other decentralised exchanges in that instead of matching orders through an order book with markets predefined by the developers, users are able to trade any two coins they choose – which is called a swap.
Typically, an exchange will offer a limited range of currency pairs, such as ETH/LINK or DAI/USDT, which means that only a restricted range of coins can be traded with one another.
Uniswap shakes up this model in two ways – the first is by allowing users to list any token they wish, and the second is through the use of liquidity pools to help fund these swap markets. This allows new tokens to enter the market without needing to list on a centralised exchange first, which can be a slow and costly process. The only requirement is that there are enough Uniswap users providing liquidity to a given token pool so that it can be swapped.
What does UNI do?
UNI is the governance token for the Uniswap exchange.
It bestows holders with a say in how the platform is managed, giving them the power to put forward proposals, vote on changes and manage fees.
The token is inflationary and was originally distributed by an airdrop that retrospectively rewarded anyone who had used the exchange before 1 September, 2020, with UNI tokens.
Following the original airdrop, additional tokens were distributed through a liquidity mining program that expired on 17 November, 2020. After this point, all remaining tokens are managed by the Uniswap treasury, which is governed by token holders.
Anyone that missed out on the initial airdrop and UNI distribution can purchase the token on a cryptocurrency exchange, just like any other token.
What to watch out for
Uniswap platform is open-source, which means that anyone can copy the code and create their own version of the platform.
This is a potential threat to the value of the Uniswap token, as Uniswap governance can be side-stepped by creating a fork (copy) of the project. If enough people abandoned the original in favour of a new exchange, then it stands to reason that the original project (Uniswap V2) and it's underlying token may lose value.
Following Uniswap V2's massive success in 2020, several projects launched new platforms based on the Uniswap code, gaining a significant user base in the process. Of note were SushiSwap, DeFi Swap and a slew of other culinary-themed DeFi exchanges.
How to buy UNI
Here's a step-by-step guide to one way of buying UNI. Note that there might be other options available, so you may want to compare cryptocurrency exchanges to find the one that's right for you.
- Find an exchange that supports UNI, like the ones we've listed in the table below.
- Create an account and make a deposit
- Search for a UNI market, and trade a suitable cryptocurrency for UNI. For example, to buy UNI on the UNI/BTC market, you will need to have some Bitcoin to trade for UNI.
Disclosure: The author holds a variety of cryptocurrencies at the time of writing.
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