Story of UNISWAP

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Im broke!

4 years ago

Have you heard about UNISWAP? What is the story behind it? And why is UNITOKEN the best distributed token ever? Better read the whole article for you to find out the answer to this quesstions.

Btw, this is Ray from the country Phillipines. Hope that you will like this article of mine. So lets begin...

Uniswap

One of the most important and the most discussed project in the DeFi universe.
It is a protocol for decentralized exchange of tokens in the ethereum blockchain

Uniswap protocol is deployed as a set of smart contracts and is completely decentralized, permissionless and censorship-resistance.

It is build in the concept of liquidity pools amd automated market maker

Visit my other article about liquidity pool if you wanna know more about it. Here is the link:

https://read.cash/@Crypt.Walk/lets-dive-in-liquidity-pools-b720a7a9

Uniswap History

The initial version of uniswap published in the ethereum on November 2, 2018. This is a combination of years of work by its creator Hayden Adams.

Hayden who is a mechanical engineer started UNISWAP without prior programming knowledge. He learned writing smart contracts when he works on the initial version of UNISWAP protocol.

The initial idea on implementing an automated market maker came from Hayden's friend, Karl Floersch who is impressed by Vitalik Buterin's blogpost describing ethereum behind a constant marekt maker.

At the time of building the first version of the UNISWAP protocol, EtherDelta is pretty much the only decentralized exchange with some traction.

EtherDelta even popular that time was based on order book model that doesn't fit well in the first layer of blockchain protocol like ethereum. Beside that, EtherDelta has a intuitive sense that results in poor user experince and lack of liquidity.

While working and optimising smart contracts and preparing a potential main launch, Hayden applied in ethereum foundation grant that is accepted in July 2018.

The money from the grant allowed for auditing UNISWAP smart contract by a company called RUNTIME VERIFICATION. The initial audit of the runtime verification resulted in adding extra safety checks and re working math operation to minimise the rounding error. On top of that, a formal verification is on the way.

Before launching the protocol, Hayden decide to rebuild the user interface for even better user experience.

The first version of the protocol is launched on the last day of the DEVCON4 conference with a $30,000 worth of liquidity across three different tokens.

The protocol gained a lot of attraction which resulted in initial seed investment that allowed UNISWAP team to work for the second version of the protocol.

In May 2020, UNISWAP launched a second version of the protocol called UNISWAP V2.

The main feature is the addition if ERC20-ERC20 liquidity pool. Before V2, each liquidity pool should consist of ETH as ine of the currencies.

Example: when you trade USDC to DAI, the user needs to trade first their USDC to ETH and ETH for DAI which resulted in higher gas fees.

Offering ERC20-ERC20 pools was better for liquidity providers who didm't want to supply ETH and exposed themselves to impermament lost

I think i'm gonna create an article about impermament lost 😅

V2 had also other features including on-chain price feeds and flash swaps. An intersting fact is that all V2 smart contracts were written in solidity. This can be compared to V1 that all its smart contracts is written in vyper.

In August 2020, the UNISWAP team raised $11million in Series A from a few notable firm including Andressenhorowitz, USV, paradigm and Version One.

The funds are used to grow a team and build Version 3 which will dramatically increase the flexibility and capital efficiency of the protocol.

In May 2020, with an increase of interst in DeFi, the trading volume of UNISWAP started rising up. It is not unusal anymore to see a $1million in daily trading volume and $10-20million in provided liquidity.

In August 2020, with the Yield Farming craze going on, we are looking at around $150million in trading volume and $300million in provide liquidity. A very enormous exponential growth.

The UNISWAP volume started getting closer and closer to the top centralized exchanges overtaking KRAKEN.

Sushiswap also came into play in August 2020. It is aiming and directly competin with UNISWAP by forking the project by adding a reward to liquidity providers and eventually stealimg UNISWAP's liquidity into the sushiswap platform.

I'm gonna try to create article about this Sushiswap. Another work for me. Tips please! Lol 😅😅

The sushiswap yield farming resulted in UNISWAP liquidity around $300million provided liquidity to $2billion in a matter of days and daily trading increase to $500million to $1billion overtaking coinbase trading volume.

This is history in the making of UNISWAP. They have reached an incredible achievement considering they have only around 10 employees compared to 1000 employees at coinbase.

Before the liquidity migration from UNISWAP to Sushiswap started, there was still around $800million worth of UNISWAP's liquidity stake in the Sushiswap platform. This was the time Hayden hinted a potential UNISWAP token.

The migration cost UNISWAP's liquidity to decrease form $2billion to $500million, the remaining liquidity is still higher than the couple of weeks earlier even before the sushiswap project started.

Trading volume stays strong with $300million to $500million per day.

On the 16th of September, UNISWAP announced the launch of their new token, UNI, the most surprising part of the launch was somehow the parts of the token is allocated to everyone who used UNISWAP even once before the 1st of September. Users who are eligible got 400 UNI token that is worth $1,200 in the day of announcement.

Couple of days later, UNI token is actively traded to both centralized and decentralized exhanges making the token price gets high as $8.

The UNI tokens was distributed to around 50,000 ethereum addresses making them one of the most widely distributed token in the space. On top of that, liquidity providers in the protocol are also rewarded for extra UNI tokens.

A total of 1 billion UNI token is distributed with a breakdown of 60% to UNISWAP users, 21.51% to employees, 17.8%to investors and 0.069% to advisors.

Aftter 4 years there will be 2% inflation rate per year to ensure continued participation and contribution to UNISWAP at the expense of passive UNI holders.

UNISWAP also announced to incetivise four liquidity pools rewarding liquidity provider for extra UNI token. This results in attracting million fo dollars to the liquidity pool.

UNI holders can also vote to add more incetivise pools after an initial 30 day governance period is over.

By launching a token, the UNISWAP team wanted to further decentralized the protocol making it a publicly owned or self sustainable financial infrastructure while protectimg its safe and indestructible autonomous qualities and working in UNISWAP V3.

The token holders can participate in the UNISWAP governance by voting on different proposals or delegating their votes to a third party.