Uniswap (UNI)

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One of the first and most widely used AMM DEXs on Ethereum and other EVM chains.

Basics

  1. "A simple smart contract interface for swapping ERC20 tokens.
  2. A formalized model for pooling liquidity reserves
  3. An open source frontend interface for traders and liquidity providers
  4. A commitment to free and decentralized asset exchange"

"Uniswap uses pooled liquidity reserves and a constant product market-making formula. In less abstract terms that means that liquidity providers can add tokens to pools and others can then trade directly against those pools with the smart contract as their counterparty. Liquidity providers earn fees from trades done against the liquidity pool they supplied to. The benefit of this model is that it’s very easy to use as neither liquidity providers nor traders need to find a counterparty to use the system. The downside is that traders sometimes experience significant slippage and that being a liquidity provider is not always as profitable as one might hope."

History

  • For a personal take on Uniswap its history, check out this post by founder Hayden (2-11-2019).
  • Hayden Adams took a $65,000 grant and turned it into a $2 billion protocol (9-12-2020).

Audits & Exploits

  • Bug bounty program can be found here. Max payout is $40,000 (29-6-2020). Got raised to a max of $500.000 (31-5-2021).
  • Blockchain Security DB (29-6-2020) shows 2audits. The latest was in 4-2020.
  • Scored 73% on DAOmeter (21-2-2023). Scoring a bit low on Community (no payroll, no clear on and off boarding), Voting (no staking and no compensation for delegates) and Treasury (100% native token).
  • V3 score got updated to 96% (4-5-2022):

"With a perfect score in the Smart Contracts and Team, Admin Controls, and Oracles sections, Uniswap's road to development is seemingly paved of sunshine and rainbows. The team is clearly committed to perfection and this was equally apparent in our communications with them.

Uniswap V3's parade takes on a little water from a lack of formal verification and code-coverage. Nonetheless, the protocol has no trouble remounting atop their high-horse with the help of in-depth CI, rigorous testing, and multiple high-quality audits.

We are especially impressed by Uniswap’s admin controls; the core protocol is immutable and permissionless. The team have added this information to their docs in a more explicit manner as to truly signal their fully decentralized nature - a beautiful sight to behold.

In the future, to get 100%, Uniswap V3 will need four things:

- a formal verification

- code coverage reports

- explicit traceability in their docs

- $1m bug bounty"

"We are thrilled to announce the http://dapp.org.uk smart contract audit and formal verification of Uniswap V2 has finished! Read the audit report: https://uniswap.org/audit.html"

Bugs/Exploits

  • Uniswap announced a v4 audit competition with $2.35M in rewards (16-8-2024).
  • Jeiwan reports an interesting bug caused by Uniswap SwapRouter’s handling of unspent ETH in partial swaps (14-1-2023).
  • From this blog (11-1-2023):

"Security firm Dedaub discovered and disclosed a critical vulnerability in Uniswap. The team behind the protocol fixed the bug, and the affected components were redeployed.

According to the security firm, the vulnerability was unintentionally implemented with the Universal Router. This component allows Uniswap users to trade ERC-20 tokens and non-fungible tokens “into a single swap router.”  When the vulnerability was in, a user could send a transaction to a third party, and the latter could have gained access to the sender’s funds."

$300,000 Uniswap Hack

"Today, the imBTC pool on Uniswap has been attacked & drained. The hacker utilized an attack vector on ERC777 tokens on Uniswap. The BTC in custody is not impacted. We have paused imBTC transfers for now, are evaluating the situation & will notify when transfers are restored"

"The imBTC attack took advantage of the fact that imBTC uses ERC 777 standard, which allows the hacker to continuously call [[[Reentrancy Attack]]] the Uniswap smart contract to withdraw funds before the external balance could be updated.

On Twitter, some users are speculating that Lendf.Me experienced a similar attack to the imToken one, as transaction records show that the hacker repetitively called Lendf.Me's withdrawal function to take out imBTC that was supplied to the lending protocol by the hacker in the first place."

Governance

Uniswap's Interface

  • During the Summer of 2021, the company behind Uniswap made a change of direction, catering towards TradFi and regulators. Its interface (not the smart contracts itself) started blacklisting potential securities. From DeFi Watch (25-7-2021):

"TradFi partnerships, KYC, Centralized middleware Uniswap seems fully committed to building superpowers for TradFi middlemen who have been censoring us & ripping us off for decades."

 Admin Keys

"All contracts are clearly labelled as upgradeable (or not) -- 10% -- Because the actual control over the protocol by UNI holders is not clearly specified. Are the contracts immutable?

The type of ownership is clearly indicated (OnlyOwner / MultiSig / Defined Roles) -- 30% -- UNI holders via a contract

The capabilities for change in the contracts are described a bit but overall upgradeability is not clear.-- 10%

Score: 10+30+10 or 50%.

The whitepaper (Section 4) indicates the owner cannot pause the contracts."

"Uniswap is the most trustless DeFi protocol/product currently available. There is no possible way to upgrade, modify, or stop Uniswap's smart contracts."

"Current Admin Key Config- Time Lock: No admin key or upgrade abilities

Current Admin Key Config- Multisig: No admin key or upgrade abilities

Claimed Admin Key OpSec: N/A

Verified Admin Key OpSec: N/A

Is security of deposited funds dependent on opsec of admin key?: No

Admin Key Address: N/A

Documentation on Admin Key Powers: N/A

Additional Info (if any)? Tokens offer varying level of admin key risk"

DAO

  • When Uniswap Labs announced Unichain, Uniswap DAO delegates raised their voices saying they had been completely left in the dark regarding the idea and on why OP stack was chosen over Arbitrum's Orbiter chains, which are faster. Hinting that Uniswap Labs probably got money in a backroom deal (10-2024).
  • Had its largest turn out for a vote till date and almost voted in favor of deploying on BNB (24-1-2023). Last minute, a16z voted against, some speculated this was due to them being large investors in LayerZero, a competitor of Wormhole, which would have been used in the proposal.
  • HasGauntlet, Reverie and GFX Labs as some of their professional delegates (30-11-2022).
  • From its UNI token announcement (16-9-2020):

"Uniswap governance will be live from day one, although control over the treasury will be delayed until October 17 2020 12:00am UTC. Control over the Uniswap fee switch is subject to a 180 day time lockdelay.

UNI holders are responsible for ensuring that governance decisions are made in compliance with applicable laws and regulations. To help facilitate this, the fee switch has been initialized to a contract UNI holders can use to vote on tokens for which they will collect fees. The community is encouraged to consult knowledgeable legal and regulatory professionals before implementing any specific proposal.

The Uniswap team will continue to have no involvement in v2 protocol development, auditing, and other matters. Similarly, team members will not participate directly in governance for the foreseeable future, although they may delegate votes to protocol delegates without seeking to influence their voting decisions.

In the meantime, UNI holders will have immediate ownership of:

  1. Uniswap governance
  2. UNI community treasury
  3. The protocol fee switch
  4. eth ENS
  5. Uniswap Default List (tokens.uniswap.eth)
  6. SOCKS liquidity tokens

Initial governance parameters are as follows:

  1. 1% of UNI total supply (delegated) to submit a governance proposal
  2. 4% of UNI supply required to vote ’yes’ to reach quorum
  3. 7 day voting period
  4. 2 day timelock delay on execution"

"Glassnode criticized the project’s governance, noting that in order to submit a proposal, one needs to possess at least 1% of the entire UNI supply. As the entire supply has not yet been released into circulation however, Glassnode indicates that this threshold is actually 8% of the currently circulating supply. The post further concluded that the only entity who currently has enough UNIs to submit a governance proposal appears to be Binance, “a centralized exchange in direct competition with Uniswap”

"The yEarn community introduces a proposal via Uniswap governance to add the YFI/ETH pool to the list of pools eligible for UNI rewards."

So far, the sentiment is a 98% 'nay'.

"Dharma on Monday proposed to lower the threshold for submitting a proposal to alter the network from 10 million UNI (about $31 million, or a tenth of the market cap) to 3 million (about $1 million). It also wants to lower the amount of UNI the community must stake to pass a vote from 40 million UNI (~$120 million) to 30 million (about $90 million).

Others said, should the proposal pass when voting closes on October 19, it would be easier for Dharma and the other major proponent of the proposal, blockchain simulation company Gauntlet, to pass proposals, if they work together. That’s because Dharma and Gauntlet are big bagholders of UNI. The fear was that, should the proposal pass, Dharma, with backing from Gauntlet, would have enough power to follow through on its plans to use Uniswap’s treasury funds to pay its own community."

The proposal was not adopted (19-10-2020).

"UNI governance has been….limited to say the least. It has not passed any proposals and has actually failed to meet quorum for a vote. Of course, the Uniswap team and prominent investors are absent, but the community is trying to rally around a proposal to keep the “status quo”.

There is strong evidence that UNI rewards are incentivizing more liquidity than they need to. Attracting assets into Uniswap is only good if the enable additional volume. The UNI incentive program has made Uniswap competitive to centralized exchanges on ETH/stablecoin and ETH/WBTC trades. But does it need an $800m ETH/WBTC pool? If the the same volume be generated on a $400m pool, then why spend UNI attracting vanity assets?

There is currently a Snapshot vote for a ‘Temperate Check’ on the proposal from Cooper and Monet Supply to halve the UNI rewards. The vote is 65% in favor right now, but it still needs several thousand more UNI to reach quorum."

DeFi Education Fund

  • Governance within Uniswap is still limited to a few parties, with decisions being able to be pushed through by less than 10 parties. Some proposals, like the "DeFi Defense Fund" have gotten fierce critiques for its possible malicious motives and small popular support (22-6-2021).
  • The group which managed to get 1M UNI funded through a vote within Uniswap governance. They pushed it through with 5 whales. There were little to no restrictions on how they would use it. As almost to prove their point, they dumped 500K UNI without any justification (13-7-2021). To further the controversy, one of the multi-sig signers of the fund did inside trading: "Looks like Larry Sukernik, one of the multi signers behind the $20M DeFi education fund, dumped UNI five hours before the $10M OTC sale."

Treasury 

  • Holds 100% UNI (as of 3-4-2023).
  • After creating (16-9-2020) its own UNI token, Uniswap also gained a treasury:

"With 15 % of tokens already available to be claimed by historical users and liquidity providers, the governance treasury will retain 43% [430,000,000 UNI] of UNI supply to distribute on an ongoing basis through contributor grants, community initiatives, liquidity mining , and other programs.

Uniswap Grant Proposal (UGP)

"UGP will begin as a grassroots program, sponsoring hackathons, and other events, which are not capital intensive. 

The program will have a budget of $750,000 each quarter. The community will assess the budget and caps on a bi-annual basis. The funds will come from the Uniswap Community Treasury, which currently has 172 million UNI, worth ~$579 million at press time.

The Grant Allocation Committee consists of six members, one lead, and five reviewers. Each member will serve a six-month term, after which the governance community will renew the program.  The lead role is compensated by 25 UNI per hour, or ~$85, and is capped at 30 hours per week. The co-author of the proposal, Kenneth Ng, will be the first to assume this inaugural role. Previously, Ng helped grow the Ethereum Foundation Grants Program over the past two years.

The five reviewers will maintain a system of checks and balances, ensuring that the lead is using the funds effectively. These reviewers will have a 4-of-5 multi-sig set up to vote on decisions made by the lead.

  1. Jesse Walden of Variant Fund, author of the proposal.
  2. Monet Supply, risk analyst at MakerDAO.
  3. Robert Leshner, founder and CEO of Compound Finance.
  4. Kain Warwick, founder of Synthetix.
  5. Ashleigh Schap, growth lead at Uniswap, a company representative.

The program will launch in 2021. UGP will have six months to prove that the program is worth maintaining."

Token

Launch

  • After weeks of speculation, Uniswap released its UNI token on the night of 16-9-2020.

"The UNI token is initially launching via a community airdrop and liquidity mine, which started on 18 September 2020. The genesis supply of UNI is 1 billion, which will gradually enter into circulation."

Token allocation

"1 billion UNI have been minted at genesis and will become accessible over the course of 4 years. The initial four year allocation is as follows:

  • 60.00% to Uniswap community members [600,000,000 UNI]
  • 21.51% to team members and future employees with 4-year vesting [215,101,000 UNI]
  • 17.80% to investors with 4-year vesting [178,000,000 UNI]
  • .069% to advisors with 4-year vesting [6,899,000 UNI]

A perpetual inflation rate of 2% per year will start after 4 years , ensuring continued participation and contribution to Uniswap at the expense of passive UNI holders.

With 15 % of tokens already available to be claimed by historical users and liquidity providers, the governance treasury will retain 43% [430,000,000 UNI] of UNI supply to distribute on an ongoing basis through contributor grants, community initiatives, liquidity mining , and other programs."

  • Glassnode came out with a blog (24-9-2020), saying the tokens that supposed to have vesting, were located in addresses without restrictions.

Utility

  • Governance and potential revenue share. Update: revenue share got voted in (2-2024), but due to regulatory uncertainty, did not get implemented yet.
  • UNI will have utility within the Unichain (11-10-2024, Messari):

"Unichain will also introduce the Unichain Validation Network (UVN), which will allow UNI stakers to earn a share of the sequencer fees generated by the chain.

  1. UVN is a decentralized network of node operators that independently validate the latest state of the network.
  2. This helps mitigate the risk of the sequencer proposing invalid blocks and conflicting blocks simultaneously, which are risks associated with single-sequencer networks.
  3. To become a validator, users must stake UNI on Ethereum. The validators with the highest stake weight will be considered in the active set of validators."

"The governance contract contains a fee switch which, if activated, will enable UNI holders to earn a portion of the protocol's fees (similar to the SUSHI fee model). This switch is subject to a 180 day timelock, giving investors and liquidity providers (LPs) half a year to prepare for the shift to this new revenue sharing model if it occurs."

Token Details

Coin Distribution 

"Over 66 million UNI tokens allocated for simply using the protocol have been claimed in under 24 hours, from a distribution of about 100 million UNI tokens in all and about 10% of the total supply. Already, Uniswap’s token is one of the most widely held digital assets in DeFi."

"UNI is now held by more than 50k Ethereum addresses, making it instantly one of the most decentralized tokens in DeFi, only trailing Dai and LEND among the top 10 by market cap, according to Etherscan."

Tech

How it works

"Uniswap is an automated market maker (AMM), which means that it uses a decentralized liquidity protocol powered by smart contracts. Rather than covering ask/bid spreads itself, Uniswap gives traders the opportunity to do so. It is they who receive the bulk of the cut whenever a trader makes currency (token) swaps. This AMM backbone is called liquidity mining, and investors themselves are the liquidity providers. When a trader taps into such a pool, they give a small cut to the liquidity providers, also called liquidity miners. Anyone can become a liquidity provider by staking their tokens in the liquidity pools. This way, they generate passive income when other traders use their locked tokens to make swaps. The elegance of decentralized finance is that everyone can become a market maker through blockchain smart contracts. Uniswap is just there to automate the process."

Fees

  • Uniswap Labs introduced a 0.15% fee to use their front end UX that goes directly into their pockets (17-10-2023).

Upgrades

  • Uniswap v4 (16-6-2023): customize liquidity pools using hooks, flash accounting using ERC1153 (transient storage) in Dencun upgrade, work in progress, 4 year business source license.
  • Uniswap v3 went live (6-5-2021).
  • From Our Network #22 (22-5-2020):

"There is no off switch or upgrade lever -- Uniswap v1 will run as long as there are traders and liquidity providers. So far, Uniswap v2 has attracted $11m in liquidity and $1m of daily trading volume (source). The team's launch and migration efforts have migrated over 20% of liquidity so far. For reference, Black Thursday saw the platform's liquidity drop 13% (in ETH terms) as LPs liquidated their positions."

"These are the main user-facing features of Uniswap V2:

  1. ERC20/ERC20 pools: In Uniswap V1, all liquidity pools are between ETH and a single ERC20 token, allowing  users to swap any ERC20 for any other ERC20 by routing through ETH, the most liquid Ethereum-based asset. The introduction of ERC20 token/ERC20 token pools “can be useful for liquidity providers, who can maintain more diverse ERC20 token denominated positions, without mandatory exposure to ETH,” Hayden wrote.
  2. Improved price feeds: Uniswap V2’s price feeds are harder to manipulate as they accumulate historical data, allowing external smart contracts to create gas-efficient, time-weighted averages of Uniswap prices across any time interval. “Despite closely tracking the real-world price most of the time, Uniswap V1 cannot be used safely as a price oracle because the price can move significantly in a short period of time,” the post said.
  3. Flash swaps: Similar to flash loans on other protocols, Uniswap V2’s flash swaps allow users withdraw as much of any ERC20 token as they want without upfront costs. They can then use those tokens for whatever they want provided that by the end of the transaction execution, they pay for or return all the tokens withdrawn. A 0.3% fee for liquidity providers is paid when tokens are returned. “Flash swaps are incredibly useful because they remove upfront capital requirements and unnecessary constraints on order-of-operations for multi-step transactions that use Uniswap.
  4. Potential for protocol fees: At launch, the protocol charge will default to 0, and the liquidity provider fee will be 0.30%. If the decentralized governance process deployed after the Uniswap V2 launch decides to turn on the protocol charge, it will become 0.05% and the liquidity provider fee will be 0.25%.

“This feature, including the exact percentage amounts, is hardcoded into the core contracts which remain decentralized and non-upgradable,” the post said. “Without any additional growth, it will generate more than $5 million in liquidity provider fees this year. If the protocol charge was on, ~$830,000 of this would instead go to a decentralized funding mechanism used to support contributions to Uniswap and its ecosystem.”"

Staking

"Anyone can lock collateral into a specific Uniswap Pool and earn a portion of the 0.3% liquidity fee incurred on all exchange transactions. For those unfamiliar with this process, suppliers *lock* collateral in return for a liquidity token which can be redeemed at any time."

"Andre Cronje unveils a Synthetix-style staking rewards system for Uniswap V3 liquidity provider positions (which are represented as NFTs)."

Liquidity Mining

"An initial liquidity mining program will go live September 18 2020 12:00am UTC. The initial program will run until November 17 2020 12:00am UTC and target the following four pools on Uniswap v2:

  1. ETH/USDT
  2. ETH/USDC
  3. ETH/DAI
  4. ETH/WBTC

5,000,000 UNI will be allocated per pool to LPs proportional to liquidity, which roughly translates to:

  1. 83,333.33 UNI per pool per day
  2. 54 UNI per pool per block

These UNI are not subject to vesting or lock up.

After 30 days, governance will reach its vesting cliff and Uniswap governance will control all UNI vested to the Uniswap treasury. At this point, governance can vote to allocate UNI towards grants, strategic partnerships, governance initiatives, additional liquidity mining pools, and other programs."

Scaling

"[ Optimism has] plans to work with Uniswap and Chainlink to bring their services to layer 2."

Went live 14-7-2021.

Different Implementations

Interoperability 

Other Details 

  • Trading fees are distributed to Uniswap liquidity providers.

"Uniswap has permissionless liquidity reserves that are 100% on-chain. There are no dependencies outside of the Ethereum network for the protocol to operate. This ultimately allows for anyone with an internet connection to trade any ERC20 token, and more importantly, for anyone to integrate Uniswap functionality directly into their web3 product.

Liquidity providers deposit 50% of the value in ETH and the other 50% of the value in the ERC20 token into the token pool. In doing so, liquidity providers receive a tokenized share of their pool which entitles them to a pro-rate percentage of the 0.3% trading fees that are generated when the trading pair is used. Providers can liquidate their shares at any time using this link.

While this doesn’t seem very significant, the returns can add up over time if there’s sufficient trading on any given pool. As it stands today, liquidity providers can earn over 14% in annualized returns on the ETH/DAI trading pair. This is fairly significant as it outpaces DeFi lending platforms, like Compound, with lending rates of 4.24% APY on Dai."

Oracle Method

  • For Unichain, it chose to partner with Pyth (10-10-2024).
  • From this Tezos forum (30-4-2020):

"Uniswap is a constant-product automated market maker (or constant-product AMM), that allows users to exchange asset pairs on the Ethereum blockchain as long as a predetermined product of the reserves remains constant. Uniswap exists entirely on the Ethereum blockchain, and is completely decentralized, with no single party having control of the asset pool or prices. Uniswap’s reserve balances are public and viewable by any party at any time, thus Uniswap can be used as a price oracle to determine the marginal price of an asset.

Uniswap relies on arbitrageurs to ensure its quoted asset prices are close to the reference market price. If the price quoted by Uniswap differs from the true market price of the traded pair, arbitrageurs can always make a profit from executing a trade with this oracle. Thus, it is always likely to trade close to a reference market price.

Using Uniswap as an oracle does have downsides, however, as low liquidity asset pools are vulnerable to relatively inexpensive manipulation as was demonstrated in the bZx attack. Thus, Uniswap should only be used as an oracle if the service using it does not depend on relatively small changes in market price, or over a very short period of time.

Uniswap v2 will incorporate price feeds focused on solving both of the above problems. Each traded pair measures the current Uniswap market price at the beginning of each block. This price iis set by the last transaction in a previous block, and is thus expensive to manipulate. Uniswap V2 adds this end-of-block price to a cumulative-price variable in the contract that is weighted by the time this price has existed. This variable represents a sum of the Uniswap price for every second in the entire history of the contract. External contracts seeking a manipulation resistant price from Uniswap can read this variable and calculate their required price."

"Uniswap is adding a time-weighted oracle service (time-weighting makes shenanigans expensive) that can flexibly deliver average prices over any length of time."

"Uniswap’s Time Weighted Average Price (TWAP) oracle now supports over 66 protocol integrations alone — second only to Chainlink — with highlights including Compound, Augur v2, and Empty Set Dollar."

Compliance

  • Uniswap Labs settled (4-9-2024) CFTC Charges over 'Illegal' Margin Products. Uniswap will pay $175,000 to settle the charges.
  • Uniswap Labs received Wells notice from SEC (4-2024).
  • Uniswap has blocked roughly 253 cryptocurrency addresses allegedly tied to crimes or government sanctions (21-8-2022).
  • From a list of projects that implements address checking, sanctions, TRM, etc (15-8-2022):

"Collects data on addresses/hashes

Has OFAC blacklist

Uniswap/interface#2623

https://twitter.com/0xzuberg/status/1558278137620103168

https://twitter.com/bantg/status/1558456226245132294 "

"Two U.S. law firms have invited anyone who lost money on Uniswap since last April to join a class action suit against the exchange’s developers and investors for failing to crack down on “rampant fraud”. On April 4, Nessa Risley of North Carolina filed a lawsuit alleging that the decentralized exchange’s lack of identity checks and securities restrictions lets fraudsters list “thousands of scam tokens” associated with rug pulls, pump and dumps, and Ponzi schemes on the platform. Risley spent about $10,400 on low capitalization altcoins between May and July of last year. In the same period, the total crypto market cap lost half of its value. Risley cites “substantial losses” in EthereumMax, Matrix Samurai, Rocket Bunny, Alphawolf Finance, Bezoge Earth, and BoomBaby tokens.

Risley’s suing Uniswap Labs, its founder, Hayden Adams, and investors A16z, Paradigm, AH Capital Management, and Union Square Ventures. The lawsuit accused them of abetting Uniswap’s “failure to register as an exchange or broker-dealer,” and selling unregistered securities.

Uniswap can only control its front-end website. Last year, Uniswap Labs restricted access to synthetic stock tokens on its website, citing “the evolving regulatory landscape.” A court may end up deciding whether Risley should have taken greater care with her investments. Popular crypto commentator ‘Cobie’ tweeted said that BoomBaby’s website “doesn’t even work,” Rocket Bunny’s maximum supply is a staggering 777 quadrillion, and Matrix Samurai’s core use-case is “a token for shilling a shilling service.”"

"The U.S. Securities and Exchange Commission (SEC) is reportedly investigating Uniswap Labs. Last month, SEC chairman Gary Gensler said that the agency could regulate decentralized finance (DeFi) projects. Specifically, DeFi projects that reward participants with valuable tokens or similar incentives could be regulated, no matter how "decentralized" they say they are, Gensler said at the time. The investigation appears to be in its early stages and may not result in any formal allegations of wrongdoing, per the report."

  • During the Summer of 2021, the company behind Uniswap made a change of direction, catering towards TradFi and regulators. Its interface (not the smart contracts itself) started blacklisting potential securities. From DeFi Watch (25-7-2021):

"TradFi partnerships, KYC, Centralized middleware Uniswap seems fully committed to building superpowers for TradFi middlemen who have been censoring us & ripping us off for decades."

"A Uniswap V3 fork called HolaSwap has launched on Binance Smart Chain. As Uniswap V3's source code is protect by copyright, there could be legal ramifications if the anonymous developers are traced."

"The random copyright license that prevents others from forking Uniswap for 2 years. I get that the PTSD from the Sushi saga would make them do this but it also shows that Uni was heavily impacted and somewhat worries about a v3 competitor springing up at the same time. The license probably won’t even be enforceable if the team is full of anons. Also, the clause itself doesn’t really have any material impact but gives us some clues as to how the Uni team thinks about competition moving forward and a general theme from this announcement was that Uni is less open and less down to collaborate. Not having this clause altogether would have probably been better as it would give a stronger front but the inclusion of the clause sends counter signals about how they view competition/forking."

"UNI tokens are currently a non-productive governance token, meaning they don’t represent any economic rights over the cash cow that is Uniswap. On the other hand, SUSHI holders do have a claim to the protocol’s cash flows, making it a productive asset.  (RSA—one reason for this difference may be regulatory concerns, see our conversation with 0xMaki from Sushi)"

Their Other Projects

"At ETH Boston, UniSwap created a project for Decentralized Restaurant Reviews with the FOAM Map and 3Box Chat threads. Code is here."

ETH Grant Web Interface

"The UniswapDEX.com site is a new web interface to the Uniswap contracts that were developed as part of an Ethereum Foundation grant. Using this interface you can instantly convert between Ethereum and any other ERC-20 token. You can also become a liquidity provider and earn about 3% APR for the ERC20 tokens you are not using. Many more features are also included so check out the announcement post here."

Genie

  • Kerman speculates on Genie and that it will mainly benefit Uniswap Labs and is a bad move for Uniswap as the protocol (8-7-2022).
  • Uniswap Labs bought Geniexyz. From the acquisition announcement (21-6-2022):

"Genie is the first NFT marketplace aggregator. Since launching in November 2021 Genie has completed $560M in transactions, democratized sweeping, and saved users millions in gas fees. We have been working towards merging Genie's product offering into Uniswap. We will also be improving our developer tools: commerce APIs, price feeds, and more."

Initial Uniswap Listing

"In an Initial Uniswap Listing, a team funds a liquidity pool with equal amounts of its native token and ETH. UMA, which is building infrastructure for synthetic assets, launched its token directly on Uniswap in April. While Uniswap is the most widely used product in DeFi, Uniswap launches have some severe drawbacks. Given the initial liquidity pool is the only supply of tokens, users cannot sell, which means that the token price can only go up. This is exactly what happened with $UMA—despite the teams' claims that they were selling the token at $0.267 (its seed round price), the token price spiked to over $2 within five minutes of the start of the sale. Bots front-run the pricing curve, bidding up gas prices and eventually dumping tokens on retail traders."

Unichain

Uniswap announced its own L2 (11-10-2024). UNI will have utility within the Unichain (11-10-2024, Messari):

"Unichain will also introduce the Unichain Validation Network (UVN), which will allow UNI stakers to earn a share of the sequencer fees generated by the chain.

  1. UVN is a decentralized network of node operators that independently validate the latest state of the network.
  2. This helps mitigate the risk of the sequencer proposing invalid blocks and conflicting blocks simultaneously, which are risks associated with single-sequencer networks.
  3. To become a validator, users must stake UNI on Ethereum. The validators with the highest stake weight will be considered in the active set of validators."

 Roadmap

"In the last Bankless PE Ratio article, we ran a quick thought experiment on “what if” Uniswap had a native token. While this seemed like a pipedream at the time, the Uniswap V2 announcement in late March strongly hinted at a native governance token.

For those that missed it, Uniswap V2 will feature an optional protocol charge where the liquidity provider fee can shift from 0.30% down to 0.25% with the remaining 0.05% directed to a treasury where allocations will be determined via a decentralized governance process. 

The rise of governance tokens fits perfectly with a Uniswap native token in the coming future. Not only would it provide previous Uniswap investors with an exit, but it would also enable a long-term sustainable model for growing the protocol. That said, the article does not outright state there will be a UNI governance token and it’s not impossible for the protocol to be governed entirely by LPs and their liquidity pool tokens."

"Following a targeted May 5th launch, a deployment to Optimism’s Layer 2 scaling solution is “set to follow shortly after.” Uniswap’s V3 will also allow liquidity providers to take “Concentrated Liquidity” positions: Instead of contributing capital to an entire range of prices for a trading pair, users will be able to provide liquidity for a specific range. “LPs can provide liquidity with up to 4000x capital efficiency relative to Uniswap v2, earning higher returns on their capital,” the post said.

A result of custom price curves is that liquidity positions are no longer represented as ERC20 tokens as they are not fungible. Instead,they will be represented by non-fungible tokens (NFTs). Common shared positions can be made fungible (ERC20) “via peripheral contracts or through other partner protocols,” the post said.

Uniswap’s V3 also allows LPs to “deposit a single token in a custom price range.” If the market price enters the range LPs can sell into the opposing asset, which the release’s post says “feels like a limit order.” Limit orders have thus far been exclusive to order book exchanges.

Uniswap V3 protocol fees will be off by default but can be turned on by governance on a per-pool basis and set between 10% and 25% of LP fees."

  • During the Summer of 2021, the company behind Uniswap made a change of direction, catering towards TradFi and regulators. From DeFi Watch (25-7-2021):

"TradFi partnerships, KYC, Centralized middleware Uniswap seems fully committed to building superpowers for TradFi middlemen who have been censoring us & ripping us off for decades."

Usage

"Uniswap’s weekly volumes have been (7-2019) over $6 million for 3 consecutive months now. This could be indicating that there are not occasional whale acts that drive the metrics, but rather persistent user problems being solved and a snowball effect at play with better liquidity, lower slippage, more demand and so on."

  • From their year recap (1-1-2020):

"All Time Volume: $0.8M -> $390M

Liquidity Provider Fees Accrued

$2400 -> $1.2Mx

Exchanges Deployed: 110 -> 1605

Pools with >$50k: 2 -> 28

Largest Pool: $100k (SAI/ETH) -> $10M (sETH/ETH)"

  • From (31-12-2019) an 0x 2019 recap:

"Uniswap took the Ethereum community by storm, garnering significant mindshare, and driving a new narrative around dApp UX and composability. In less than a year, Uniswap captured 25% of DEX market share by $-volume."

"Since its inception back in November 2018, Uniswap has grown to become quite a success within the ecosystem, reaching $50M in total value locked and distributing over $1.6M to liquidity providers."

"Uniswap continues to serve as the de facto home for long tail assets, supporting 5,306 unique assets across 5,264 pairs: Dune Analytics-integrated trading platforms support 2,828 assets combined. Yet Uniswap similarly dominates short-tail markets. For example, between August 10-17, Uniswap commanded close to 68% market share across ETH-USDC swaps."

"Uniswap’s Daily Volume Just Overtook Coinbase by More than $80 Million. Uniswap’s 24-hour trading volume of $479 million outpaced Coinbase’s $397 million. This is the first instance of a decentralized exchange (DEX) facilitating more volume than crypto incumbent Coinbase."

  • According to its own blog (16-9-2020):

"In less than two years, the protocol has:

  1. Supported over $20bn volume ($270k of which was socks!) traded by over 250,000 unique addresses across 8,484 unique assets
  2. Secured over $1bn liquidity deposited by over 49,000 unique liquidity providers (LPs), earning $56m fees in the process"

"Hours after the rewards stopped, hundreds of millions of dollars worth of assets flowed from Uniswap to Sushsiswap, particularly in the ETH/WBTC. The Uniswap pool lost 50% of its TVL($350m), while Sushiswap has seen more than $100m added to its ETH/WBTC pool."

"Uniswap surpassed 300,000 monthly unique active addresses in December. Median trade size has crept up since the start of 2021 to ~$1,200, although it remains the lowest among Uniswap’s prominent competitors. Despite record-high network congestion in recent weeks, the protocol continues to serve as the destination for over 20% of all Ethereum transactions."

  • From Our Network (29-5-2021):

"Just three weeks after its launch, Uniswap v3, the latest iteration of the Uniswap protocol, has officially flipped v2 on volume. Together the protocols have facilitated over $65bn in the month of May, up from $26bn in January 2021. The Uniswap protocols continue to hold 50%+ DEX volume market share. A testament to v3’s trade execution quality, the Uniswap protocols now receive 40% of weekly aggregator flows, up from 20% pre-launch. v3 activity is highly concentrated in the ETH/USDC, ETH/USDT, USDC/USDT, and ETH/WBTC markets, which collectively account for 78% of volume over the past 7 days.

v3 is already the highest volume DEX with just $1.3bn liquidity, counting 100%+ turnover rate on a daily basis. For perspective, Uniswap v2 sees just 15-20% daily liquidity turnover. v3 currently supports over 7,800 unique LPs across 1,370 unique markets — while 1% fee tier pools make up ~35% of all markets, they have attracted just 7% of cumulative volume. The median LP balance is $1,800, while the top three largest LPs have balances of $96m, $53m, and $47m respectively; this disparity reflects v3’s ability to cater to a broad range of users. The Uniswap protocols continue to dominate Ethereum activity, with the v2 and v3 routers attracting ~25% of all network transactions."

Projects that use or built on it

 Competition

"Roughly 18 months in, it entered basically the same space as Bancor, a token-swapping project that raised $150 million in an initial coin offering (ICO). Uniswap simplified the design by using ETH instead of a new ERC-20. When we last made the comparison in February 2019, Uniswap and Bancor were closely matched.

Today, DappRadar shows $213,000 in volume for Bancor over the last seven days and $38 million for Uniswap. Another third-party source, Dune Analytics, reports larger numbers for both projects, with Uniswap doing $67.8 million in volume and Bancor $3.2 million, over the last seven days."

"There was about $810M of tokens in SushiSwap, or 55% of Uniswap liquidity, when the migration started earlier today. By the end of the process, value in SushiSwap had increased to about $860M, according to DeBank. Total value locked in Uniswap has more than halved since yesterday to $430M, today according to DeFi Pulse."

"While they started as identical products, the past few months have diverged these two AMMs into two completely different products. Sushiswap has been constantly releasing new features—like Bentobox—while Uniswap core developers have been heads down building V3 behind closed doors.

UNI tokens are currently a non-productive governance token, meaning they don’t represent any economic rights over the cash cow that is Uniswap. On the other hand, SUSHI holders do have a claim to the protocol’s cash flows, making it a productive asset.  (RSA—one reason for this difference may be regulatory concerns, see our conversation with 0xMaki from Sushi)"

  • CoFix is an alternative AMM, but with an external oracle.

"A Uniswap V3 fork called HolaSwap has launched on Binance Smart Chain. As Uniswap V3's source code is protect by copyright, there could be legal ramifications if the anonymous developers are traced."

Pro's and Con's

Pro's

  • Never give up ownership of your funds.
  • No KYC/AML.
  • Users don’t have to worry about deposit or withdrawal minimums and lockups.
  • "Uniswap has (23-1-2020) solid defensibility as it has moneyful state in it. The more liquidity in the protocol, the more liquidity it attracts."

Con's

  • It's V3 was supposed to be more effective, however according to Rekt (18-11-2021):

"A recent study suggests that around 50% of UNI V3 LPs are losing money compared to if they just held their assets (and the fees they earn don’t make up for it). When V3 was launched, Uniswap promised their LPs increased capital efficiency via the use of concentrated liquidity positions. But after 6 months of use, it appears that the increased complexity (and risk) have left half of LPs losing out under the new system."

  • Stiff competition (Ren, Kyber, 0x, SushiSwap and IDEX)
  • "Uniswap for better or worse (23-1-2020), has no premine and no transaction fee cuts. Good for users, not so good for investors. Eventually when VC pressure kicks in, the team will need to add fees in v2 or v3 in the further out future. However the biggest threat to Uniswap will be the non rent seeking behavior of v1. Just like 0x v2 is a non rent seeking protocol (or a poorly attempted rent seeking protocol), 0x v3's biggest problem is its predecessor. If you think about it, the best time to launch and fund a new Uniswap competitor will be during the launch of a new version. I'd imagine that v2 could offer enough improvements that migrate liquidity over, however if v2 is similar to v1 (in terms of monetisation) then v3 is going to be harder to push as majority of improvements will be taken care of in v2."
  • V3's new optimisations and customisable setup will mean users can no longer (24-3-2021) simply deposit tokens and 'win'. This will make it less attractive for retail investors;

"You can have many position orders, but you risk making less or no fees if you provide liquidity in the wrong price range. To maximize fee revenue, you need to continuously pick the best price positions for each pool. A LP position that is too tight loses fees when the liquidity position goes inactive. A LP position that is too wide will lose fees due to better, narrower liquidity positions that contribute to more, active trading. Different price positions have varied risk considerations. Most of the liquidity will concentrate around the mid-market price, but if the price moves out of that range, a significant amount of the liquidity will fall, automatically exiting the liquidity pool & converted to one of the pool's assets. That means that a position outside of the price range might incur a new type of loss called “Inventory Loss”.

  • Governance within Uniswap is still limited to a few parties, with decisions being able to be pushed through by less than 10 parties. Some proposals, like the "DeFi Defense Fund" have gotten fierce critiques for its possible malicious motives and small popular support (22-6-2021). When Uniswap Labs announced Unichain, Uniswap DAO delegates raised their voices saying they had been completely left in the dark regarding the idea and on why OP stack was chosen over Arbitrum's Orbiter chains, which are faster. Hinting that Uniswap Labs probably got money in a backroom deal (10-2024).
  • Chris Blec has been warning users of Uniswap Labs and their staff members (US gov), also predicting Uni V4 will not be as permissionless as the previous versions.

Country Banning

"Uniswap low-key bans a bunch of countries that the US has shaky relations with. However, there wasn't an official announcement - just a silent code push with no comments from Hayden or anyone else on the project. What is interesting is the fact that someone happened to re-host the front-end on IPFS without the restrictions. It's great to see the permissionless nature of these technologies take place although I think it's a key event to take note of."

Team, Funding, partners

Team

  • Universal Navigation, Inc. (USA)
  • Hayden Adams; founder, but never swapped on Uniswap himself, due to 'tax headaches'
  • Ashleigh Schap; growth lead at Uniswap
  • HasGauntlet and GFX Labs as some of their professional delegates (30-11-2022).

Funding

"Uniswap makes no income off its protocol. All the revenue goes back to liquidity providers. But it’s a VC-backed project, with a seed round in April from Paradigm, so one would expect that there must be an intention to exit."

"After a $1.8 million seed round in April 2019 Uniswap raised another $11 million in a Series A funding round led by a16z to build v3 of the protocol. This has rekindled discussions regarding a potential governance token for the Uniswap protocol. The trading platform earned funding from eminent tech funds like a16z and Union Square Ventures alongside crypto native funds like Paradigm and ParaFi capital."

Partners

"The Stanford Blockchain Club has joined Uniswap as a delegate to provide guidance and governance in the future."

 Uniswap Labs

  • Uniswap Labs has launched a venture wing to make early-stage investments in web3, it announced on 2022, April 11. Uniswap’s former strategy lead, Matteo Leibowitz, and Uniswap COO Mary-Catherine Lader will both lead ULV’s operations. This Labs is not operated by the UNI DAO.

Projects

  • Uniswap Labs has built a self-custody crypto wallet (4-3-2023).

Investments

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