Uniswap is a popular decentralized cryptocurrency exchange that operates on the Ethereum blockchain. The vast bulk of cryptocurrency trading occurs on exchanges like Coinbase and Binance. These platforms are administered by a single authority (the corporation that maintains the exchange), require users to deposit funds under their custody, and permit trading through the use of a typical order book system. Buy and sell orders are given in a list together with the total amount placed in each order in order book-based trading. The number of open purchase and sell orders for a certain asset is referred to as market depth. A purchase order must be matched with a sell order on the other side of the order book for the same amount and price of an asset to make a successful trade using this method, and vice versa.

For example, if you wanted to sell one bitcoin for 33,000 USD on a centralized exchange, you'd have to wait for a buyer to materialize on the other side of the order book seeking to acquire an equal or greater quantity. The primary issue with this sort of system is liquidity, which relates to the depth and number of orders on the order book at any particular time. If liquidity is insufficient, traders may be unable to fill their buy or sell orders.

How it works

Uniswap is powered by two smart contracts: the "Exchange" contract and the "Factory" contract. These are computer programs that are programmed to conduct certain tasks when certain circumstances are satisfied. The factory smart contract is used in this case to add new tokens to the platform, while the exchange contract handles all token exchanges, or "trades." On the improved Uniswap v.2 platform, any ERC20-based coin may be swapped for another.

An automated liquidity protocol is used by Uniswap to tackle the liquidity problem of centralized exchanges. This operates by encouraging exchange traders to become liquidity providers (LPs): Users on Uniswap pool their funds to form a fund that is used to perform all deals on the site. Each token mentioned has its own pool to which users may contribute, and the prices for each token are determined by a computer-run math process.

UNI token

UNI, the native token of Uniswaps, is a governance token. This grants holders the ability to vote on new platform improvements and modifications, such as how newly created tokens should be allocated to the community and developers, as well as any changes to fee structures. The UNI coin was introduced in September 2020 to discourage users from defecting to competitor DEX SushiSwap. SushiSwap enticed Uniswap customers to allow SushiSwap to reallocate their cash to the new platform by awarding them with SUSHI tokens one month before the introduction of UNI tokens. This was a novel sort of token that granted users control powers over the new protocol as well as a percentage of all transaction fees paid to the platform.

UNI airdrop

After airdrop fraudsters lured them with only 2,000 USD worth of the exchange's native UNI currency, two Uniswap users gave over 8 million USD in bitcoin and ether. A phishing scam targeting Uniswap's V3 liquidity providers (LP) — crypto holders who provide the exchange with the funds it needs to complete deals — occurred on Monday. The hacker(s) delivered roughly 75,000 people bogus tokens loaded with a smart contract meant to empty crypto wallets. According to blockchain analytics firm PeckShield, one wallet lost 2,444 ETH (2.5 million USD) and 201 BTC (3.8 million USD).