History of Uniswap
Traversing the history of Uniswap, from the origin v1 to swing trading of billions of dollars using v3.
Uniswap is without a doubt one of the most important and talked-about Ethereum-based decentralised exchange protocol (DEX).Uniswap allows any user to perform token exchanges with a high degree of decentralisation without the necessity of intermediaries.
Let’s take a look at its origins to see how Uniswap came to be and what piqued Hayden Adams’s (Uniswap’s creator) interest in the crypto world.
Recapitulation of Uniswap
Each Uniswap pool holds two tokens, which together represent a trading pair for those assets. Uniswap uses a pricing mechanism called the ‘constant product market maker model’.
Returning to the main plot……..
Uniswap V1
On November 2nd, 2018, the first version of Uniswap V1 was released on the Ethereum mainnet.
After being inspired by Vitalik Buterin’s reddit post, Hayden, who previously worked as a mechanical engineer founded Uniswap with no prior programming experience founded the first version. While working on the first version of the Uniswap protocol, he learned how to design smart contracts .
This blog entry goes into greater depth about Uniswap’s beginnings.
Hayden submitted for an Ethereum Foundation funding in July 2018 while working on optimising smart contracts and preparation for a possible mainnet debut. Uniswap V1 was one of the first projects to be written fully in Vyper. The first version of the protocol was released on the final day of the Devcon 4 conference, with an initial liquidity pool of $30,000.
One of the drawback of v1 was that each liquidity pool had to include ETH as one of the currencies, so to trade from USDC to DAI, for example, the user would have to exchange USDC for ETH and ETH for DAI, resulting in greater gas fees and more slippage.
The protocol soon acquired traction, leading to an initial seed funding that enabled Uniswap’s team to embark on the protocol’s second version.
Uniswap V2
In May 2020, Uniswap released Uniswap V2, a new version of the protocol.
All of the V2 smart contracts were written in Solidity. On-chain price feeds, ERC20/ERC20 liquidity pool and flash swaps were among the other features included in V2.
The Uniswap team raised $11 million in series A funding in August 2020 from Andreessen Horowitz, USV, Paradigm, and Version One, among others.
The money were used to expand the team and develop Uniswap v3, which will greatly improve the protocol’s flexibility and capital efficiency.
Launch of UNI Token
Uniswap announced the debut of their token “UNI”, on September 16th 2020.
The way some of the tokens were retrospectively awarded was the most surprise aspect of the launch. Everyone who utilised Uniswap at least once before September 1st were eligible to get 400 UNI tokens, which were valued roughly $1200 on the day of the announcement.
Token holders will be able to vote on various proposals or delegate their votes to a third party in order to participate in Uniswap’s governance. The following diagram shows how 1 billion UNI tokens were distributed.
At the time of writing this article, there is over $7B worth of liquidity locked in the protocol (Source https://defillama.com/).
Uniswap V3
In May 2021, Uniswap released Uniswap V3, another new version of the protocol.
While Uniswap v2 stressed on low risk and ease of use, v3 prioritises capital efficiency. Uniswap V3’s new automatic market maker (AMM) solution, in addition to the core aggregate liquidity, also brings multi-level rate control, range orders, and historical predictions Machine and other functions.
The standard 0.3% transaction fee in Uniswap V2, while V3 provides 3 independent fee levels: 0.05%, 0.3% and 1%. This allows liquidity providers to choose a pool of funds based on the risks they are willing to take, which makes liquidity providers more selective and more demanding on strategies.
Summary
Uniswap arose from Vitalik Buterin’s 2016 proposal for a decentralised exchange (DEX) that would use an on-chain automated market maker with certain characteristics. Hayden Adams began working on turning this concept into a practical product a year later.
The barbarian expansion has just just begun in the decentralised world of Uniswap. We’ll have to wait and see if this marks the end of the DEX competition or a fresh beginning!
References
Uniswap V1 Docs https://uniswap.org/docs/v1
Uniswap V2 Docs https://uniswap.org/docs/v2
Uniswap V3 Docs https://docs.uniswap.org/