What is Uniswap
Uniswap is decentralized exchange powered by a set of non-upgradeable smart contracts on Ethereum.
UNI token is used for
Uni token governance
The token will give the community immediate ownership of:
- Uniswap governance
- Community treasury
- Protocol fee switch (0.05% of current 0.3% that goes to liquidity providers)
- eth ENS
- Uniswap List
- SOCKS tokens
Parameters for Governance
- 1% of total supply to submit a governance proposal
- 4% to reach quorum
- 7 day voting period
- 2 day timelock delay
How Uniswap Protocol works
On Uniswap anyone can submit any tokenpair at a 50/50 ratio as a reserve. Trades are facilitated against these token pairs without any middlemen.
Liquidity providers earn 0.3% on every trade (proportional to total amount of liquidity) for that token pair.
Uniswap uses this formula to determine price and facilitate trade
x*y = k
TokenA * TokenB = Invariant
Trading Fee: 0.3%
ETH Pool: 10
UNI Pool: 500
10 * 500 = 5000
Buyer sends 1 ETH to buy UNI. How many does he receive?
Fee: 0.003 ETH
ETH Pool: 10 + 1 – 0.003 = 10.997
So now we have:
And to get the amount of UNI tokens left in the pool:
y=5000/10.997 = 454.669
500 – 454.669 = 45.331
Buyer receives: 45.331 UNI
After the trade the fee is added but into the liquidity pool. Redeemable for LPs when they remove their liquidity.
ETH Pool: 10.997 + 0.003 = 11
UNI Pool: 454.669
11 * 454.669 = 5001.359
After the trade the price has shifted, and another trade in the same direction will move the price further. Therefore the larger the trade the larger the price slippage.
If prices on Uniswap diverge from the outside market, arbitrageurs are incentivized to buy or sell the diverging tokens. Pushing to price toward the overall market price.
More on this in Uniswap v1 whitepaper.
UNI token issuance
Total: 1 000 000 000 Tokens + 2%/year after 4 years.
- 60.00% Community [600,000,000 UNI]
- 21.51% Team – 4-year vesting [215,101,000 UNI]
- 17.80% Investors – 4-year vesting [178,000,000 UNI]
- .069% Advisors – 4-year vesting [6,899,000 UNI]
Liquidity Mining 2020
September 18 – November 17 on Uniswap v2:
5,000,000 UNI will be allocated per pool. See amount of liquidity in pools here.
- 83,333.33 tokens per pool per day
- 54 tokens per pool per block
How much UNI can you earn from staking in the pools?
It depends on the total amount of liquidity.
Let’s say there’s $100 000 000 in ETH/USDT. And you stake $1000.
5 000 000 / 100 000 000 = 0.05
0.05 UNI / $1
1000 * 0.05 = 50
That’s 50 UNI for the entire liquidity mining period of 3 months. So if you don’t have a large stack there might be better opportunities. Especially with high gas prices.
If you have used Uniswap or been a liquidity provider before Sep 1 2020. You can claim tokens for free.