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What the UNI token is used for

How the UNI token works. Uniswap is decentralized exchange powered by a set of non-upgradeable smart contracts on Ethereum.

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

Example

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:

10.997*y=5000

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:

  • ETH/USDT
  • ETH/USDC
  • ETH/DAI
  • ETH/WBTC

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.

More here.

Claim UNI


If you have used Uniswap or been a liquidity provider before Sep 1 2020. You can claim tokens for free.

Docs


Docs

Paper (v2)

Paper (v1)

Competition


UNI price


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