Uniswap is the predominant decentralized exchange for trading cryptocurrencies by almost any metric. Uniswap controls anywhere between 60% and 75% of all DEX trading volume, depending on the source. What a sizable market share proportion! Uniswap dominates all its competitors with an average daily trading volume of over $1 billion. The next-closest DEX rival, PancakeSwap (CAKE -4.34%), records an average daily trading volume of about $200 million.
Imagine this vast, open financial infrastructure automatically managed by smart contracts, liquidity providers, traders, and arbitrageurs around the clock, every day of the year. We should picture the structure when we consider the inner workings of Uniswap.
Uniswap has a significant share of Total DEX volume; its market share is around 65%, while other top projects after Uniswap are Curve, etc.
The protocol’s second iteration, Uniswap V2, was released in May 2020. The “fee switch” function, coded into V2 to capture 0.05% of trading volume, has never been used. Since LPs currently receive 100% of the fees on Uniswap, the decentralized exchange could be considered a public good. The project may resemble a traditional business if the fee switch is activated and the protocol brings in money.
UNI Governance
Uniswap’s governance is divided into three levels. The first step is a temperature check, and the second is a “Consensus Check.”
The Governance Proposal, the third step, is the real obstacle. A proposal must receive a majority vote of 40M UNI to pass, as opposed to the first two stages, which only require 25,000 or 50,000 UNI.
Most people consider Uniswap to be the founder of DeFi. The project popularised the automated market maker model, carried out one of the earliest retroactive airdrops, and collaborated with Layer 2 businesses like Optimism before anyone else.
Uniswap effectively dismantles a market-making monopoly by allowing anyone to participate in the business model. The protocol fees are paid directly to the liquidity providers or market makers.
Stats:
Even though Uniswap’s code is open-source and is freely forkable and copyable, they control the majority of trading volume among automated market makers. It’s interesting to note that their share of the pie has grown even more during a bear market.
Uniswap currently experiences a crypto winter with an average daily trading volume of $1 billion. They have experienced daily volume spikes of up to $6.5 billion, and in May of this year, their combined volume surpassed $1 trillion.
There was an increase in user activity on Uniswap after the collapse of FTX on November 7.
In 2022, the number of new wallets actively transacting each day reached a record-high 55,550. ETH transactions on Uniswap V2 and V3 increased.
The Leading decentralized cryptocurrency trading protocol Uniswap [UNI] confirmed in a tweet on November 14 that by 2022, there will be an all-time high of 55,550 transacting wallets on its web application.
The sudden surge in trading activity on the decentralized exchange over the past week is attributable to the collapse of FTX and the ensuing FUD and widespread distrust in centralized exchanges, which decimated the cryptocurrency market.
Uniswap’s daily trading fees saw a massive spike in November due to FTX’s fiasco. It saw a surge of 55% in daily trading fees compared to last month’s trading fees volume.
Token Utility
What gives the token value today is the ability to take a portion of the fee paid to LPs (or from an aggregator). Holders of tokens have a say in the future allocation of fees. The Uniswap DAO recently decided to test protocol fees by returning 10% of the LPs to the protocol treasury for many chosen pools.
The UNI token leads the pack with better returns or a lower loss percentage compared to other CEX tokens/shares like Coinbase’s COIN, Kucoin’s KCS, etc.
Latest Developments:
Uniswap acquired the NFT’s aggregator platform Genie. The main point of Uniswap Labs’ June 2022 NFT announcement was that it had bought the NFT exchange aggregator Genie. The integration of Sudoswap and the purchase of Genie are both signs that Uniswap has decided to pool liquidity from multiple NFT exchanges instead of “owning” it as it does for ERC-20 tokens. This makes sense from a tactical point of view since token markets depend more on depth-reducing slippage than NFT markets, which rely more on a broad scope.
Concluding thoughts:
Creating a genuinely peer-to-peer system of exchange and removing monetary control from the control of centralized authorities are two of the main arguments presented in Satoshi Nakamoto’s now more than ten-year-old Bitcoin White Paper.
For this reason, decentralization proponents see centralized cryptocurrency exchanges as essentially the same as the traditional financial institutions that the crypto industry is attempting to displace. In the case of FTX.com, the centralized exchange used customer deposits as loans to a related trading arm called Alameda Research.
Due to this, cryptocurrency traders have chosen to move away from storing their assets on centralized exchanges in favor of cold storage wallets and using decentralized exchanges for trading after the collapse of FTX, one of the most well-known centralized cryptocurrency exchanges. The fact that cryptocurrency seems to be returning to its fundamentals and reevaluating its founding ethos of decentralization is the industry’s one bright spot in the wake of the terrible liquidity crises engulfing the entire sector.
Uniswap has successfully launched Layer-2 scaling solutions, making up 65% of all Layer-2 DEX volume in the third quarter of 2022. Several projects have used Uniswap’s software development kit to either integrate the Uniswap protocol or make it work better. If the fee switch experiment works, it will be a big test for people who own UNIs and build crypto protocols. No matter what happens, Uniswap Labs has plenty of money to keep building. The group that made Uniswap during the last bear market is likely to keep coming up with new ideas during this one.
Also, their recent Genie platform acquisition strategy could have far-reaching effects because NFTs have a much larger total user base than token trading. The initiative will bring many new users to the DEX while lowering the costs of getting new customers.
