If you never heard of Uniswap (UNI 3.85%) before, this would be a great time to get familiar with this promising cryptocurrency. In fact, Uniswap looks like a solid buy right now.
Uniswap platform overview
Let's start with the absolute basics. Uniswap is a decentralized exchange (DEX) platform built on the Ethereum blockchain. It allows users to trade cryptocurrencies directly, without intermediaries, by automatically matching buyers and sellers based on a mathematical algorithm.
Uniswap also provides a platform for liquidity providers to earn rewards by holding and staking assets in the exchange's pools. It is known for its ease of use, low fees, and fast transaction times, making it a popular choice among decentralized finance (DeFi) enthusiasts.
It's also a fairly flexible trading platform. The original Uniswap is currently the second-largest DEX as measured by daily trading volume. According to CoinMarketCap, tweaked versions of the same exchange also qualify as No. 7 and No. 9 on that list. Altogether, five different versions of Uniswap stand among the 14 most active DEX trading platforms.
The main difference between these options is how they use different Layer 2 systems to speed up their access to the underlying Ethereum blockchain. Seen as different on-ramps to the same unified trading platforms, Uniswap easily qualifies as the more active DEX today.
The UNI token and project governance
UNI, also known as the Uniswap Protocol token, is the Ethereum-based governance token for Uniswap. Ownership of this token gives its holders a say in the decision-making process for the platform. This way, owners can participate in the governance of the protocol and propose changes, upgrades, and new features.
Swapping cryptocurrencies with the Uniswap protocol doesn't consume UNI tokens. Instead, transaction fees are collected by the liquidity pools in the form of Ethereum or one of its Layer 2 tokens, such as Polygon or Optimism. There is a hardcoded 0.05% protocol fee in the smart contract that runs this system, but it is currently disabled. If the developer community ever votes to turn it on, the liquidity provider fee will automatically shrink by the same amount.
In effect, you can think of the UNI token as a stock that gives you a say in managing the system and potentially a very small, dividend-like share of future transaction fees.
The value of UNI is tied to the success and growth of the Uniswap platform, as more users and assets on the platform may increase the demand for UNI. This gives Uniswap the capacity to appreciate in value for UNI holders over time.
Navigating Uniswap's market prospects
As you can see, Uniswap is a firmly established leader among decentralized crypto exchanges. Apart from the direct crypto-swapping facility, the Uniswap Protocol is already integrated into more than 300 decentralized finance apps. The ecosystem is thriving, setting the UNI token up for future gains.
At the same time, Uniswap was swept up in the marketwide crypto panic of 2022. As a result, the token lost 71.4% of its value last year. The price is up 40% from the 52-week lows of last June but still down by 88% from the all-time peak in May 2021. It's a long way back to the token's former glory, but investor interest in the Uniswap project's voting rights should increase in the long run. Many signs immediately point to a brief recession followed by an overall economic recovery in 2023, which could also trigger turnarounds across the cryptocurrency sector.
So if you expect the crypto winter to start thawing out in 2023, this would be a great time to pick up some deeply discounted Uniswap governance tokens.
