What is Uniswap? Understanding Decentralized Trading

By Hata Team

6/6/20245 min read

Uniswap functions as an automated cryptocurrency exchange built on the Ethereum network, and it boasts its own governance token known as UNI.

What is Uniswap?

Uniswap is a decentralized exchange that facilitates peer-to-peer market making and operates with its cryptocurrency, UNI. This platform allows users to trade cryptocurrencies without the need for a centralized intermediary.

Hosted on the Ethereum blockchain, Uniswap is governed by holders of the UNI token. It is open-source, so anyone can view and contribute to its code. Uniswap supports the trading of any digital token that follows the ERC-20 standard. It uses smart contracts—automated programs running on the blockchain—to enable trading and liquidity provision without a middleman.

On the Uniswap platform, users can create liquidity pools, provide liquidity, and swap various digital assets securely. As a permissionless platform, Uniswap does not restrict access, allowing anyone to trade, provide liquidity, or set up new markets for trading asset pairs.

The use of smart contracts makes trading on Uniswap more efficient and helps avoid the liquidity problems often seen in centralized exchanges. By removing the need for a central third party, Uniswap also reduces transaction fees, making it a cost-effective option for cryptocurrency trading.

How Does Uniswap work?

Uniswap is a platform where people can trade different digital assets without a central authority. Instead of a traditional exchange, it uses smart contracts on the blockchain to handle trades automatically.

Here's how it works:

  1. Trading Pairs: Users can swap one digital asset for another using liquidity pools. These pools are filled with various digital assets and are managed by smart contracts.

  2. Decentralized Exchange: Uniswap operates without a central authority, making it a decentralized exchange. This means trades happen directly between users.

  3. Ethereum Platform: Uniswap runs on Ethereum, a blockchain platform. Ethereum switched from proof of work to proof of stake in 2022.

  4. How Users Participate:

    • Creating Markets: Users can create new markets for trading different digital assets using smart contracts.

    • Swapping Assets: They can also swap assets using existing markets on Uniswap.

    • Providing Liquidity: Users can earn rewards by providing liquidity to the platform. This involves staking their digital assets and not actively trading them.

    • Governance: UNI token holders can participate in governing the platform by voting on proposals. The more UNI tokens they hold, the more voting power they have.

  5. Connecting Wallets: To participate in Uniswap, users need to connect a compatible digital wallet to the platform.

  6. Transaction Fees: Ethereum charges fees for processing transactions on Uniswap. Users need to have Ether (ETH), Ethereum's native cryptocurrency, to pay these fees.

What Makes Uniswap Different?

Uniswap, a decentralized exchange, stands out because it doesn't take any fees for itself. Instead, all the fees from trades go straight to the people who provide money to the platform, called liquidity providers. This is unlike regular exchanges where the company keeps the fees.

What Is the UNI Token?

UNI serves as the governing token for Uniswap. Here's a rundown of its functions:

  1. Governance: The UNI token primarily enables holders to participate in governing Uniswap. Those with UNI can vote on and suggest alterations to the Uniswap protocol, covering adjustments to its code, fee arrangements, and future plans.

  2. Liquidity Mining: Upon its launch, UNI tokens were dispersed to users as incentives for contributing liquidity to specific pools on Uniswap. This distribution method, rewarding users for supplying liquidity, is termed 'liquidity mining' or 'yield farming.'

  3. Treasury: A segment of the UNI token pool is allocated for the Uniswap treasury, which can be utilized to finance further advancements, grants, collaborations, and other endeavors that promote the Uniswap ecosystem.

In essence, holding UNI represents a stake in the Uniswap ecosystem. By decentralizing governance and placing it in the hands of UNI holders, Uniswap strives to become a genuinely community-powered platform.

Why is UNI valuable?

UNI, the currency of Uniswap, is important because it helps keep the Uniswap network running smoothly.

People who own UNI can vote on ideas for improving Uniswap. This means users have a say in how Uniswap grows and gets better. The Uniswap team made UNI with the idea that users would own and control the network. They made this a reality by giving 400 UNI to every user on September 1st, 2020, and giving extra tokens to people who helped with liquidity. If you want to suggest changes to Uniswap, you need to own at least 1% of all UNI tokens.

How to buy UNI in Hata
  1. Sign Up: Start by creating an account on Hata if you haven't already. You'll need to provide some basic information and verify your identity.

  2. Deposit Funds: Once your account is set up, deposit funds into it. You can typically do this using USD/MYR or other cryptocurrencies supported by Hata.io.

  3. Find UNI: Navigate to the exchange and search for UNI.

  4. Place an Order: Determine the amount of UNI you want to purchase and at what price. You have the option to buy at the current market price or set your own price.

  5. Confirm Your Order: Review your order details carefully and confirm. If everything looks good, proceed with the purchase.

  6. Wait for Your Order to Fill: Once your order is placed, the exchange will match you with a seller. If you're buying at the market price, this should happen quickly.

  7. Check Your Balance: After your order is completed, you'll see the UNI tokens reflected in your account balance on Hata.

  8. Consider Security: If you plan to hold onto your UNI for an extended period, it's advisable to transfer them to a secure wallet for added protection.


To sum up, Uniswap changes how we trade crypto by offering a safe and effective platform. The Uni token is key, giving users voting power, rewarding liquidity providers, and enabling transactions. Uniswap and its Uni token show how decentralized finance can empower people worldwide to join the crypto world.


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