Uniswap is a DEX protocol project consisting of a set of smart contracts running on the Ethereum blockchain. In technical terms, it is an automated liquidity protocol that is powered by a constant product formula, which is Uniswap’s automated market making algorithm.
The Uniswap blockchain is open source, meaning that anyone can view and contribute to the blockchain’s code. What makes Uniswap interesting is that unlike entities that maintain a central order book for buying & selling, it uses a collection of liquidity pools.
Simply put, liquidity pools are digital piles/reserve of cryptocurrency locked in a smart contract. This results in creating liquidity for faster & permissionless transactions in Decentralized Finance (DeFi). With its liquidity pool structure, traders on the DEX can use the user-funded token reserves
Uniswap incentivizes its users to maintain the liquidity of the exchange, providing portions of the transaction fees and newly minted UNI tokens to those who participate.
UNI is the native token of Uniswap DEX, it was launched on September 1 2020 with the purpose of making the protocol owned and operated by its users. Through this new model, the protocol gradually will be able to function only on its users.
Governance with UNI HODLers is distributed in proportion to their real-time balances of UNI tokens. Additionally in exchange for maintaining liquidity in the pools, providers are rewarded with a portion of the trading fees, along with newly minted UNI cryptocurrency.
The staking options will allow users to earn UNI tokens using Uniswap’s liquidity pools which are called yield farming or liquidity mining. Yield farming or liquidity mining is a process where you can lend your crypto to other users through liquidity pools and earn rewards.