The complete guide to buying Uniswap (UNI)
Uniswap is best known for being the most popular decentralized exchange.
It uses auto market maker (AMM) technology to ensure a smooth user experience.
With proprietary math behind its liquidity pools to ensure market depth, Uniswap quickly rose to the top of the pile.
In September 2020, Uniswap launched its very own ERC-20 token, known as UNI.
Instead of being used to cut down on trading fees, UNI is a governance token that allows holders to vote on the future of the protocol.
Token owners that have 1% or more of the total supply can propose new changes to the network.
There’s no other purpose or use for the UNI token.
But that hasn’t stopped it from becoming one of the hottest ERC-20 tokens around.
And there’s no sign that it’s going to cool off any time soon.
So, without further ado, let’s dive into the world of Uniswap and the UNI token.
CryptoMeister will teach you how to buy Uniswap and how you can use the popular exchange as well as all the gubbins that goes on behind the scenes.
Hold on to your hats – this will be a wild ride!
What is Uniswap and how does it work?
Uniswap launched its V1 platform in 2018, and it became popular with traders looking for a simple and easy to use decentralized exchange.
Its interface was simple, clean and unlike anything that had come before, which made it particularly popular with new people to the space.
It then launched V2 in 2020 which enabled direct swaps between any ERC-20 token that had a liquidity pool.
If there was no liquidity pool, users were able to create them on their own, essentially creating a self-governed trading platform.
This was made possible by using Auto Market Maker (AMM) technology.
AMMs are smart contracts that control the liquidity pools that traders use to trade against.
Instead of Uniswap creating its own markets, or paying a 3rd party to do, it lets users create these pools.
Anyone can deposit 2 tokens at an equivalent value and create a pool, which then provides liquidity on the Uniswap exchange.
If these funds are used in trading, the fees collected are distributed to the liquidity provider.
This is also known as yield farming.
The pool balance is arranged using the formula x*y=k.
Let’s say that the liquidity pool in question is using DAI/ETH.
DAI would form X and ETH would form y in this example.
K must remain constant, and this is what drives the price fluctuations of currencies within the pool.
For example, let’s say Jane buys 1,800 DAI for 1 ETH using this liquidity pool.
This reduces the supply of DAI and increases the supply of ETH.
This in turn reduces the price of ETH in the pool as the supply has increased against DAI.
You then have leverage traders that take advantage of these discrepancies using automated scripts and bots.
This leads to the price balancing out rapidly and returning to its normal state.
But this isn’t necessary for the pools to work correctly, it’s merely another way traders can make money from the liquidity pools.
In September 2020, every Ethereum address that had used Uniswap received 400 UNI tokens in the form of an airdrop.
Significant liquidity providers were rewarded with more tokens.
UNI tokens give the holder the ability to vote on new changes and upgrades to the protocol.
People that hold 1% or more of the totally supply of UNI tokens are able to submit changes and proposals to the protocol.
There are no other uses for the UNI token as it’s a governance token.
Under the V2 platform, liquidity providers simply threw money into a pool, and it would cover the entire price range.
But, with the launch of V3 in May 2021, liquidity providers can provide liquidity up to 4,000x more effectively.
Simply put, this means that liquidity providers can select the price range they wish for their liquidity to be used at.
The smaller the range, the higher the rewards that are generated.
This reduces the required capital required to provide liquidity up to 4,000x in some cases.
What is Uniswap used for?
The Uniswap token, UNI, only has a single purpose – governance.
This means that it cannot be used to reduce trading fees like other tokens issued by exchanges.
However, a lot of people are trading it like a regular cryptocurrency.
This is largely down to the fact that they are more interested in making money than the future of the Uniswap protocol.
There’s nothing wrong with this, and it has led to UNI getting listed on major exchanges.
So, you can also use UNI as a currency to trade and add to your portfolio.
There are 1,000,000,000 UNI tokens set to be minted between 2020 and 2024.
This was split into 2 categories with 60% being issued via the airdrop to early users of the platform.
The remaining 40% will be distributed at a rate of 10% per year to team members, investors, and advisors.
Once all tokens have been issued, Uniswap will implement an annual inflation rate of 2%.
People have used their UNI tokens to create liquidity pools and trading pairs with other cryptocurrencies on the Uniswap exchange.
Which blockchain does Uniswap run on?
Uniswap is a decentralized exchange built on the Ethereum blockchain.
This means that the UNI token is an ERC-20 token and requires Ethereum in your wallet to cover gas fees when making a transaction.
There are currently no plans to create a Uniswap blockchain as the Ethereum blockchain more than caters to the decentralized exchange’s needs.
This means that all ERC-20 tokens are supported by the Uniswap exchange and can be added as a trading pair through the liquidity pools.
By opting for the Ethereum blockchain, Uniswap gives users more variety and choice of trading pairs than other decentralized exchanges on other networks.
Which wallets support Uniswap?
Uniswap’s UNI token is an ERC-20 token, which means that wallets that support ERC-20 tokens should support it.
As with most ERC-20 wallets, you may have to manually add the token, but it’s a quick and easy process.
In order to send UNI to your ERC-20 wallet, you’ll need a little bit of Ether to cover the gas fees.
The same goes if you want to move your UNI from that wallet to another.
But the general rule of ERC-20 tokens is that if you’re going to use them, keep some Ether spare in your wallet anyway.
There are a range of hardware, mobile and browser extension wallets that support UNI.
But, if you’re going to get deep into UNI and use it to vote on matters and propose new changes, then we recommend using MetaMask.
You can also use a hardware wallet and connect it to the governance portal, but it’s a bit more long-winded.
But you can use any wallet that supports ERC-20 tokens, there’s no real limit when it comes to that.
It’s more of a preference thing and whether you want to use your UNI or you just want to hodl it for the gains.
Whatever you do, don’t keep your UNI in an exchange wallet as these are not safe places to store crypto.
You can learn more about crypto wallets with our detailed guide to crypto wallets.
How do you vote with Uniswap tokens?
The whole purpose of the Uniswap token is to be able to vote on new proposals.
Unlike other blockchains where voting and staking can be confusing, the Uniswap protocol has made it simple.
You’ll need to have your UNI in a MetaMask wallet to vote on Uniswap.
Currently, you get 1 vote for every 1 UNI in your wallet, but there are proposals to change this.
There were 2 proposals in Q3 2021 to amend the voting system to prevent whales rigging the votes.
One such proposal suggested each wallet gets 1 vote, meaning that for whales to influence a decision, they’d need to create millions of wallets.
But this was not pushed forward after the proposer attempted to bribe a whale to vote for the proposal.
So, until one of these proposals makes it through, the more UNI you have, the more votes you get.
Head on over to the Uniswap governance page.
Here is where new proposals are made and you can add to the discussion, giving your feedback on whether a proposal is good or bad.
Those that make it through this stage are then sent for voting.
To vote on matters, head over to the Uniswap exchange, or go directly to the voting portal.
You will need to connect your wallet that has UNI in it before you can vote on items, so do this now by clicking “Connect A Wallet” on the top right of the site.
If there are any items with “Active” next to the name, you can then click on it and vote either for or against.
Once voting ends, the proposal will either be executed or rejected.
You can also add proposals from here, but you need 2.5 million UNI or delegated votes to do so.
New items are added to be voted on all the time, so keep checking back to vote.
Remember, 1 UNI is 1 vote, so the more UNI you have, the more say you have in the governance of the protocol.
This has led to some abuse of the system and it’s the reason behind the proposals calling to change the voting rules.
There are a handful of whales that have around 15 million votes combined, which allows them to essentially control the outcome of the votes.
This does detract from the decentralized aspect of Uniswap, but it’s one of the risks associated with decentralized exchanges.
There is no real perfect solution to this issue as forcing whales to split up their holdings would create a Sybil attack.
Are there any risks with Uniswap?
As we just discussed, there are some major risks and flaws with Uniswap’s governance system.
These risks and flaws could negatively impact the protocol and cause it to break.
The exchange itself is relatively secure and hasn’t suffered any major issues.
However, while the decentralized finance (DeFi) ecosystem is so young, never say never.
In August 2021, Poly Network’s DeFi system was hacked, and it turned into the largest theft in crypto history.
It’s estimated that $600 million was stolen, during the hack, but most of it was eventually recovered.
While this hasn’t happened to Uniswap, there is still potential.
Smart contracts are still young, and this means that there still chances for hackers to find flaws and bugs in the code then exploit them.
If Uniswap did get hacked, liquidity providers could lose all their funds and UNI token holders could see the value of their tokens plummet
On the other hand, we’ve got the issue of Uniswap’s voting system.
As it stands, 1 UNI gives you 1 vote.
The top 10 wallets hold 52% of all UNI tokens in existence.
The top 100 wallets hold 89% of all UNI tokens.
This gives a handful of people an insane amount of power of the protocol.
All it takes is for 10 people to get together and they could change Uniswap forever.
While it wouldn’t benefit them to damage the network in the long run, they could if they wanted to.
Let’s say that the 10 largest holders all get hacked in a targeted attack.
The hackers could then use the UNI tokens on their wallets to obliterate the network through proposals and mass voting.
This would wipe out any value in the UNI tokens and could cripple the exchange.
So, while we might not see this under normal circumstances, there is a possibility for it to happen.
It also makes the protocol fairly centralized, meaning that if regulatory pressure is applied and these whales are facing losing their investment, they could use their votes to make Uniswap more centralized.
This would hurt the exchange, but it would shore up the price of the token as regulators would no longer be after it.
There’s a lot of potential for mayhem and chaos with the governance and voting system, but there’s no clear way to solve it.
If whales are forced to reveal their identity, then it exposes them to all sorts of risks.
Setting votes to wallets rather than token numbers creates a Sybil attack scenario.
There’s no good way to resolve this issue and the best solution here is to trust that the large token holders have the platform’s best interest at heart.
Is Uniswap legal?
Uniswap is a decentralized exchange, and the UNI token is designed as a governance token.
As a result, neither the exchange nor governance token really falls under any form of regulation.
The platform is non-custodial, meaning that you trade directly from your wallet, rather than depositing into the smart contract.
For liquidity providers, it’s a bit of a different story, but even so, these pools are managed via smart contracts rather than Uniswap itself.
The governance tokens were not sold like an ICO and were distributed mostly to platform users, meaning that they pass the Howie test with flying colors.
So, as a result, it’s unlikely that we’ll see any regulations or implications imposed upon Uniswap in the near future.
However, we could see governments clamp down on decentralized exchanges, outlawing them in their country.
Although, this wouldn’t prevent people from being able to use them, so even if Uniswap is made illegal by a government, there’s no real way to follow through with it.
Is it safe to buy Uniswap?
If you want to get your hands on some Uniswap tokens and take part in governance, then you’re in the right place.
But, before you buy Uniswap you might be wondering if it’s safe to do so.
We’ve got some good news for you – it’s safe to buy Uniswap, if you use a reputable exchange.
You can buy Uniswap directly on the Uniswap platform, but you’ll need some Ether in your wallet to do so.
Otherwise, you can opt to buy Uniswap from another exchange that supports it.
There are a few trading platforms that offer a contract for difference (CFD) version of Uniswap, but you cannot use this for governance.
The CFD version of Uniswap is only useful for gaining exposure to its price fluctuations.
You can currently buy Uniswap safely from the following exchanges:
There are more exchanges offering Uniswap trading pairs, but these are the safest and most reliable options.
Can someone hack me or steal my Uniswap?
Unfortunately, all technology can be hacked, and this means your Uniswap can be stolen.
But, there are some steps that you can take to protect yourself and keep your Uniswap tokens safe.
Unfortunately, a little more than half of all internet users user the same email and password combination for every website and app out there.
This is dangerous as if one site leaks your credentials, then all your sites are compromised.
You should be using unique passwords that are at least 12 characters long for every site.
Also, enable 2-factor authentication (2FA) on all of your accounts.
Finally, store your wallet seed phrases somewhere secure.
Ideally they should be kept offline, or at very least on an air gapped computer.
The seed phrase is essentially the restore code for your wallet, meaning that anyone with access to it can enter your wallet – no questions asked.
So, treat this like it’s a top-secret military document and hide it somewhere secure.
People have put their seed phrases in light switches, fake power sockets, under the bed, in the fridge and even inside video games.
However you store it, make sure it’s somewhere safe and that you remember it.
If you follow these steps, you’ll make yourself harder to hack and keep your crypto safe.
There are still other ways to get hacked, but these steps will remove you from the radar of the majority of hackers out there.
Where can I buy Uniswap?
If you want to buy Uniswap, you might be wondering where you can do so.
Fortunately, there are dozens of exchanges that support Uniswap, so you can buy Uniswap just about anywhere.
However, if you want to buy Uniswap safely, it narrows down your choice slightly.
For obvious reasons, it’s recommended to buy Uniswap using a reputable exchange that you know and trust.
If you’re new to crypto, we’ve taken the time to sign up, deposit, trade and withdraw at dozens of exchanges, reviewing each one carefully.
This saves you a bunch of time and cuts out the risk factor – you’re welcome.
You can check out our reviews here.
The best places to buy Uniswap, according to CryptoMeister, are:
If you opt to buy Uniswap tokens directly from the Uniswap exchange, you’ll need to have Ethereum in your wallet.
How can I pay for Uniswap?
When you buy Uniswap, you’ll be presented with a range of payment methods.
Depending on the exchange that you use, you’ll be able to pick and choose a method that suits you.
But, for the most part, there are 4 main payment methods to use when you buy Uniswap.
First up, we’ve got cryptocurrency.
Uniswap itself is an exchange and you can buy Uniswap tokens from the pools there.
All you need is a little bit of Ethereum in your wallet and you can buy Uniswap tokens until your heart’s content.
This is the most direct way to buy Uniswap, but it’s predicated on you owning Ethereum beforehand.
If you don’t already have Ethereum, then you’ll want to check out the other options!
The best crypto exchanges will allow you to deposit and buy Uniswap using your credit or debit card.
These types of deposits are usually instant and are perfect for small amounts.
Ideally you keep the amount to €1,000 or less, but this is mostly for your sake.
Cards often have daily spend limits, so if you max it out at 8am when you buy Uniswap, you’re stuck all day if you don’t have a second card.
Secondly, card deposits usually come with a fee, which can be as high as 5%.
So it becomes a less economical to use a card to buy Uniswap when you buy large amounts.
Some exchanges will waive this fee, but there are only a handful that do this.
If you don’t mind waiting a little longer for your deposits to clear, then a bank transfer is a great option to buy Uniswap.
There are no fees involved with a bank transfer, but they can take up to 3 working days to process.
Most exchanges have a range of bank accounts for you to pick from, which can allow you to speed up the process if you both have an account at the same bank.
There will also be a range of currency options for you to pick from when going down this route.
The lack of fees makes bank transfers ideal if you’re looking to buy vast quantities of Uniswap.
A small handful of crypto exchanges will allow you to deposit and buy Uniswap using PayPal.
Binance is the most popular exchange that lets you do this, but there are a few others.
To buy Uniswap with PayPal, you simply head to the deposit page and click pay with PayPal.
You’ll then go through the familiar PayPal payment process and head back to Binance.
There are usually no fees involved with this process, but it’s not the same across the board, so do triple check.
Using PayPal to buy Uniswap is a fantastic way to get around banking bans as it shows up as a deposit to PayPal rather than a crypto exchange.
It’s a sneaky little trick that those of you with banks that don’t like crypto will appreciate.
Are Uniswap profits taxed?
Whenever you make some form of profit when holding or trading crypto, you could be liable to pay taxes.
The amount varies from country to country, but for the most part, you can expect to pay.
Most countries will tax your crypto profits as capital gains if you’re a personal trader just making a bit of money for fun.
If trading crypto is your main source of income, then you’ll pay at income tax rates.
Some countries will offer discounts and deductions that allow you to reduce your bill significantly.
Australia, Germany, and Malta all reduce your tax bill to €0 if you hold a currency for a year or more.
You can learn all about crypto taxation with CryptoMeister’s detailed guide to crypto tax!
Is investing in Uniswap a good or bad idea?
If you’re looking to buy Uniswap as an investment, then you’ve got some decisions to make.
It’s not designed as an investment vehicle, meaning that simply holding it and not using it impacts the protocol negatively.
UNI is designed to be used to create and vote on proposals to amend the Uniswap protocol.
By withholding pools of UNI from the voting scene, you’re making the voting pools smaller which could change the outcomes of votes.
That beign said, by taking the coins off the market, the supply will be reduced.
This in turn will increase the price when demand to vote on new protocol upgrades increases.
This would make it a good coin to hodl in your portfolio.
However, UNI doesn’t look like the sort of governance token that will be legitimately worth hundreds of Euros.
Can I day trade Uniswap?
Day trading involves making big bets on small market movements.
All cryptocurrencies are highly volatile, which make them ideal for day trading.
On the 1-minute charts, UNI make significant movements.
Zoom out to the daily and all of that action will have resulted in a net move of perhaps 5%, which is nothing.
This means that if you’ve got the skill, time, and patience, you can do quite well day trading UNI.
It’s worth noting that day trading is incredibly complex and can be dangerous, so only do it if you’ve got experience.
Is Uniswap a good long-term investment?
If you’re looking to buy Uniswap as a long-term investment, then you might be a little disappointed.
Aside from its use as a governance token, it doesn’t do anything else.
This means that its maximum price point is determined by people that wish to vote on proposals.
There are dozens of exchanges out there like Uniswap and they’ve all got their own governance tokens.
While Uniswap is one of the biggest and most popular decentralized exchanges, nobody will want to pay €100 or more fort a single vote.
The only way this would be feasible is if someone wants to have a lot of votes to push through a proposal that benefits them directly.
So, without another real use case, UNI is fairly limited in long-term gains.
The €50-€75 range looks like it will realistically be the top.
If you’re purely speculating on UNI and using it as an investment and it rises above this level, it would be prudent to sell.
It’s not feasible for it to remain so high owing to its lack of purpose.
What’s the supply and demand for Uniswap like?
Uniswap tokens were all pre-mined and the allocation has been set.
60% of the tokens were distributed in 2020 to early users of the platform, with each wallet getting 400 UNI.
There’s a total supply of 1,000,000,000 UNI once the market is fully diluted.
This will be completed in 2024 as the team members, investors and advisors have 40% allocated to them distributed at 10% every year for 4 years.
Once this is completed, there will be an annual inflation of 2%.
UNI’s only use is as a governance token, so the demand for UNI isn’t massive.
A lot of people are using it as an investment, which is a poor decision.
It has no use outside of creating and voting for proposals, meaning that the price will never really rise too high.
The 40% of allocated tokens will inevitably be sold off as the price rises, creating an oversupply in the market.
So for now, the supply and demand is fairly balanced, but as the remaining 40% of tokens hit the market, we’ll see it shift to a saturated market.
Challenges ahead for Uniswap
All crypto projects face an uphill battle in the future, but Uniswap should be able to avoid most of the big problems.
Thanks to its unique setup and operation method, regulators should leave it alone.
But as we see all too far often with crypto, this could change in a heartbeat.
Let’s take a look at some issues that Uniswap could face!
Laws and regulations
At the moment, Uniswap doesn’t fall foul of any regulations.
But as the US and other nations decide to regulate crypto, we could see Uniswap squirm.
It may eventually have to bow down to the regulators, and the whales holding most of the tokens will do what’s best for the longevity of the exchange.
It’s still not clear how governments will tackle decentralized exchanges, but they will get round to it at some point.
If they decide to enforce at least doxing of wallets, then we could see UNI holders forced to vote on whether it goes ahead or not.
It will be a momentous moment for the UNI holder community.
At the moment, 10 addresses hold more than 52% of the total supply of UNI tokens.
This means that these 10 addresses could come together and push through any changes that they wish.
While it’s unlikely that they would do anything to harm the exchange, there is still a chance for it to happen.
It wouldn’t even require all 10 to get involved, as most proposals get around 70,000,000 votes.
One bad actor could, in theory, push through a proposal and destroy the network.
However, there is currently no clear or good way to resolve this issue.
Uniswap is one of the most popular decentralized exchanges in the world.
But, as time goes on we’re seeing more and more other exchanges spring up.
Some have the same features, others have slightly better features.
As the decentralized finance (DeFi) circus carries on, we could see exchanges offering better rewards take the majority of users with them.
Ethereum upgrades and gas fees also hurt Uniswap significantly, with Pancake, running on Binance Smart Chain, looking set to steal the spotlight if fees get too high.
Uniswap operates in the decentralized finance (DeFi) space, giving people the chance to trade cryptos pseudonymously or provide liquidity.
But, the entire scene is a massive circus full of people that are there only to make a quick buck, give the system a bad reputation and head off to the next fad.
This crippled ICOs and gave them a bad name.
Uniswap also has the added issue of the fact that its token is a governance token.
If people don’t use it for its intended purpose, it puts the protocol at the mercy of bad actors.
With a bit of education, people will finally take DeFi seriously and look after the Uniswap protocol by using their tokens to vote.
Uniswap burns brightly
Uniswap has and always will be one of the biggest and best decentralized exchanges.
It’s got a fantastic community and an army of loyal followers.
As long as the governance is taken care of and there’s more importance put on using the UNI token properly, then it will prosper.
It’s going to be hard for another exchange to come along and topple Uniswap, but never say never.
All it takes is enough people to hold their UNI tokens and not use them properly for this to happen.
Frequently Asked Questions (FAQ)
Uniswap’s token is a governance token and it is used for voting. This is its sole purpose, so it’s hard to imagine that people would want to pay €1,000 or more for a single vote.
Around €100 is probably the upper limit, but with cryptomania and bull season in full swing, don’t be surprised if it gets as high as €250.
The UNI token is designed to vote on protocol changes, rather than as a payment currency. If the Uniswap protocol shuts down or is attacked beyond repair, then yes, the UNI token could crash to €0 in value.
However, with proper governance and use of the UNI token, this shouldn’t be an issue. The Uniswap exchange is one of the best around.