What is Uniswap and how does it work
                     What is Uniswap and 
how does it work
One of the best-known Decentralized exchange in the blockchain 
world is Uniswap, and it is not for less, because this protocol has 
become one of the largest DEXs in the crypto ecosystem, with a 
locked value that amounts to 5 billion dollars. With this, Uniswap 
becomes one of the main contenders for centralized 
solutions, and leaves behind the belief that this type of 
technology could not become truly viable.Uniswap clone
But how has Uniswap achieved this? What technology is 
behind its design? You will learn this and much more below.
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What is Uniswap?
Uniswap is a DEX (Decentralized EXchange or Decentralized 
Exchange), which allows you to exchange your cryptocurrencies 
for others, using smart contracts on the Ethereum network. This 
fact already tells us one thing: Uniswap works with ERC-20 
Ethereum tokens . Let us remember that an ERC-20 token is a 
type of standard token within Ethereum and there is a great 
variety of these types of tokens. In fact, there are currently more 
than 420 thousand different ERC-20 tokens on Ethereum, which 
gives us an idea of  the huge ecosystem that exists. It is 
precisely this point that led Uniswap to its immense 
success: there is a huge community that needs this 
exchange functionality and, if you can make money with 
it, so much the better.
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However, as Uniswap only works with ERC-20 tokens, it is very 
limited in functionality. For example, direct trades cannot be 
made using other cryptos, such as Bitcoin or Bitcoin Cash. To 
overcome this limitation, other projects have dedicated themselves to 
creating ERC-20 tokens that represent these other cryptocurrencies. 
This is done by creating ERC-20 tokens pegged 1:1 with that 
specific crypto, or using other means. A good example of this is 
RenBTC, where RenBTC is an ERC-20 token pegged 1:1 to the value of 
Bitcoin, and guarded by a decentralized network of nodes. Thus, each 
RenBTC token can be exchanged 1:1 with BTC (except for a small 
commission) and, you can be sure that it will always be so.
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Who created Uniswap?
The idea that shaped Uniswap began in the mind of 
Vitalik Buterin in a paper posted on the Ethereum 
Research forum. Under the name "Improving front running 
resistance of x*y=k market makers", Buterin showed how 
Ethereum and its smart contracts could be used to build 
advanced financial systems for market makers. This thread 
created a huge discussion about the possibilities, among which 
one answer stands out, that of Hayden Adams. Adams was a 
young developer in the Ethereum community, who was working 
on a market maker implementation like the one shown by 
Buterin. decentralized exchange script
How does Uniwap work?
Uniswap is now much more than just a DEX. First of all, we have 
that Uniswap was created as an AMM (Automated Market 
Maker) protocol. This means that Uniswap is able to enable its 
users to create markets from which third parties can benefit. 
The creation of these markets is self-sustaining, allowing the 
protocol to generate income that serves to encourage the 
injection of liquidity in exchange for a small interest to its 
investors.  They are the well-known pools, where 
investors inject tokens to increase its liquidity, and as it 
is used by third parties, these transactions generate 
commissions that are used to maintain the protocol and 
give rewards to investors in said pool.It is, in a few words, 
the germ of the well-known liquidity mining.
Liquidity control in the pool
Now, at this point we can say that liquidity pools are the heart of 
Uniswap. The creation and management of them is what 
allows Uniswap to provide all the services for which it was 
designed. But also, it is the "hook", that which attracts 
investors to invest in Uniswap with the promise of making a 
return on their investment. Let us remember that each token 
in a liquidity pool is an opportunity for investors to obtain 
rewards.This is possible because your tokens are used to carry out 
trades and other operations that generate commissions within 
Uniswap. From these commissions, the profits come both for the 
development of the protocol and those that go to the investors in 
each pool. Thus, as a pool has a lot of use, the greater the profits it 
generates in relation to its liquidity.
Oracles and commissions
Oracles also have an important role within Uniswap, as the 
platform needs information about the price of tokens that are on 
its platform. On Uniswap, this feature is controlled by Time Weighted 
Average Price (TWAP) oracles. This type of oracle is capable of 
offering information about the different tokens within Unsiwap, 
and feeding the system to recognize and configure the prices 
within the protocol. This function of the oracles is fundamental because 
the system of commissions and rewards of the Uniswap protocol depends 
on it. 
In the current V3 of Uniswap, the system is maintained and has 
become much finer and more configurable. For example, TWAP 
oracles have been made more efficient in order to avoid unnecessary Gas 
expenses. At the same time, the commissions in V3 have been adjusted to 
allow for so-called flexible commissions. In this way, LPs have three 
different types of commissions per pair: 0.05%, 0.30% and 1.00%. 
In this way, LPs can better adapt to the volatility of the pairs they 
trade with.
What is the UNI token or Uniswap Coin?
The arrival of competitors like SushiSwap (a clone of Uniswap), with 
its application of yield farming thanks to its SUSHI token, made the 
SushiSwap community respond, and the best response was to 
launch its own token: the UNI token or Uniswap Coin. Thus, on 
September 16, 2020, Uniswap announces the launch of this new 
token thought of three fundamental points:
1. Offer a new reward mechanism for participating in 
Uniswap pools and services.
2. Reward those who believed in the project from the 
beginning.
3. Allow for a more decentralized on-chain governance 
system.
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