What Is Uniswap (UNI)? The Token Behind DeFi’s Largest DEX

Uniswap is one of the most influential decentralized exchanges (DEXs) in crypto, enabling anyone to swap ERC‑20 tokens without centralized intermediaries. Its governance token, UNI, sits at the center of the Uniswap ecosystem, powering protocol governance and shaping how value flows through the network. This guide explains how Uniswap works, where UNI fits in, what’s changing in 2025, and how to use and secure UNI effectively.

Uniswap in a Nutshell

Uniswap is an automated market maker (AMM) built on Ethereum and multiple Layer 2s. Instead of order books, Uniswap uses liquidity pools—smart contracts holding pairs of tokens—where prices adjust algorithmically as traders swap. Liquidity providers (LPs) deposit assets into pools and earn fees paid by traders.

Uniswap pioneered concentrated liquidity in v3, allowing LPs to allocate capital within specific price ranges to improve capital efficiency. For a deeper dive into AMM mechanics and concentrated liquidity, see the official Uniswap documentation at the protocol overview and v3 concentrated liquidity sections. Uniswap Docs and Concentrated Liquidity Overview

Uniswap consistently ranks as the largest DEX by volume and liquidity across chains. You can track up‑to‑date usage and market share on analytics platforms like DeFiLlama’s Uniswap page.

What Is UNI?

UNI is the governance token for the Uniswap protocol. Holders can propose and vote on changes to the protocol—everything from deploying on new chains to adjusting fee parameters and treasury allocations. Governance is executed via on‑chain proposals and community participation through the Uniswap DAO’s forum and interfaces such as gov.uniswap.org and Tally’s Uniswap DAO dashboard.

Key properties of UNI:

• It represents governance power, not protocol ownership or claims on revenue by default.
• Distribution was initially via an airdrop, liquidity mining, and treasury allocations; UNI now has a fixed supply. Token details in Uniswap Docs

How Uniswap Works (AMM, Liquidity Pools, and Fees)

• Swaps: Traders interact with pools via routers that optimize routes across multiple pools and chains. Protocol Concepts
• Liquidity provision: LPs deposit token pairs and choose fee tiers (e.g., 0.05%, 0.3%, 1%) based on expected volatility.
• Concentrated liquidity: LPs select price ranges; positions are more capital efficient but require active management.
• Protocol fee switch: Uniswap has a governance‑configurable “fee switch” that could direct a portion of pool fees to the protocol treasury. Its design, scope, and activation are matters of ongoing DAO governance. Governance and Fee Switch

UNI’s Utility: Governance, Upgrades, and the DAO

UNI governs:

• Deployments to new chains and upgrades (e.g., v3/v4 decisions)
• Treasury management and grants via the Uniswap Foundation
• Protocol parameters like fee tiers and potential fee‑sharing mechanisms

The Uniswap Foundation coordinates grants and governance education while maintaining decentralization. Learn more at the Uniswap Foundation.

For decentralized participation, holders review proposals in the Uniswap Governance Forum and vote on‑chain via interfaces like Tally.

What’s New in 2024–2025: v4, Cheaper L2s, and Regulatory Pressure

• Uniswap v4 progress: v4 introduces “hooks”—modular extensions that enable features like dynamic fees or on‑chain limit orders—aiming to make Uniswap more flexible. v4 development continues, with community testing and feedback following the Dencun upgrade on Ethereum. Read the announcement and vision at the Uniswap v4 blog post.

• Cheaper Layer 2 transactions: Ethereum’s Dencun upgrade, particularly EIP‑4844 (proto‑danksharding), significantly reduced L2 data costs, improving user experience for swaps and LP management across chains like Arbitrum, Optimism, and Base. Learn more from the Ethereum Foundation’s Dencun overview and the EIP spec for EIP‑4844.

• Regulatory landscape: In April 2024, Uniswap Labs disclosed receiving a Wells Notice from the U.S. SEC regarding aspects of its business. The situation underscores ongoing regulatory scrutiny of DeFi and may affect protocol features or product interfaces. See coverage at CoinDesk.

These developments matter for UNI holders because governance may steer how the protocol adapts—e.g., the design of v4 hooks, cross‑chain deployments, and the parameters of any protocol fee mechanisms.

Risks to Understand

• Impermanent loss: LPs are exposed to price divergence risk; concentrated positions amplify both returns and risk. Concentrated Liquidity Risks
• Smart contract and MEV: While Uniswap contracts are extensively audited and battle‑tested, on‑chain execution is subject to MEV and network conditions. Protocol Concepts
• Governance risk: Delegation concentration or low voter turnout can skew outcomes; staying informed and participating mitigates this.
• Regulatory risk: Actions against interfaces or related entities can affect liquidity and user access, even if the protocol remains on‑chain and permissionless. CoinDesk coverage

How to Use UNI: Acquire, Delegate, and Vote

• Acquire UNI: UNI is available on centralized exchanges and DEXs. If you use a DEX, ensure you connect to the official Uniswap interface or a trusted aggregator.
• Self‑custody: Store UNI in a wallet you control. For long‑term governance participation, prioritize security and reliable signing.
• Delegate: UNI follows a delegation model—if you don’t actively vote, delegate to a trusted representative. You can delegate on‑chain via governance portals like Tally.
• Vote: Review proposals on the Uniswap Governance Forum and cast votes during on‑chain voting periods.

Best Practices for Self‑Custody and Governance

• Use hardware signing for governance votes and treasury interactions to reduce key‑theft risk.
• Separate hot wallets for day‑to‑day swaps from cold storage for long‑term UNI holdings.
• Verify contract addresses and proposal links via official sources before interacting. Uniswap Docs and Uniswap Governance Forum

Where OneKey Can Help

If you’re participating in Uniswap governance or holding UNI over the long term, secure key management matters. OneKey hardware wallets focus on:

• Offline, hardware‑isolated private keys and secure transaction signing
• Multi‑chain support (Ethereum and major Layer 2s), making it straightforward to sign governance transactions across networks
• Open‑source approach and a simple user experience that reduces operational friction for DeFi participants

By combining OneKey’s offline security with Uniswap’s on‑chain governance interfaces, you can vote, delegate, and manage UNI positions with minimized attack surface while retaining full self‑custody.

Final Thoughts

Uniswap remains a cornerstone of DeFi liquidity and innovation, with UNI as the lever for community‑driven evolution. From v4’s modular hooks to cheaper L2 execution and heightened regulatory attention, 2025 continues to be a pivotal year. If you hold UNI, stay engaged in governance, understand LP and market risks, and secure your participation with robust self‑custody practices.

This article is for educational purposes and not financial advice. Always conduct your own research using primary sources like the Uniswap Docs, Uniswap Governance Forum, Uniswap v4 overview, and broader ecosystem updates such as the Ethereum Dencun mainnet post.