On August 6th, 2020, Uniswap, the most widely used decentralized exchange (DEX) on the Ethereum network, raised $11M in a Series A funding round. The funds were to develop the third version (V3) of the protocol, which will significantly improve capital efficiency and integrate new functions.
This funding round was made possible by leading the DeFi fund USV and well-known tech funds such as a16z and Union Square Ventures.
Interestingly, the funding announcement came just hours after the prevalent DeFi account devops199fan leaked the details on Twitter.
Uniswap currently has more than $59.5 million worth of ETH tokens held in its liquidity pools. It is emerging as a serious contender to be the primary market for DEX liquidity, with numerous projects such as UMA choosing to distribute their tokens via Uniswap pools.
Yesterday’s funding round follows up on an earlier $1.8M seed round in April of 2019. The capital raised in both rounds now indicates that Uniswap is keen on enhancing its protocol and building a better iteration of its DEX.
Even with investors providing capital to the project, there is still room for a potential governance token for Uniswap, which would allow holders to vote on the way the protocol functions.
The DEX Platform Records an Increase in Trading Activity
The just-concluded funding round comes at an exciting time when Uniswap is enjoying a surge in web activity amid a growing DeFi craze that has engrossed the crypto sphere over the past few months.
According to info from Eric Turner, director of research at Messari, Uniswap went from 90K visits in June to 1.42 million in July. Consequently, the protocol registered record-setting growth as trading volume increased from $6.2M to $43M during that period.
While Uniswap’s recent trading volumes are inspiring, the figures involved are still low compared to centralized exchanges, which usually see amounts of about $5.83 billion in a single day.
How Uniswap Differs from Other Exchanges
For a bit of background, Uniswap is a DEX protocol that allows users to convert ETH-based tokens on-chain in a private, safe, and non-custodial way.
Instead of using other books, the DEX utilizes an “automated market maker” (AMM) that sets and balances trading prices depending on how much demand there is for a particular token.
The current Uniswap V2 protocol was launched in May of this year, bringing new features to users such as low-cost transactions, more diversification by liquidity providers, and enhanced safeguards against attacks involving flash loans.