Uniswap
Uniswap is a cryptocurrency exchange that employs a decentralized network protocol. It allows automated transactions among cryptocurrency tokens on the Ethereum blockchain via smart contracts. In simple words, it is a computerized liquidity protocol. It is available on blockchain networks powered by open-source software. It differs from cryptocurrency exchanges run by centralized corporations. Hayden Adams, a former Siemens mechanical engineer, created it. In the paragraphs below, we’ll cover the development of Uniswap, how it works, what are some of its critical features of it, how to buy Uniswap, the pros, and cons of Uniswap, the improvements required, its main goals and competitors.
The Development of Uniswap (UNI)
Hayden Adams, an Ethereum developer, created Uniswap. After researching the Ethereum blockchain, he discovered that a decentralized exchange was required. It was due to the need for a way to efficiently trade the various cryptocurrencies as more dApps began to launch on the Ethereum network.
It became a DAO shortly after its inception (Decentralized Autonomous Organization) which means that a group of people lead Uniswap rather than a single entity. In addition, in September 2020, the UNI token was introduced. This token is used to aid in decentralizing the Uniswap protocol’s governance.
The first version of Uniswap was launched on Ethereum in November 2018. The protocol was created as a way to facilitate the trading of ERC20 tokens.
Uniswap: A Decentralized Exchange
Uniswap is a fully decentralized exchange that employs a relatively new trading and financial model known as an automated liquidity protocol. It allows its users to copy and use the code to create their own decentralized exchanges, making it an open source. Moreover, It will enable its users to list tokens on the exchange without charging them.
Key Features
One of the critical features of Uniswap is that it lacks a centralized order book in contrast to conventional exchanges. It instead uses liquidity pools to set prices and complete trades, one that is employed to supply a market with liquidity.
It uses an automated market maker, or AMM–an algorithm that automatically establishes prices per market supply and demand. Its main benefit is that it does not need a central order book. Hence, it is much less susceptible to manipulation.
What makes Uniswap Unique? The “Constant Product Market Maker Model” is a pricing technique that sets it apart from other decentralized exchanges. As a result, trades are the only way for the price of tokens on Uniswap to fluctuate. In essence, Uniswap balances out the value of receipts and allows for their exchange based on how much individuals are willing to pay to purchase and sell them.
Any ERC20 token that can be listed on Uniswap without permission is another fantastic feature of this platform. Anyone can trade a token or add to the liquidity pool once it has its own exchange smart contract and liquidity pool, earning a 0.3% liquidity provider fee. A liquidity pool requires an equal value of ETH and ERC20 tokens to be added.
How to Buy Uniswap
In order to buy it, visit the exchange’s trading platform and type the ticker symbol UNI to buy it. You can either enter the number of tokens you want to buy or the money you want to invest.
Market orders and limit orders are typical options. Limit orders are only processed if the cryptocurrency’s price reaches your specific price, whereas market orders are immediately executed at the best price available.
How to Use Uniswap?
It can be an excellent tool for staking funds and trading freely. Using Uniswap is also very simple, requiring only a few steps.
Buy Ethereum from an exchange
Because Uniswap is built on the Ethereum network, the first step in connecting to it is to purchase Ethereum (ETH). There are numerous exchanges where you can buy Ethereum, but a few stand out if you’re looking for low-cost options with high functionality. Coinbase, Gemini.com, and Crypto.com are among these options.
Send ETH to your Ethereum wallet
The initial step is to send your Ethereum to a wallet. A wallet differs from an exchange because it serves as a repository for cryptocurrency, whereas an exchange allows you to buy and sell cryptocurrency.
Connect your wallet
Connecting the wallet in the upper right corner will be available. Click this and select one of the wallets that are supported. You are ready to use the technology after connecting a wallet to Uniswap.
Pros of Uniswap
It widely spread across the market in 2020 due to its wide range of benefits.
Easy to Use
The practical design of Uniswap is one of the main factors contributing to its popularity. The Uniswap app is very user-friendly compared to other cryptocurrency exchanges. It, therefore, takes little to no time to learn how to use it. On Uniswap, it’s straightforward to connect a cryptocurrency wallet, add cryptocurrency to a liquidity pool, or exchange one cryptocurrency for another.
No Liquidity IssuesÂ
Liquidity is known to be essential for decentralized cryptocurrency exchanges. A decentralized exchange’s low liquidity is terrible for traders and liquidity providers. It might be challenging for traders to exchange the desired cryptocurrencies. It offers a solution to these common liquidity issues. You won’t encounter any liquidity-related problems when using Uniswap.
Fewer FormalitiesÂ
One of the biggest pros of Uniswap is that you don’t have to give any personal information or register to use it. You only need to connect your cryptocurrency wallet to get started trading.
The advantages discussed above have further led Uniswap to Market domination.
Cons of UniswapÂ
Even though Uniswap is dominating the market with its multiple advantages, it still has a few cons.Â
Doesn’t accept fiat money
You cannot purchase cryptocurrency on it using, for instance, US dollars. Decentralized crypto exchanges frequently have this problem, which is why many don’t ask their customers for personal information. You must already have cryptocurrency in a connected crypto wallet to use the exchange. It still causes a lot of trouble. Before using Uniswap, you must purchase cryptocurrency elsewhere. Some users deal with this inconvenience by transferring the cryptocurrency to a wallet, which they then link to it.
Gas Fees
Gas fees are what the blockchain network refers to as transaction fees. Network fees are another name for them. Since it is an Ethereum-based platform, the network’s activity determines how much gas costs.
Due to Ethereum’s popularity, there have been times when the network was highly congested. Gas prices increase due to congestion, which can make using anything based on Ethereum, such as the Uniswap exchange, costly.
Although it has a reputation for charging exorbitant gas prices, this isn’t always the case. When using Uniswap’s trade tool, you can calculate the network fees associated with a transaction.
The Main Goal
Offering end users more ownership and governance rights solely to increase the protocol’s decentralization is the primary goal.
The main objective of the UNI token is to enable holders to vote on various proposals and improvements to advance the platform’s development. It not only boosts public confidence in the Uniswap protocol but also offers a better idea of how to protect user funds.
Technical Data Associated with Uniswap
It runs two separate smart contracts as part of its protocol: an “Exchange” contract and a “Factory” contract. These are decentralized, automated programs created to perform particular tasks when certain criteria are satisfied.
The “Factory” smart contract, in the case of Uniswap, is in charge of adding new tokens to the platform, whereas the “Exchange” contract controls the actual trades and swaps. On the new Uniswap v2 platform, essentially, any ERC20-based token can be swapped for another.
Competitors
There are many other options besides Uniswap. Many decentralized exchanges function similarly. Here are a few illustrations: BurgerSwap, DODO, Curve, and SushiSwap
Running on the Balance Smart Chain, which currently has significantly lower fees than Ethereum, several other exchanges have an advantage over Ethereum. For example, mainly PancakeSwap has been successful as a less expensive substitute for Uniswap.
ConclusionÂ
The cryptocurrency community has long waited for a solution, and now it has one, thanks to the Uniswap team. Users are also more confident due to the automated liquidity protocol’s unique governance system, which uses UNI tokens for ownership, elevating their usage to a new level. In addition, swapping Ethereum-based tokens is now simple and easy.
