Uniswap is a leading decentralized crypto exchange that runs on the Ethereum blockchain.

Uniswap, which launched in November 2018, was one of the first decentralized finance (or DeFi) services to acquire considerable momentum on Ethereum. Since then, a slew of other decentralized exchanges have debuted (including Curve, SushiSwap, and Balancer), but Uniswap remains by far the most popular.

Why is Uniswap Different?

There are two main types of cryptocurrency exchanges: centralized and decentralized. If you’re relatively new to crypto investing, you’re probably more familiar with centralized exchanges like Coinbase.

Centralized exchanges serve as a go-between for buyers and sellers. Know-your-customer (KYC) requirements are common, requiring users to verify their identities by inputting personal information. Many investors utilize custodial cryptocurrency wallets, which allow them to leave their crypto assets on the exchange. In addition, they frequently have a limited amount of coins to trade.

Uniswap is a completely different type of exchange that‘s fully decentralized – meaning it isn’t owned and operated by a single entity – and uses a relatively new type of trading model called an automated liquidity protocol.  

Traders can swap tokens directly with one another. DEXs use smart contracts to facilitate trades and don’t use custodial wallets. And instead of the more traditional order books with a buyer and a seller, most DEXs use liquidity pools.

How Uniswap works

Uniswap is made up of two smart contracts: one for “Exchange” and another for “Factory.” When particular criteria are satisfied, these are automated computer programs that are meant to do specified duties. The factory smart contract is used to introduce new tokens to the platform in this case, while the exchange contract handles all token exchanges, or “trades.”

Any ERC20-based token can be swapped with another on Uniswap platform.

By supplying tokens to Uniswap liquidity pools, users can earn rewards while enabling peer-to-peer trading. Anyone, anywhere, can supply tokens to liquidity pools, trade tokens, or even create and list their own tokens (using Ethereum’s ERC-20 protocol). There are currently hundreds of tokens available on Uniswap, and some of the most popular trading pairs are stablecoins like USDC and Wrapped Bitcoin (WBTC).

ERC20 tokens are the most prevalent sort of Ethereum-based token. They’re fungible by nature, which means they can’t be distinguished from one another. For instance, if I have 50 bricks of the same size and color, it makes no difference which one I give you. Similarly, if I have 50 ERC20 tokens, it makes no difference which one I give you. This contrasts with ERC721 tokens which are non-fungible tokens (NFTs).

How to use Uniswap

In order to use Uniswap, all you need is an Ethereum wallet and a bit of ETH (which you’ll need to pay for gas fees).

You will need is to make sure you already have an ERC-20 supported wallet setup such as MetaMask, WalletConnect, Coinbase wallet, Portis, or Fortmatic.

Gas payments vary in price depending on how many people are using the network. Most ERC-20 compatible wallet services give you three choices when making a payment over the Ethereum blockchain: slow, medium or fast. Slow is the cheapest option, fast is the most expensive and medium is somewhere in between.

UNI token

UNI, Uniswaps’ native token, is a governance token. This grants holders the ability to vote on future platform innovations and modifications, such as how newly created tokens should be allocated to the community and developers, as well as any fee structure adjustments.

Unlike other decentralised exchanges, UNI tokens allow holders to trade in any two ETH-based crypto coins, which is termed as a “swap”. The action is seen as a more liquid way of exchanging large amounts of crypto.

As of the time of writing this post, according to coinbase the current price is $15.16 per UNI. Uniswap is 66.29% below the all time high of $44.97. The current circulating supply is 627,300,766.975 UNI.

Should you buy UNI

As the global crypto ecosystem develops, it’s possible that volumes on decentralized crypto exchanges may skyrocket. Indeed, the fact that the global crypto market is already close to $2 trillion shows that the flood of new investors in the crypto area may continue.

Of course, transaction volumes are a key driver of the value of the Uniswap DEX as well as UNI token.

If you believe in the decentralized finance industry, Uniswap may be a great addition to your portfolio.

When compared to other centralized exchanges, Uniswap offers a number of advantages to traders. There are no listing fees or native tokens required by Uniswap, and its DEX has one of the lowest gas prices. This project is totally open-source and permissionless, which implies that anybody may construct an ERC market. Furthermore, Uniswap V3 has the potential to reshape the DeFi ecosystem and become a powerful rival for other prominent exchanges if it can resolve major concerns such as gas costs.

And always remember, as with any investment, you must be prepared to lose what you put in when investing in crypto.

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