Some factors used in making a decision on which decentralized exchange is worth joining are the experiences of those who are already members and the order books of the exchanges. The User Interface of the exchange doesn’t have to be sophisticated. In fact, it is best to have something simple but rewarding.
The good news is that Uniswap has positive reviews from users and its user interface gives every reason to visit the site often. It is a place where tokens built from Ethereum are available for trading so long as the person interested has a web 3 wallet. You can trade straight from your wallet so there is no need depositing first. The assets donated to Uniswap’s pools do not affect the trader’s experience with regard to what is paid for each transaction.
Uniswap is one place where people can exchange their ERC tokens even if they don’t want to do any KYC registrations. Notwithstanding, the exchange’s security is tight such that phishing activities are difficult to be established there. Uniswap also uses smart contracts to provide cheap on-chain deals.
Four months ago, Uniswap stepped up its protocols to the new UniswapV2. There was a need to do this so that ERC20 tokens could be made available by market makers and it also made swapping fast. Nothing changed for those who used to provide liquidity before the upgrade as they can still continue doing so here.
Uniswap started officially in November 2018 after Hayden Adam finished his works on the protocol. Adam was not a professional per se because he still had many things to learn in Solidity and wasn’t even perfect as a developer. He used the small workforce available to him and the $100,000 grant given by Ethereum Foundation to create a functional decentralized exchange.
Uniswap was able to improve its systems to suit the requirements of a proposed Uniswap V2 few months ago after raising $1 million from a seed round that was organized in April last year.
How Uniswap operates
Uniswap does not use order books but instead prefers a market maker that is not influenced by human hands. This means the whole duty of the user is to choose the token to start and end with and leave the hassles with price determination for Uniswap to handle.
It takes place in two easy steps. First of all, you need to join with a web 3 wallet. After that, choose the asset you are giving out in exchange for what you want. For instance, you can give out your ETH to gain DAI. Once this is done, you are good to go. It is Uniswap’s business to pick the price but you will know about it when your balance changes.
Uniswap makes use of liquidity pools to create a place for buying and selling asset pairs. Traders enjoy quotes from the Automated Market Maker (AMM) after they have entered some of the conditions they want.
There is something known as “Constant Product Market Maker Model,” which has remained one of the most preferred options of Uniswap. This product enables Uniswap to cater to the needs of every trader even if there are many orders to handle or the available liquidity is small.
If this must happen, the asset’s price should increase as its demand rises. There is a possibility that the rise in orders will continue due to rallying prices but this is good for liquidity to always be available. In other words, Uniswap tries to provide a lump supply of smart contracts because this benefits traders in that they have to pay only a little for slippage.
To prevent tailgating, traders are given the permission to choose the highest price beyond which an order should not be placed. This prevents a user from being disadvantaged if a miner tries to gain undue advantage of the market based on insider knowledge of pending transactions. Uniswap also presents expiring orders to miners so that they do not have to hold them longer than necessary as some love to do so that they can execute them at a price that is more favorable to make higher profits.
Those that supply liquidity can do that to wherever they wish if they have the collateral needed for the pair involved. For example, assuming a user wants to supply liquidity for DAI/USDC, the collateral given must be the same for DAI and USDC to fulfill the requirements for the provision of Constant Product AMM mentioned earlier.
In return for any liquidity provided, Uniswap gives a liquidity token which states the user’s level of contribution to a pool. It is possible to return the liquidity token and get the collateral it supports whenever you wish.
Uniswap encourages users to supply liquidity by placing a fixed fee of 0.25% on any transaction performed with the contribution. This means as more people participate in opening positions, more fees are deducted and the liquidity providers benefit from them.
Reason to join Uniswap
Uniswap is the ideal choice for beginner traders. Small traders will consider it as their first choice because of low gas fees, lack of native tokens, and nothing is to be paid for listing.
You can find Uniswap as an open-source project on GitHub so anyone who wants to build an ERC market can do so without any other approval provided their ETH reserve is big enough to support it. This is important because it gives the developer the capacity to determine the most fundamental cost of their token.
Uniswap cannot be forgotten when listing popular decentralized exchanges because it is already popular among users that swap DeFi tokens..
Uniswap bridges the gap between DeFi users who are not so well equipped and the market so that they can also enjoy the benefits of exchanging tokens just like their more experienced colleagues. However, kindly note that Uniswap is meant specifically for Ethereum-based assets though it is still possible to trade wrapped cryptocurrencies such as wBTC. However, the likes of Binance Coin, Tezos and other native tokens do not exist there.
One thing to watch out for is if Uniswap will continue to sustain the momentum of trades it presently records. But when we look at how it all started with just $100K, it is compelling to predict that Uniswap’s upcoming features will be breathtaking.