The cryptocurrency Uniswap (UNI) is one of the most talked-about in 2021. If you’ve been keeping an eye on the charts, you’ve probably noticed how swiftly this cryptocurrency is rising.
For years, centralized exchanges have served as the backbone of the bitcoin industry. They provide quick settlement times, a large trade volume, and ever-improving liquidity.
However, a parallel universe is emerging in the form of trustless protocols. To enable trade, decentralized exchanges (DEX) do not require intermediaries or custodians.
In terms of performance and user experience, most DEXes could be better.
Many developers have been considering novel approaches to constructing a decentralized exchange. Uniswap is one of the first to do so. The way Uniswap works is a little more complicated to grasp than a standard DEX. We’ll soon find, though, that this model has several appealing features.
As a result of this invention, Uniswap has grown to become one of the most successful Decentralized Finance (Defi) ventures.
What is Uniswap
Uniswap is a completely distinct form of exchange that is fully decentralized – that is, it is not owned and run by a single company – and uses an automatic liquidity protocol, which is a very new type of trading mechanism.
The Uniswap platform was created in 2018 on the Ethereum blockchain, the world’s second-largest cryptocurrency project by market capitalization, making it interoperable with all ERC-20 tokens and infrastructure.
Uniswap is also open source, which means that anyone may copy the code and use it to build their own decentralized exchange. Users can even list tokens on the exchange for free. This is a significant difference because most centralized exchanges are profit-driven and demand exorbitant fees to list new coins.
Users maintain control of their funds at all times because Uniswap is a decentralized exchange (DEX), as opposed to a centralized exchange, which requires traders to give up control of their private keys so that orders can be logged on an internal database rather than executed on a blockchain, which is more time consuming and expensive. Also, read Royal Q trading BOT
Why Choose Uniswap?
Uniswap outperforms other decentralized exchanges due to its simple functionalities and low marginal fees. It does not require native tokens, has no listing fees, and has a cheap gas cost when compared to other Ethereum-based decentralized exchanges.
The project’s permissionless nature allows users to develop the ERC-20 market as long as they contribute an amount equal to Ethereum to do so.
You’re probably wondering what sets Uniswap apart from other DEXs, so we’ve outlined some of its key features that have recently acquired a lot of traction.
How Uniswap works
In the absence of an order book, Uniswap departs from standard digital exchange design. It employs a model known as Constant Product Market Maker, which is a variation of the Automated Market Maker concept (AMM).
Smart contracts are called automated market makers to retain liquidity reserves (or liquidity pools) against which traders can trade. Liquidity providers contribute to these reserves.
Anyone who deposits the equivalent of two tokens in the pool can be a liquidity provider.
Liquidity providers establish a market by depositing two tokens of equal value. Either ETH and an ERC-20 token or two ERC-20 tokens can be used. Stablecoins like DAI, USDC and USDT are widely used in these pools, but they are not required.
Liquidity providers are compensated with “liquidity tokens,” which represent their portion of the overall liquidity pool. These liquidity tokens can be exchanged for the share of the pool that they represent.
Also, read Pancake Swap Review
Uniswap is a decentralized exchange that makes markets using liquidity pools (LPs) rather than a traditional order book. There are no order books, centralized parties, or central facilitators in these pools, which are established by smart contracts that permit token trading and liquidity addition.
Users of Uniswap pool two assets, which are subsequently exchanged against each other, with the price defined by the ratio of the two assets. By adding an equal value of each token to the LP, anyone with ERC-20 tokens can offer liquidity to these pools.
Here are the two major fees requires in Uniswap
- Trading fees
- Withdrawal fees
Uniswap Trading fees
Many exchanges levy taker fees and maker fees from the takers and the manufacturers, respectively. The most common method is to just charge “flat” costs.
This exchange charges a 0.30 per cent fixed fee for every trade. This is slightly higher than the global average for the industry (arguably 0.25 per cent). So, in terms of trading fees, Uniswap has a reasonable offering.
Uniswap Withdrawal fees
There are certain exchanges that charge minimal trading fees but then slap you with exorbitant withdrawal fees when you leave. Because you can’t get out without paying withdrawal fees once you’re in.
This conversation, on the other hand, is on the opposite end of the spectrum. When you make a transaction, they just charge you the network fees. The industry standard for BTC withdrawal fees is 0.000812 BTC per transaction.
The network fees fluctuate from day to day, however, they are typically 15-20% of the worldwide industry average BTC withdrawal fee.
As a result, this exchange has a competitive offering when it comes to withdrawal costs.
How to Buy Uniswap
- Open an Online Account
- Buy a Wallet
- Make Your Purchase
Open an Online Account
You don’t have an ERC-20 token to exchange for Uniswap? That’s not a problem; you can still purchase and trade UNI through controlled exchanges. A cryptocurrency exchange (sometimes known as a “cryptocurrency broker”) provides you with access to a trading platform where you can place buy and sell orders for cryptos. Your broker will execute your order according to your instructions after you place it, normally in exchange for a fee or commission.
Buy a Wallet
One of the most serious issues with centralized exchanges is that they provide hackers with a single point of failure, making theft easier. For example, the world’s largest cryptocurrency exchange Binance was hacked in 2019, with criminals stealing $40 million in Bitcoin from on-exchange wallets.
By storing your tokens in a private wallet, you can safeguard yourself and your investment. A cryptocurrency wallet is hardware or software that protects your tokens when you’re not using your exchange account. You should get a hardware wallet if you want the utmost level of security. A software wallet can work for you if you’re looking for a free choice.
Make Your Purchase
You can make your first purchase on your brokerage’s exchange after you’ve done setting up your wallet.
Uniswap market cap
The current market capitalization of Uniswap is 6,419,417,549 USD with a circulating supply of 242,962,886 UNI.
Does Uniswap have a 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.
Uniswap, as the most widely used DEX, provides a convergent platform for many users to profit from a liquidity pool. Staking their tokens is how they make money. Uniswap received its present locked value through investor deposits, during a popularity rise.
You must recognize that an increase in blockchain project involvement is not a measure of profitability.
To be more profitable, a pool should have a small number of liquidity suppliers but a large number of traders. Investing in such a pool will offer a higher return than other pools that do not meet this requirement.
However, just like any other business transaction, this investment opportunity comes with its own set of risks. As an investor, you must routinely estimate potential losses due to fluctuations in the value of the token you have staked over time.
Many people are frequently concerned about the security of every deal. When it comes to Uniswap, though, you can feel assured that they have your back. People prefer decentralized exchanges to their centralized equivalents for this reason.
The exchange ensures that its servers will run constantly by spreading out. This strategy also protects the exchange from cyber-attacks on its systems. It would be much easier for criminals to compromise them if they were more concentrated. However, because the servers are not in a secure location, even if an attacker succeeds in compromising one of them, the exchange will continue to function normally.
Another positive aspect of Uniswap security is that the exchange does not touch any of your assets, regardless of the trades you make. Even if hackers get access to all of the servers and the exchange, your assets will be safe because they are not stored on the platform.
In this aspect, they are superior to centralized exchanges since if a hacker gains access to such platforms, they can take all of your assets on the platform unless you have withdrawn them all after trading, which is improbable.
Can I invest in Uniswap?
Uniswap could be an excellent addition to your portfolio if you believe in decentralized finance. Uniswap’s V3 upgrade not only makes bitcoin on the platform even more liquid, but it also makes it the most liquid decentralized exchange.
Where to Invest in Uniswap
eToro and Coinbase are the two most popular centralized exchanges that support the Uniswap coin. It’s simple to register an account with either of these exchangers; all you have to do is enter your email address and create a password. You’ll need to authenticate your identity after you’ve created an account. A photo of your driver’s license, your Social Security number, your home address, and your date of birth are usually required at exchanges.
Alternatively, you can invest in UNI tokens using Uniswap’s exchange. All you have to do to use the platform is connect your Ethereum wallet to Uniswap’s website.
Uniswap has succeeded in offering a much-needed DEX experience that traders had been yearning for a long time in a world where hurdles and barriers to access continue to impede adoption. According to numerous measures, it has grown to be the largest DEX, with developers continuing to innovate and improve the user experience.
With that being said, it should be noted that the current version of the software only supports Ethereum-based assets. While it is possible to wrap cryptocurrencies such as Bitcoin (WBTC) and trade them on Uniswap, other protocols are not currently supported by the Uniswap exchanges.