Uniswap is a fully decentralized crypto exchange and the most popular DEX which runs on the Ethereum blockchain. Anyone can exchange any ERC token in a few clicks without going through a KYC process. Moreover, it uses a relatively new type of trading paradigm referred to as an automated liquidity protocol.
The team’s goal is to remove the barrier of entry into the financial markets by connecting it with the decentralized finance (DeFi) ecosystem. Recently, Uniswap also achieved a milestone of processing over $100 billion in transactions in regard to cumulative volumes. Today, we will examine Uniswap and its decentralized platform.
Ten Reasons To Buy Uniswap
1. Uniswap is a decentralized exchange where users can swap any token with the famed ERC-20 protocol employed by Ethereum, such as USDT, Dai, and many more. Uniswap makes it super easy to swap an ERC-20 token with another ERC-20 token with a few clicks by connecting MetaMask or other compatible wallets to the exchange.
2. The key feature of any DEX is to provide more privacy protection than centralized exchanges. These protocols are permissionless in that they do not require any KYC (know your customer), and anyone can trade without registering into the market. Hence, Uniswap is a protocol that allows buyers and sellers to exchange ERC-20 tokens in a trustless manner.
3. Compared to other DEX competitors, Uniswap includes a variety of benefits for traders. Impressively, Uniswap does not have listing fees, it does not require any native token, and features an affordable gas cost to process the transaction. Additionally, this project is open-source, and anyone can create any ERC market as long as they have an equal amount of ETH to back it.
Key Features
4. While doing transactions over the Ethereum blockchain, most ERC-20 compatible wallets give you three options such as slow, medium, or fast. Slow is the most cost-effective option, fast is the most expensive, and medium is somewhere in between. Users can choose any of the options according to their affordability, which determines how quickly the transaction is processed and how much of a gas fee it incurred.
5. The decentralized finance (DeFi) market is in huge demand and is exploding nowadays. To tackle this, Uniswap is equipped with an automated liquidity protocol and is one of the most popular decentralized exchanges (DEX). Interestingly, DEXs are powered by liquidity pools. In addition, Total Volume Locked (TVL) is measured by the worth of assets deposited into the exchanges’ smart contracts. According to DeFi Pulse, Uniswap is one of the top leaders in the decentralized exchange category as it holds over $3.7 billion in locked assets.
🦄 @Uniswap just became the first decentralized trading platform to process over $100b in volume – an exciting milestone for DeFi 🚀 pic.twitter.com/hUoM36aG6A
— Hayden Adams 🦄 (@haydenzadams) February 15, 2021
Swap
6. Uniswap’s swap feature authorizes users to swap between Ethereum (ETH) and different ERC-20 tokens. Additionally, any project can build a market by fulfilling it with an equal value of the two ERC-20 tokens being paired.
Token swaps are one of the easiest ways on Uniswap to trade one ERC-20 token for another. Moreover, users simply have to select an input-output token and specify an input amount, and the protocol calculates how much output token the user will receive. This whole process requires just a few clicks, and the user gets the output token in their wallet immediately.
Interestingly, swaps in Uniswap are different from trades on traditional platforms. Uniswap does not use any order book for liquidity or to manage prices. It uses an automated market maker mechanism to provide instant feedback on rates and slippage.
Pool
7. This platform allows anyone to create their own liquidity pools and allows users to earn through providing liquidity. This is often done by depositing tokens into a smart contract, and in return, the user receives pool tokens. Moreover, users can exchange the tokens inside the pools using Ethereum as a channel.
Notably, the centralized exchanges have control and authority to delegate what trading pairs are available. However, the innovative feature of Uniswap is that anyone can create new exchange pairs in a liquidity pool for any token. In addition, these liquidity tokens are themselves tradable assets. Hence, liquidity providers can sell, transfer, or use these liquidity tokens.
UNI Foundation
8. Ethereum’s co-founder, Vitalik Buterin, projected the thought of a decentralized automated market maker. However, Hayden Adams transformed this idea into a reality with the help of the Ethereum community. In addition to this, he also received various grants as well as a grant from the Ethereum Foundation. Furthermore, the recent explosion in DeFi platforms has made Uniswap more valuable and become an important launchpad for the entire DeFi sector.
9. Usually, on centralized exchanges, new projects are required to go through a vetting process before listing any coin or token for trading. Hence, Uniswap was designed to tackle such issues. Further, its decentralized nature helps to reduce the power and control of major exchanges. Since Uniswap is decentralized and globally popular, it is the first choice for a lot of new projects to launch on its platform directly. Which allows users to explore and invest in new tokens to get a first-mover advantage.
Uniswap Technology
10. Uniswap eliminates the traditional order book model and introduces an automated market maker (AMM) protocol that provides open access to the market. Impressively, this helps anyone to swap tokens, add tokens to a pool, or list a token on Uniswap.
Interestingly, Uniswap implemented Sybil which maps on-chain addresses to digital identities. Sybil verifies the user’s Twitter handle with the signed message and matches it with their Ethereum address. Additionally, Sybil users can delegate or vote on governance proposals directly through the interface.
UNI Token
UNI is the governance token of Uniswap, and the entire system utilizes it as a primary token. It is an ERC-20 token that is compatible with the Ethereum ecosystem and ERC-20 wallets like MetaMask and MyEtherWallet. UNI got hype through a retrospective airdrop to the exchange users, either by swapping tokens or by providing liquidity.
Moreover, as part of this initial launch of Uniswap’s governance token, 150 million UNI, accounting for 15% of supply, were distributed to the users and liquidity providers. Hence, each person received 400 UNI tokens, which currently amounts to over $10,000.
Additionally, UNI token holders gain the right to vote on new developments and changes to the platform. Stakers can also participate in key decisions such as usage of the treasury or future upgrades, and more.
Roadmap
According to the official blog, the Uniswap team aims to launch the V3 version. This version is driven by a desire to drastically improve the AMM experience for both swappers and liquidity providers. The team’s focus is to solve current issues such as slippage and to solve capital efficiency issues.
The team also intends to make the Uniswap interface more user-friendly. Additionally, the team has plans to incorporate solutions such as lower latency trading, quick settlement, and cheaper transaction costs. If we summed up these features, it seems that the V3 version might solve the high transaction fees problem and other major issues.
UNI Technical Analysis
Uniswap price, at the time of writing, is $26.92, with a circulating supply of 300 million UNI coins. The maximum supply of UNI is 1 billion. Top exchanges that support the trading of UNI are Binance, Huobi Global, HBTC, and OKEx.
UNI Coin already exploded in 2021 and surged from $4.50 to an all-time high of $32.50. Currently, UNI has fallen through support levels of $29.33 and $28.13, meaning we could see a further drop in price to $23.15.
Conclusion
Uniswap has a range of benefits for traders as compared to other centralized exchanges. Uniswap does not require any listing fees or any native token, and its DEX has one of the cheapest gas costs. This project is open-source and completely permissionless, which means that any person can create any ERC market. Additionally, if Uniswap V3 will solve major issues, such as gas fees, then it can transform the DeFi ecosystem and will be a strong competitor for other top exchanges.
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