Uniswap Review
Uniswap
uniswap.org
Uniswap Website Review
- Uniswap is a decentralized exchange that facilitates the trading of Ethereum (ERC-20) based tokens.
- UNI is the native governance token that allows owners to participate in the decision-making process of how the platform is run.
- Uniswap was founded by Hayden Adams who is a former engineer at Siemens.
- Uniswap started facilitating traders in 2018, while the UNI token was launched in September of 2020.
- Uniswap has a market cap of $17.8 billion as of January 2022.
Uniswap is by far one of the most popular and widely-used permissionless, decentralized exchanges (DEX) that gives users the ability to trade just about any Ethereum-based tokens, all whilst simply connecting a Web 3.0 wallet. What this means is that they are not required to make any deposits or withdrawals to a decentralized order book.
As a platform, Uniswap provides users access to any ERC-20 token, all through a few simple clicks. This means that no user needs to go through any Know-your-customer (KYC) procedure or worry about custody or even phishing.
Through the utilization of smart contracts, Uniswap also offers autonomous, on-chain transactions with low costs associated with them.
Uniswap Website
The Uniswap website has been developed with minimalism in mind and follows distinctive and unique color tones that differentiate itself from any other offering out there.
On the top navigation bar, the menu is split across multiple website sections, including:
- Ecosystem
- Community
- Governance
- Developers
- Blog
- FAQ
- Jobs
- Launch App
This helps navigate through the overall website with ease the second someone decides to use it.
By clicking on the Launch App option, you can select a cryptocurrency network, including:
- Ethereum
- Polygon
- Optimism
- Arbitrum
After that, you can simply connect a wallet and swap just about any token.
Additionally, at the bottom of the page, you have several more options available to you, including Swap, Pool, Vote, and Charts.
In terms of the wallets you can connect, you can use:
- MetaMask
- WalletConnect
- Coinbase Wallet
- Formatic
- Portis
By clicking on the three dots on the right side of the screen, you can gain access to an additional menu and functionalities, such as changing the language, switching to a light or dark theme, accessing the help center, or reading over all of the Uniswap documentation with ease. In the Vote tab, you can view a list of all of the proposals, including the ones which were approved (EXECUTED), the ones which were canceled, and the ones that were not approved (DEFEATED).
In the Charts tab, you can view the total value locked (TVL) in Uniswap at the time of your arrival, as well as the total volume within the span of the last 24 hours.
Additionally, you can view the fees incurred within the last 24 hours, alongside the top tokens. The top tokens can be categorized by price, price change, 24-hour volume, and locked total value.
Moving back to the main website, as you scroll further down, you can view the trading volume, the all-time trade amount, the number of integrations, and the number of community delegates.
Additionally, you can view the Uniswap ecosystem, where you can easily browse and search up all and any projects that are built on the Uniswap Protocol. For developers who are building something through Uniswap, they can also submit their projects within this menu.
Here, you have tools, wallets, aggregators, and just about any decentralized application (dApp) developed or integrated with Uniswap, some of the most popular ones being:
History of Uniswap
Uniswap initially launched in November of 2018 and was founded by Hayden Adams, who is a developer that received a $100,000 grant from the Ethereum foundation to develop the decentralized exchange. In April of 2019, Uniswap closed a $1 million seed round which was led by Paradigm.
Over time, Uniswap managed to raise $11 million in a Series A round, after which they launched their own governance token known as the UNI token.
Since then, Uniswap upgraded to Uniswap V2 in May of 2020 and eventually Upgraded to Uniswap V3 in May of 2021, each upgrade delivering significant improvements, such as Layer-2 scaling, Optimism as well as other ways through which the transaction cost was cut down.
What is Uniswap V2?
Uniswap V2 is the second iteration of the on-chain exchange, which enabled new features and improvements to the DEX, including:
- ERC20 / ERC20 Pairs.
- Price Oracles.
- Core / Helper Architecture.
- Technical Improvements.
- Path to Sustainability.
- Testnet and Launch Details.
What is Uniswap V3?
Uniswap V3 is the third and latest iteration of the on-chain exchange, which enabled new features and improvements, such as:
- Concentrated Liquidity.
- Multiple fee Tiers.
- The ability for liquidity providers to provide liquidity up to 4000x capital efficiency.
- Layer-2 Scaling.
- Optimism.
Uniswap Functionality
Uniswap removes order books and leverages what is known as an automated market maker (AMM) model. What this means is that, instead of specifying the price to buy or sell at, users can select an input, and an output token, where Uniswap can provide the best possible market rate out there.
To take advantage of this functionality and actually use the Uniswap website, all a user has to do is connect a Web 3.0 wallet, the most popular one being MetaMask, for example. Afterward, they can select the asset they are interested in trading and the asset they would like to receive. Uniswap then automatically processes the transaction and updates the wallet balance.
What are Traders on Uniswap?
Uniswap essentially utilizes global liquidity pools with the intention of creating unique markets for any two assets. Through the utilization of the aforementioned automated market maker (AMM) model, the exchange can quote prices to the end-user in accordance with specific rules.
Specifically, Uniswap utilizes a variation known as the Constant Product Market Maker Model, mainly because it enables the exchange to provide liquidity consistently.
The sport price for assets increases when the desired quantity increases as a result. As such, Uniswap essentially always manages to maintain an aggregate supply within its smart contracts.
Traders are allowed to specify a maximum price whenever they place an order, so if a miner front runs an order, the user cannot really be forced into accepting a price that is worse for them.
What are Liquidity Providers on Uniswap?
Liquidity providers are responsible for the process of supplying capital to a pool through submitting the collateral for both sides within a market. This means that if someone wants to supply the capital to a specific market, they need to submit an equal amount of each token to maintain the Constant Product AMM.
Once an LP (Liquidity Provider) ends up supplying liquidity, Uniswap grants users what are known as liquidity tokens, which help in maintaining a record of how much of any liquidity pool a specific user is responsible for. With that in mind, liquidity providers redeem these liquidity tokens for the underlying collateral at any point they want to.
With the goal of incentivizing liquidity providers, Uniswap ends up charging a 0.3% fee on each transaction that occurs. These are fees, which are automatically added to the market once a transfer occurs, which results in deeper spreads.
Liquidity providers get ownership over a large pool of capital, and the more transactions a market has, the more fees are collected, and as such, the more income a market maker can earn when they redeem their liquidity tokens.
Uniswap V3 shifted this slightly by providing accounts with different levels of risk when it comes to providing liquidity, and each tier has different percentages, ranging from 0.05%, 0.30%, and 1.00%. The liquidity providers can select which fee tier they provide liquidity for.
What is Uniswap Staking?
Due to the fact that it is one of the most popular decentralized exchanges out there, Uniswap is also a solid platform for users that want to profit out of the liquidity pools. Any earnings that are gained on Uniswap are gained from staking tokens.
Typically, within a liquidity pool, the standard trading fee is shared across all of the members. For a pool to be profitable, it needs to have very few liquidity providers but a large number of traders. Investing in these types of pools will give more profit to the providers.
However, this is an investment opportunity that has a high level of risk associated with it. Typically, the losses can be estimated by comparing two parameters: the price of a token and the change in the total liquidity value.
The UNI Token Explained
Uniswap has its own native cryptocurrency token known as the UNI token, which plays a major role in the maintenance and operation of the network.
This is because any user who holds the UNI token can help in the governance of the protocol and vote on proposals that can further develop the protocol and improve the overall ecosystem.
The Uniswap team ended up creating this token to allow the users to own and operate Uniswap, which would help the platform grow into a self-sustaining model.
When the token was introduced, Uniswap even sent 400 UNI tokens to every user on September 1, 2020, and rewarded the users even further who contributed towards liquidity pools with additional tokens.
Note that if a user intends to submit a proposal to the Uniswap network for any future developments, they need to own a minimum of 1% of the total supply of UNI tokens.
Pros and Cons of Uniswap
Pros of Uniswap
- Uniswap lets users swap all and any ERC-20 based tokens.
- Users can get high-interest returns when they decide to become liquidity providers.
- The UNI token helps in the development of the protocol.
- There are no requirements when it comes to identity verification, and users do not need to sign up for an account to use the website.
- The website has a solid design that's simple to understand even by newcomers.
Cons of Uniswap
- There can be high gas fees or transaction costs.
- There is a risk of impermanent loss within the liquidity pools.
- Some users that are newcomers to crypto might feel more comfortable with centralized exchanges.
The Bottom Line
Uniswap is an excellent decentralized exchange offering that has gone through numerous upgrades and improvements over time and is by far one of the most popular options out there when it comes to trading Ethereum (ERC-20) based tokens.
Aside from the potentially high transaction costs and gas fees, it offers high-interest returns to liquidity providers, and its UNI token plays a major role in its future developments.
Overall, it is a solid platform that has an excellent website that just about anyone can get comfortable with using.
Frequently Asked Questions (FAQs)
What wallets are supported on Uniswap?
Uniswap supports the following wallets: MetaMask, WalletConnect, Coinbase Wallet, Formatic, and Portis.
How do you connect your wallet to Uniswap?
To connect your wallet to Uniswap, all you have to do is go to app.uniswap.org, click on "Connect to a Wallet" in the top right corner of the screen, select your preferred wallet, and sign into it if you are not already signed in. Afterward, just verify that you want to connect your wallet to Uniswap, and you can begin using the exchange.
What tokens can I buy on Uniswap?
You can buy many ERC-20 based tokens on Uniswap, as it supports all Ethereum tokens.
However, to give you a bit more of a perspective, the most popular tokens supported on the platform are Ethereum (ETH), Enjin Coin (ENJ), Yearn.finance (YFI), Basic Attention Token (BAT), Uniswap (UNI), Synthetix (SNX), Dai (DAI) and USD Coin (USDC).
Is Uniswap a safe exchange to use?
Uniswap operates as a decentralized exchange and liquidity pool built on top of Ethereum, which means that it has the same security measures in place as the Ethereum blockchain does.
Due to the fact that there is no central server that can be hacked, and due to the fact that the exchange does not store any funds or require any account creation, hackers cannot gain access to user funds. If you keep your wallet safe, then Uniswap as an exchange will be safe for you to use.
What are the fees of Uniswap?
Uniswap charges a 0.3% fee for all swaps. This fee does not go to Uniswap but is allocated to the liquidity providers as an incentive for them to provide assets to the protocol.
