Contents<\/p>
- 1<\/span> Uniswap Background<\/a><\/li>
- 2<\/span> How Uniswap Works?<\/a><\/li>
- 3<\/span> Why Should I Choose Uniswap?<\/a><\/li>
- 4<\/span> What Uniswap Offers?<\/a><\/li>
- 5<\/span> Introduction to Uniswap Token\u00a0(UNI)<\/a><\/li>
- 6<\/span> Uniswap Staking<\/a><\/li>
- 7<\/span> Uniswap Capital Efficiency<\/a><\/li>
- 8<\/span> How Uniswap Makes Money?<\/a>
- 8.1<\/span> Previous UNI Disputes<\/a><\/li>
- 8.2<\/span> Uniswap Security<\/a><\/li><\/ul><\/li>
- 9<\/span> Conclusion<\/a><\/li><\/ul><\/div>\n
Uniswap Background<\/span><\/h2>\n
Hayden Adams founded Uniswap in 2018. Hayden was a young independent developer at that time. After receiving $100k from the Ethereum foundation, Hayden successfully built an effective decentralized exchange that gained significant growth after its launch, alongside his small team.<\/p>\n
Earlier in 2019, Paradigm closed a $1 million seed round with Uniswap. Hayden used that investment to release V2 in 2020. Uniswap has raised $11 million from multiple seed rounds, making it the top project on Ethereum.<\/p>\n
How Uniswap Works?<\/span><\/h2>\n
Being a decentralized exchange, Uniswap excludes centralized order books. Instead of highlighting specific prices to buy and sell. Users can insert the input and output tokens; meanwhile, Uniswap highlights the reasonable market rate.<\/p>\n
Image Courtesy of Uniswap.org<\/p><\/div>\n
You can use a web 3.0 wallet such as Metamask to conduct the trade. At first, select the token to trade and the token you want to receive; Uniswap will instantly process the transaction and automatically update your wallet\u2019s current balance.<\/p>\n
Why Should I Choose Uniswap?<\/span><\/h2>\n
Thanks to its easy-to-use functions and marginal fees, Uniswap beats other decentralized exchanges. It does not require native tokens, no listing fees, and low gas cost compared to other decentralized exchanges on the Ethereum network.<\/p>\n
The project has an inherently permissionless nature that allows users to develop the ERC-20 market as long as they amount equivalent to Ethereum to support it.<\/p>\n
Probably, you\u2019ll be wondering what makes Uniswap different from other DEXs out there, and below we outline its valuable features that have gained tremendous traction lately.<\/p>\n
What Uniswap Offers?<\/span><\/h2>\n
You get to trade any Ethereum-based token<\/strong>. The platform neither charges the listing process nor a token listing fee. Users instead trade tokens in a liquidity pool that determines which token to list.<\/p>\n
The v2 upgrade allows users to merge two ERC20 tokens in a trading pair without using ETH. There are some exceptions as not all trading pairs are available. According to CoinGecko<\/a>, Uniswap\u2019s reach of over 2,000 trading pairs surpassed all other exchanges.<\/p>\n
Uniswap does not hold funds in custody: <\/strong>Users worried if the exchanges will store their funds don\u2019t need to fret. The Ethereum-based smart contracts control users’ funds entirely, and they monitor every single trade. Uniswap produces separate contracts to handle trading pairs and support the system in other aspects.<\/p>\n
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It shows that funds go into the user\u2019s wallet after every trade. There\u2019s no central body to seize your funds, and users don\u2019t have to provide identification to create an account.<\/p>\n
No involvement of central authorities<\/strong>: Unlike the traditional financial system, there is no central body to control prices. Its liquidity pools implement formulas based on token ratios. To prevent price manipulation and generate reasonable prices, Uniswap uses the oracles.<\/p>\n
Liquidity providers: <\/strong>Users can mint profits from UNI fees by simply staking tokens in Uniswap liquidity pools. Projects can invest in liquidity pools to support trading.<\/p>\n
On the exchange, LPs can provide capital to any specific pool but must first submit collateral to each of their targeted markets. For instance, a user interested in the DAI\/USDC market must provide equal collateral to both markets.<\/p>\n
After providing the liquidity, a user gets what’s known as “liquidity tokens.” These LTs show the portion of the user’s investment into the liquidity pool. He\/she is also free to redeem the tokens for the collateral backing them up.<\/p>\n
As for fees, the exchange charges every user up to 0.3% of every transaction. These fees help to ensure deeper spreads on the board. However, there are three different levels of fees on the exchange. These fees come in three, namely, 1.00%, 0.30%, and 0.05%. The liquidity provider can decide on the tier to invest in, but traders often go for the 1.00%.<\/p>\n
Trader: <\/strong>Uniswap operates by creating outstanding markets for two assets through liquidity pools. By abiding on set protocols, Uniswap uses an automated market maker (AMM) to reach the end-user with its price quotations.<\/p>\n
Since the platform will always ensure liquidity, Uniswap involves the use of the ‘Constant Product Market Maker Model.’ This is a variant with a special feature for constant liquidity irrespective of a tiny liquidity pool or the largeness of the order size. This implies a simultaneous increase in both the spot price of an asset and its desired quantity.<\/p>\n
Such an increase will stabilize the system on liquidity though larger orders may be affected by the increment in price. We can conveniently state that Uniswap keeps a balance in the aggregate supply of its smart contracts.<\/p>\n
Marginal Fees: <\/strong>Uniswap charges 0.3% per trade, which is close to what other cryptocurrency exchanges charge. Such crypto exchanges charge around 0.1%-1%. Most importantly, the fee per trade surges when the Ethereum gas fee rises. Thus, Uniswap tends to find an alternative to this issue.<\/p>\n
UNI Withdrawal Fees<\/strong>: Every exchange in the crypto market charges users specific amounts of withdrawal fees depending on how they operate. However, Uniswap is different. The exchange charges users only the normal network fees that follow the execution of a transaction.<\/p>\n
Usually, the withdrawal fees based on the \u201cGlobal Industry BTC\u201d is usually 0.000812 BTC for every withdrawal. However, on Uniswap, expect to pay a 15-20% average BTC withdrawal fee. This is a good bargain, and that’s why Uniswap is popular for favorable fees.<\/p>\n
Introduction to Uniswap Token\u00a0(UNI)<\/span><\/h2>\n
The decentralized exchange, Uniswap, launched its governance token UNI<\/a> on 17th<\/sup> September 2020.<\/p>\n
Uniswap didn\u2019t run a token sale; instead, it distributed tokens as per the release. After the launch, Uniswap airdropped 400 UNI tokens worth $1,500 to users who had used Uniswap in the past.<\/p>\n
Nowadays, users can earn UNI tokens by trading tokens in liquidity pools. This process is called yield farming. Uniswap token holders have the authority to vote on their development decisions.<\/p>\n
- 8.2<\/span> Uniswap Security<\/a><\/li><\/ul><\/li>
- 2<\/span> How Uniswap Works?<\/a><\/li>
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