Uniswap Use Case

Most importantly, they are mainly used to buy and purchase tokens; especially the ones not listed on the centralized exchanges. Exchanges like Coinbase or Gemini are known as centralized exchanges. Centralized exchange operate for a profit and make their money by charging fees on transactions. In addition, they do not list some cryptocurrencies that people are looking for.

This automated liquidity protocol pairs every token against ETH. Interestingly, ERC-20 to ERC-20 swaps are transactions that convert ERC20a to ETH, and then to ERC-20b in a single transaction. Uniswap is a decentralized crypto asset exchange platform built on the Ethereum blockchain. The project was launched in November 2018 by Hayden Adams and has since become one of the most popular crypto exchanges.

What is a decentralized aggregator?

Here, you will pay a small amount of gas fee (about $0.06). One thing we haven’t taken into account so far are the trading fees generated by the protocol. In our example, there was just one trade of 100 ETH generating $33 (0.3%) to the protocol and its liquidity providers. But as you might imagine in real life there’s a lot of trading activity and each trade generates revenue to the pool.

The exchange is adamant about changing the way most platforms operate financially. Liquidity providers for specific token pairs are now allowed to set custom price ranges for which they want to provide liquidity. This allows Uniswap v3 to work as a pseudo-order book on Ethereum, where market makers and liquidity providers can choose at which price point they want to provide liquidity. The Uniswap model revolves around liquidity providers lending their crypto tokens to create liquidity pools. Built on Ethereum, Uniswap is based on the concept of liquidity pools and automated market makers . Subsequently, attempts were made to create decentralized order books directly on the blockchain.

How to Claim your Uniswap Airdrop?

So if someone, let’s say, buys it from a DAI pool, they reduce the supply of ETH and add the supply of DAI, which increases the price of ETH and decreases the price of DAI. The main takeaway is thatthe ratio of the tokens in the pool dictates the price. On top of that, if a user wants to make only a single trade, they would have to move their funds in and out of the L2,which adds two extra steps to their process. Therefore, Ethereum, with a current throughput of around 12 to 15 transactions per second and a block time between ten and 19 seconds, is not a viable option for an order book exchange.

This system links on-chain addresses to digital identities to maintain a list of delegates and engage with their community representatives. It aims to help the community to raise https://tradecrypto.com/reviews/lending-platform-reviews/alchemix-review/ meaningful influence and involve smaller coin holders. However, the Uniswap community has taken active steps to ensure that the network retains its position at the top.

Key Highlights of Uniswap DEX

The all-time high price of Uniswap is $44.92 on May 03, 2021 . Users can swap for the desired token after selecting the desired quantity. Users can search for their preferred coin on the swap website. Users will have to import the token if it isn’t widely used. Users can look for the Uniswap protocol in the DApps explorer. The user will be taken to the swap page after clicking on the protocol.

• You can also earn interest on your crypto holdings through Uniswap’s liquidity pools.
• Basically here, you can trade any new coin that is listed and swap it against any other coin that is supported by the platform.
• The existence of these and other potential security solutions makes the Uniswap team’s decision to maintain a controlling stake concerning.

Learn more about the world’s largest decentralized exchange or DEX. Uniswap on Ethereum also ensure flexibility for exchanging ERC-20 tokens on the platform. The most striking highlight of the world’s largest DEX points to the lack of listing fees for a token. This is definitely an interesting improvement over the conventional centralized exchanges.

These are pre-written computer programs that are activated automatically by the occurrence of a predetermined set of events and are designed to carry out a particular set of tasks. DEXs are also a part of the expanding suite of decentralized finance tools, https://tradecrypto.com/news/crypto-industry-news/binance-btc-reserves/ which make a wide variety of financial services accessible directly from a compatible cryptocurrency wallet. The platform is well known for creating 1 billion UNI tokens and distributing 150 million of those tokens to each member of its platform.

The size of the liquidity pool also determines how much the price of tokens will change during a trade. The more money, aka liquidity, there is in a pool, the easier it is to make larger trades without causing the price to slide as much. Well, any Ethereum address that has interacted with the Uniswap contracts. However, with this additional layer of complexity, “lazy” LPs are going to earn much less in trading fees than professional players who can constantly keep optimizing their strategy. At the same time, it’s not hard to imagine aggregators like yearn.finance offering retail LPs a way to remain somewhat competitive in this environment. Moreover, v3 of Uniswap was released on the Optimistic Ethereum network.

Uniswap currently supports four liquidity mining pools where you can participate, and instead of receiving fees in the underlying token pair, you will receive the fee in UNI tokens. You can create a new exchange pair in a new liquidity pool for tokens. Now, let me share with you how to use the pools with Uniswap and add liquidity. If you want to learn more about how to provide liquidity you can simply click the Pool button. This guide will teach you how to use uniswap, trade in and out of pools, provide liquidity in return for rewards, and make you aware of the risks involved throughout. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

• But the underlying technology that inspired its implementation was first described by Ethereum co-founder, Vitalik Buterin.
• These tokens can either be two ERC-20 or One ERC-20 and one ETH token.
• You don’t need to provide personal information or create an account.
• They can just as quickly take that liquidity away, making it particularly hard for you to swap back your tokens.
• Another way to get exposure to cryptocurrency or blockchain technology is investing through exchange-traded funds that invest in blockchain companies.

Trades performed on the Uniswap platform are secured by its “Exchange” smart contract, a decentralized marvel allowing for users to trade at any time without any need for a central authority. In Uniswap’s case, the “Factory” smart contract is responsible for adding new tokens to the platform, while the “Exchange” contract is what powers the actual trades/swaps. Essentially https://tradecrypto.com/news/meta-web-3-0-news/zilliqa-announces-web3-game-console/ any ERC20-based token can be swapped with any other on the updated Uniswap v2 platform. Uniswap introduced UNI, its governance token, on September 17, 2020. Uniswap will distribute its UNI tokens according to a set release schedule to both community members and liquidity providers. Uniswap is currently the leading decentralized exchange by trading volume.

However, more practically-minded Buterin hinted that Uniswap would make more sense as in — Universal Swap of tokens. Things snowballed from there, https://tradecrypto.com/cat_events/tests/ with Pascal Van Hecke, one of Devcon 3’s attendees, giving Adams a grant. During this time, another Stony Brook alum joined them, Uciel Vilchis.