This is the new entry of a series of blog posts i will do, they will target new people on the cryptocurrency community. In this post i will talk about decentralized exchanges and will teach you how to use the one i find easier for new crypto users, Uniswap.
What is a Decentralized Exchange (DEx)?
A decentralized exchange (DEX) is a cryptocurrency exchange which operates without a a central authority, they allow users to make peer-to-peer trades, there are no third parties involved in the transactions.
Privacy is one of the biggest advantages of using a DEx, there is no need for document, e-mail or phone verification. Just connect your wallet and you are good to go.
Usually decentralized exchanges have way less trading volume than the centralized counterparts, this happens for many reasons, the interface is less user friendly, you need to create your own wallet, store your private keys and seed words and there are less trading options. But, at least for me, the advantages outweigh the disadvantages, making transactions without KYC (know your customer) measures, the security of knowing that the exchange cant exit scam on me, the less regulations and less manipulation are all big points that make me use DExes over centralized exchanges.
DExes are also a good way to buy small market cap cryptocurrencies before they are available to the general public. New projects without many funds will often sell their tokens on a DEx, if you are lucky you can buy a gem before it does a 100x ( or buy a useless product, it happens).
Lets now see how to use a decentralized exchange (Uniswap).
How To Use Uniswap
Go to https://uniswap.org/ and press the "launch app" button, the next thing to do is to connect your wallet, simply press the button on the top right corner.
You will be given the choice to connect one of many wallets (Metamask, Coinbase Wallet, etc), because we already made a MetaMask wallet in previous posts, that is what we will use to connect to Uniswap.
Log in using your MetaMask wallet password. Now you will have 3 choices, "Swap", "Send" or Pool, because we are doing a new user guide i will keep it simple and will only tell you how to swap your tokens. We will trade BAT for Loorping, to do it select BAT and input the number of Basic Attention Tokens you wish to trade for LRC. The output is automatically generated based on the exchange rate.
Click the swap button and the trade will be made. Well, not so fast, its the first time we are using Uniswap, we need to unlock the tokens! That means paying a very small fee to be allowed to trade, to do it press the "Unlock" button near "BAT", a MetaMask pop up will appear.
Check if the transaction fee is normal ($0.01 to $0.1 is what i would consider normal) and approve the transaction. We waited a few minutes and our transaction was approved, we are now ready to trade our BAT for LRC.
Well, actually i lied, we will not do that. One of the reasons i like to use Uniswap is to buy tokens that are not listed anywhere else, i will trade my BAT for Chimera (private erc20 token). Chimera(CMRA) is not on the default list of Uniswap tokens, so, we will have to manually add it.
Trade Custom Tokens
To add a custom token to Uniswap we need to find the contract address of said token, you can usually find it on the official website of the token you want to buy/sell. In our case https://xianlabs.github.io/ is where we will find that address.
Now that we already now the address we have to add it to Uniswap. It is a very simply process, you will have to write that address in the Output(because we want to buy) bar.
Click "CMRA" and everything is set up. We have successfully imported a custom token to Uniswap, now, lets finally make the trade. There are some things you must have in account, the first one is to check the exchange rate.
Sometimes, tokens on Uniswap can be sold for less than in other exchanges (the opposite can also happen), take that into account, verify the price (exchange rate) and make sure you are not paying more than the token is worth.
The other thing you must have in consideration is Price Slippage. Lets check it clicking "advanced details".
The less slippage you chose the more CMRA you will receive, but the risk of the transaction failing will also increase because of the normal price movements. If the expected price slippage is very high, Uniswap will alert you and you should not make the trade.
Our price slippage looks good, we will make the trade by clicking "Swap" and approving the transaction after verifying the gas fee.
Congratulations! You made your first transaction using a DEx and are now the proud owner of 506 CMRAs.
I hope you found this guide useful and that you are now fully able to make trades using Uniswap. If you have any doubts fell free to leave them in the comments.
You can expect new blog posts soon, i will make guides explaining some other common crypto things. If you have any topics you would like to see covered, leave me a comment!