On November 2, 2018, Uniswap was publicly announced and deployed to the Ethereum mainnet.
Since then Uniswap has grown a lot and we can say that it is the most famous decentralized exchange protocol (DEX) operating on Ethereum’s blockchain. However, Uniswap is much more than a DEX; in fact, this protocol offers many other additional functions for DeFi users on Ethereum.
Uniswap provides a means of decentralized exchange (DEX) to its users as well as creates an automated liquidity protocol (AMM).
Uniswap is a DEX that charges a small fee of 0.3% per trade, while centralized exchanges (CEXes) tend to charge 0.5% or more for spot trading.
In addition to being a decentralized exchange, Uniswap has many other pros, such as:
- It keeps your anonymity, as it does not require KYC and registration.
- You have control over your tokens.
- Users can trade flash swaps.
- It shares transaction fees with liquidity providers.
However, there are some cons as well:
- High Gas Fees: Uniswap runs on the Ethereum blockchain, so its interactions with smart contracts require gas fees paid in ETH and it is not uncommon to see moments of network congestion and sluggishness that leads to high gas charges.
- Failed Txs: If you do not set the gas limit fees correctly, your transaction may fail, but you will still lose the gas rates, even if you are not successful in the trading you wanted.
- Market imbalances: Uniswap relies on arbitrage trading to remove market imbalances.
- Slippage: It refers to your buy size relative to the amount of liquidity in that pool. If you have a large order relative to the pool size, slippage will increase (and your exchange rate declines). In practice, slippage happens when you enter your order, click swap, but get an error because the price changed between when you entered the order and clicked swap.
Another problem that can occur is the lack of attention or knowledge about how to correctly define the limit and the price of gas for a transaction. For example, a trader recently spent approximately $9,500 in fees for a transaction of just $120 on Uniswap, after getting confused when entering the amounts in the “Gas limit” and “Gas price” input boxes in his MetaMask wallet.
Although Uniswap is a decentralized exchange, a recent report by Glassnode puts this designation in check, suggesting that it is not as decentralized as it calls itself, since the Binance has about 26 million UNI tokens and may be the only one capable of making Uniswap governance proposals.
Despite these cons, Uniswap has been a project in constant evolution and development, which has led it to become one of the largest DeFi systems on Ethereum today.
The purpose of this article is not to dissect the Uniswap functionalities, but to bring to the debate as a new player, like the Injection Protocol, with several features and benefits for its token holders and traders, it can succeed in the Defi space.
Injective Protocol is a layer-2 fully decentralized exchange that unlocks the full potential of decentralized derivatives and borderless DeFi, enabling fast, secure, and fully decentralized trading on top of Ethereum.
Injective is an end-to-end decentralized protocol that creates a platform for decentralized perpetual swaps, futures, margin, and spot trading. All components of its protocol was built to be fully trustless, censorship-resistant, publicly verifiable, and front-running resistant.
Injective’s Orderbook is a fully decentralized 0x-based orderbook enabling sidechain order relay with on — chain settlement — a decentralized implementation of the traditionally centralized off-chain order relay used by nearly all central limit order book decentralized exchanges.
Injective is anopen and permissionless protocol, that allows anyone to create a market using only a price feed and deploy it to the Injective ecosystem.
Another great advantage offered by Injective Protocol is its zero-gas structure. Given the unique layer-2 structure, Injective is able to avoid both network congestion and the associated high gas fees. Anyone can trade freely without having to worry about high gas fees or network latencies.
Injective Protocol has many other advantages and benefits for its investors, token holders and traders:
- Staking: Token holders can stake their INJ and get rewards being a node validator or delegating their tokens to an existing validator.
- Governance: Token holders can participate in the Injective Protocol governance, submiting and voting proposals to change parameters in the protocol.
- Relayer node: By hosting an exchange relayer node, user will be rewarded with a generous 40% of the exchange fees from orders that you source.
- Fee auction: Every month, the remaining 60% of the exchange fee from each trade on our protocol is aggregated and auctioned to the public through a buyback-and-burn.
- Trading rewards: As an early Injective user, users will also earn INJ rewards for trading on the protocol and have the chance to earn extra INJ prizes the more profitable your trades are.
Just to make a comparision between Injective Protocol, Uniswap and Binance, here is a summary:
The Injective Protocol hits the market to compete with the big players in the defi space. Its objective is to bring an inclusive financial system through a complete decentralization structure. Injective is a permissionless protocol, governed by the community and with a set of benefits capable of attracting many investors and traders to its ecosystem.