As I was going through some cryptocurrencies platforms, I came across protocols and discovered UniSwap. What drew my attention to read and learn more about it the picture of the Unicorn. It's also an exchange platform which seems to be pleasant especially with it's gas fees.
WHAT IS UNISWAP?
Uniswap is a decentralized finance protocol that is used to exchange cryptocurrencies. Uniswap is also the name of the company that initially built the Uniswap protocol. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts. As of October 2020, Uniswap was estimated to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall by daily trading volume. In March 2021, Uniswap was generating fees of approximately US$2–3 million daily for the liquidity providers who facilitate liquid markets for the cryptocurrencies being exchanged.
Uniswap is a set of computer programs that run on the Ethereum blockchain and allow for decentralized token swaps. It works with the help of unicorns (as illustrated by their logo).
To be more precise, it is an automated liquidity protocol. There is no order book or any centralized party required to make trades. Uniswap allows users to trade without intermediaries, with a high degree of decentralization and censorship-resistance.
UniSwap is an open- sorce software which is an Ethereum-based protocol for creating liquidity between ERC-20 tokens. Anyone can integrate the UniSwap protocol or use it as the basis for a new protocol.
HISTORY OF UNISWAP.
Uniswap was created on November 2, 2018 by Hayden Adams, a former mechanical engineer at Siemens.
The Uniswap company received investments from venture capital firms including Andreessen Horowitz, Paradigm Venture Capital, Union Square Ventures LLC and ParaFi. Uniswap’s average daily trading volume was US$220 million in October 2020. Traders and investors have utilized Uniswap because of its usage in decentralized finance (DeFi).
In April 2020, Uniswap's website was taken down temporarily[quantify] after hackers unsuccessfully attempted to use a reentrancy hack on the exchange.
Capital named it along with Maker, Compound, Ankr, Aave, and Chainlink as some of the DeFi "coins to watch " in 2021.
HOW DOES UNISWAP MAKE MONEY?
It doesn’t. Uniswap is a decentralized protocol backed by Paradigm (a crypto hedge fund). All fees go to liquidity providers, and none of the founders get a cut from the trades that happen through the protocol.
Currently, the transaction fee paid out to liquidity providers is 0.3% per trade. By default, these are added to the liquidity pool, but liquidity providers can redeem them at any time. The fees are distributed according to each liquidity provider’s share of the pool.
A portion of fees may be dedicated to Uniswap development in the future. The Uniswap team has already deployed an improved version of the protocol called Uniswap v2.
HOW TO USE UNISWAP.
Uniswap is an open-source protocol, meaning that anyone could create their own frontend application for it. However, the most commonly used one is https://app.uniswap.org or https://uniswap.exchange.
*Go to the Uniswap interface.
*Connect your wallet. You can use MetaMask, Trust Wallet, or any other supported Ethereum wallet.
*Select the token you’d like to exchange from.
*Select the token you’d like to exchange to.
*Click on Swap.
*Preview the transaction in the pop-up window.
*Confirm the transaction request in your wallet.
*Wait for the transaction to be confirmed on the Ethereum blockchain. You can monitor its status on https://etherscan.io/.
UNI is the governance token native to Uniswap.
WHY IS UNISWAP SO EXPENSIVE?
The fees on the Ethereum network are based on gas price and gas limit. As such, the fees on UniSwap and other Ethereum-based exchanges increase with the usage of Ethereum itself. A simple token swap on UniSwap can cost hundreds of dollars in gas fees,which makes it unsuitable for small traders.
HOW LONG DIES IT TAKE TO SWAP ON UNISWAP?
If a swap takes more than 20 minutes to execute, the router is programmed to fail the transaction. This is to protect the user from extreme swings in prices that can occur while the transaction is pending. If this happens, your tokens will still be in your wallet, but the gas fees paid are not recoverable.
HOW ARE PRICES DETERMINED?
Prices are determined by the amount of each token in a pool. The smart contract maintains a constant using the following function: x*y=k. In this case x = token0, y = token1, k = constant. During each trade a certain amount of one token is removed from the pool for an amount of the other token. To maintain k, the balances held by the smart contract are adjusted during the execution of the trade, therefore changing the price.
IS UNISWAP A GOOD BE EXCHANGE?
UniSwap fees known as flat fees mean that the exchange charges the taker and the maker the same fee. This exchange charges a flat fee of 0.30 percent per trade. This is slightly above the global industry average (arguably 0.25 percent). So with respect to the trading fees, UniSwap has a decent offering.
IS UNISWAP CHEAPER THAN COINBASE?
Trading fees are cheap in decentralized exchanges like Coinbase. Coinbase charges 0.5 percent fees for trades up to $10k. In contrast, UniSwap charges 0.3 percent regardless of the amount traded.
IS UNISWAP CRYPTO A GOOD INVESTMENT?
In the decentralized finance industry, UniSwap may be a great addition to your portfolio. Not only is it the most liquid decentralized exchange, but uniswap's V3 upgrade has made its platform even more liquid.
With the UniSwap V3, there is a concentrated liquidity and multiple fee tiers.