Token swaps are one of the easiest ways on Uniswap to trade one ERC-20 token for another. Moreover, users simply have to select an input-output token and specify an input amount, and the protocol calculates how much output token the user will receive. This whole process requires just a few clicks, and the user gets the output token in their wallet immediately.
Interestingly, swaps in Uniswap are different from trades on traditional platforms. Uniswap does not use any order book for liquidity or to manage prices. It uses an automated market maker mechanism to provide instant feedback on rates and slippage.
Pool
7. This platform allows anyone to create their own liquidity pools and allows users to earn through providing liquidity. This is often done by depositing tokens into a smart contract, and in return, the user receives pool tokens. Moreover, users can exchange the tokens inside the pools using Ethereum as a channel.
Notably, the centralized exchanges have control and authority to delegate what trading pairs are available. However, the innovative feature of Uniswap is that anyone can create new exchange pairs in a liquidity pool for any token. In addition, these liquidity tokens are themselves tradable assets. Hence, liquidity providers can sell, transfer, or use these liquidity tokens.
UNI Foundation
8. Ethereum’s co-founder, Vitalik Buterin, projected the thought of a decentralized automated market maker. However, Hayden Adams transformed this idea into a reality with the help of the Ethereum community. In addition to this, he also received various grants as well as a grant from the Ethereum Foundation. Furthermore, the recent explosion in DeFi platforms has made Uniswap more valuable and become an important launchpad for the entire DeFi sector.
9. Usually, on centralized exchanges, new projects are required to go through a vetting process before listing any coin or token for trading. Hence, Uniswap was designed to tackle such issues. Further, its decentralized nature helps to reduce the power and control of major exchanges. Since Uniswap is decentralized and globally popular, it is the first choice for a lot of new projects to launch on its platform directly. Which allows users to explore and invest in new tokens to get a first-mover advantage.
Uniswap Technology
10. Uniswap eliminates the traditional order book model and introduces an automated market maker (AMM) protocol that provides open access to the market. Impressively, this helps anyone to swap tokens, add tokens to a pool, or list a token on Uniswap.
Interestingly, Uniswap implemented Sybil which maps on-chain addresses to digital identities. Sybil verifies the user’s Twitter handle with the signed message and matches it with their Ethereum address. Additionally, Sybil users can delegate or vote on governance proposals directly through the interface.
Source: uniswap.org
UNI Token
UNI is the governance token of Uniswap, and the entire system utilizes it as a primary token. It is an ERC-20 token that is compatible with the Ethereum ecosystem and ERC-20 wallets like MetaMask and MyEtherWallet. UNI got hype through a retrospective airdrop to the exchange users, either by swapping tokens or by providing liquidity.
Moreover, as part of this initial launch of Uniswap’s governance token, 150 million UNI, accounting for 15% of supply, were distributed to the users and liquidity providers. Hence, each person received 400 UNI tokens, which currently amounts to over $10,000.
Additionally, UNI token holders gain the right to vote on new developments and changes to the platform. Stakers can also participate in key decisions such as usage of the treasury or future upgrades, and more.
Roadmap
According to the official blog, the Uniswap team aims to launch the V3 version. This version is driven by a desire to drastically improve the AMM experience for both swappers and liquidity providers. The team’s focus is to solve current issues such as slippage and to solve capital efficiency issues.
The team also intends to make the Uniswap interface more user-friendly. Additionally, the team has plans to incorporate solutions such as lower latency trading, quick settlement, and cheaper transaction costs. If we summed up these features, it seems that the V3 version might solve the high transaction fees problem and other major issues.
UNI Technical Analysis
Uniswap price, at the time of writing, is $26.92, with a circulating supply of 300 million UNI coins. The maximum supply of UNI is 1 billion. Top exchanges that support the trading of UNI are Binance, Huobi Global, HBTC, and OKEx.
UNI Coin already exploded in 2021 and surged from $4.50 to an all-time high of $32.50. Currently, UNI has fallen through support levels of $29.33 and $28.13, meaning we could see a further drop in price to $23.15.
Source: Tradingview.com
Conclusion
Uniswap has a range of benefits for traders as compared to other centralized exchanges. Uniswap does not require any listing fees or any native token, and its DEX has one of the cheapest gas costs. This project is open-source and completely permissionless, which means that any person can create any ERC market. Additionally, if Uniswap V3 will solve major issues, such as gas fees, then it can transform the DeFi ecosystem and will be a strong competitor for other top exchanges.
