Uniswap is one of the largest decentralized crypto exchanges that allow you to swap cryptocurrency tokens conveniently. This Uniswap review is an up-to-date, in-depth examination of the Uniswap exchange, containing everything you need to get started with Uniswap and decide whether it’s the right DEX for you.
Do you know you can earn interest with Uniswap liquidity mining? Well, read on to find out more!
Uniswap review
Uniswap is a well-known decentralized trading protocol that facilitates automated trading of decentralized finance (DeFi) tokens. It is an automated market maker (AMM), launched in November 2018, but has grown in popularity this year as a result of the DeFi phenomenon and associated surge in token trading.
The DEX aims to keep token trading automated and completely open to anyone who owns tokens, while also improving trading efficiency compared to traditional exchanges. Uniswap increases efficiency by using automated solutions to solve liquidity issues, avoiding the problems that plagued the first decentralized exchanges.
Uniswap went a step further in September 2020, creating and awarding its own governance token, UNI, to past protocol users. This increased both the potential for profit and the ability for users to shape its future—an appealing feature of decentralized entities.
What is Uniswap?
Uniswap is a cryptocurrency exchange that uses a decentralized network protocol. It is a decentralized exchange that is used to swap cryptocurrencies and tokens and is provided on blockchain networks that run open-source software.
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.
Uniswap is not just a decentralized exchange; it exists to create and solve liquidity issues. As of October 2020, Uniswap was estimated to be the largest decentralized exchange and the fourth-largest cryptocurrency exchange overall by daily trading volume.
Uniswap review: Key Features of Uniswap
Swapping
Uniswap makes it simple to switch between Ethereum and other ERC-20 tokens. In addition, users can use this platform to buy UNI, Uniswap’s governance token.
Governance
The governance of Uniswap enables group control and decision-making, which may be very appealing to some users.
Liquidity pools
Uniswap also provides a pool through which users can earn rewards by providing liquidity to the platform.
Self-custodial
Users retain custody of their tokens rather than giving up custody to an exchange, which reduces the risk to their tokens from hacking, platform bankruptcy, and other related issues.
Easy coin access
Rather than tokens and coins being subject to a long vetting process, projects can be listed directly on Uniswap. This allows users to swap to newer tokens before they are listed on centralized exchanges.
Uniswap Pros and Cons
Pros
- User-friendly interaction: Uniswap is an exceptional DEX due to its powerful sleek design. This extends to the Uniswap app which is very user-friendly, facilitating ease of use. It’s easy to connect a crypto wallet, swap crypto for crypto, or deposit your crypto in a liquidity pool.
- Ample liquidity: It’s one of the largest decentralized exchanges in terms of total value locked (TVL) in the number of crypto funds in its liquidity pools. Whether you want to trade crypto or earn interest as a liquidity provider, you likely won’t have any problems with Uniswap.
- Get started right away: Skip all the lengthy processes of creating an account and carrying out KYC. All you need to do is connect your crypto wallet, and you’re ready to trade crypto. Now, it goes without saying it has its drawbacks. But from a convenience and privacy standpoint, Uniswap is great.
- Educational resources: The protocol has a blog with educational content surrounding updates, stories, and announcements from the Uniswap Labs team.
- Governance: The Uniswap ecosystem has its own native token called UNI. UNI acts as a DAO and can be used to make decisions on the protocol. UNI holders are responsible for ensuring that governance decisions are made in compliance with applicable laws and regulations.
Cons
- Risk of impermanent loss: Liquidity pools also carry the risk of impermanent loss in DeFi, which is when the value of your crypto changes from the time you first deposited it. If this happens, you may lose money.
- High fees: Uniswap is built on Ethereum. Because of Ethereum’s popularity, there have been periods of high network congestion. That congestion drives up Uniswap gas fees and can make it very expensive to use anything built on Ethereum, like the Uniswap exchange.
- No KYC process: Uniswap doesn’t have a KYC process. Whether this is good or bad depends on your perspective. For investors who love privacy, exchanges like Uniswap are ideal. The problem is that exchanges without KYC are also more likely to run into regulatory issues. Find out more about KYC and Cryptocurrency Exchanges.
How to use Uniswap
The decentralized protocol can be used/accessed via the website or a decentralized application (DAPP) like Trust Wallet, Meta Mask Wallet, etc. To interact with Uniswap, all you need to do is connect your crypto wallet. After that, you can start trading cryptocurrency.
To trade crypto, choose the “Swap” option, then select the crypto you want to trade and the crypto you want to receive.
You can also undergo liquidity mining by choosing the “Pool” option. Then you can open a new position and deposit any two cryptos that have a Uniswap pool already. You can also check out the top pools to see which pairs are popular.
There are plenty of crypto wallets available. Options include hardware wallets that keep your crypto offline in cold storage and free digital wallets available as an app or browser extension. Once you have a wallet, you can transfer your crypto there and start using Uniswap.
Uniswap review: How does Uniswap work
The Uniswap protocol is a decentralized crypto exchange that enables crypto trades without reliance on a centralized entity. The protocol achieves this through three distinct factors, which are: decentralization, liquidity pools, and automated market makers (AMM).
Decentralization
The Uniswap protocol is an open-source peer-to-peer decentralized exchange on the Ethereum blockchain. This makes the protocol censorship-resistant, secure, and self-custodial.
The protocol’s services are open for public use. No one has the ability to restrict who can or cannot use them. The result is that anyone can swap tokens, list a token, or provide liquidity in a pool to earn fees.
Liquidity pools
Liquidity pools are token pairs stored in a Uniswap pool contract. They allow users to swap tokens within a pool.
These pools rely on users for funding. Users create market liquidity by providing token pairs to a pool. To incentivize pooling liquidity, there is compensation for liquidity providers.
Automated Market Maker (AMM)
The Automated Market Maker (AMM) is in charge of managing liquidity pools. It allows for automated and permissionless token swaps.
The AMM analyzes a token pair’s supply and demand within a liquidity pool. This is how the AMM determines the real-time value of a token and provides efficient token prices for each swap.
This system replaces the traditional order book used by centralized exchanges. Instead, users interact with the liquidity pool using the AMM.
How Uniswap liquidity pool works
In traditional finance, liquidity is organized using a central limit order book where buyers and sellers create trades organized by price and demand.
The Uniswap Protocol takes a different approach, using an Automatic Market Maker (AMM) to replace the traditional order book method with a liquidity pool of two assets, where the price is determined by an AMM.
Uniswap review: What is a liquidity pool?
A liquidity pool is a group of tokens that are locked in a smart contract and used for trading between assets on a decentralized exchange (DEX) like Uniswap.
These pooled tokens are provided by liquidity providers (LPs), who receive an LP token in exchange for providing liquidity.
The Uniswap Protocol AMM sets prices for liquidity pools using the mathematical formula x*y=k. Prices are determined by the amount of each token in a pool, with x and y representing the two tokens in a liquidity pool.
It is important to evaluate the liquidity available in a pool before swapping. A pool with low liquidity will not give you an optimal price, and could potentially result in a loss.
Uniswap exchange review
Since its inception, the Uniswap Protocol has served as a trustless and highly decentralized financial infrastructure
In less than two years, the protocol has:
- Supported over $20bn volume ($270k of which was socks!) traded by over 250,000 unique addresses across 8,484 unique assets.
- Secured over $1bn liquidity deposited by over 49,000 unique liquidity providers (LPs), earning $56m in fees in the process.
- Emerged as foundational DeFi infrastructure, with integrations across hundreds of interfaces and applications.
Uniswap exchange reviews include feedback from users who have interacted with the protocol. Below are some of the top Uniswap Reddit reviews from its users:
“I’m not an active trader, but I fucking love Uniswap.
When I want to swap some ETH into another position, Uniswap is always there.
When Coinbase is down, Uniswap is up.
If an ERC20 token exists, you can bet there’s liquidity for it on Uniswap.
It’s a work in progress, like all of Ethereum and DeFi. But it’s smooth and promising and does what it was built to do. And when L2 scaling solutions get folded in, all those gas concerns go out the window.”
“It’s very reliable in my experience, but not as brainless as it looks. You have to make sure your gas limit is high enough (that is adjusted in your wallet, not on Uniswap), you want to check current gas prices before trading, and you may have to turn on expert mode and/or adjust slippage tolerance if trading deflationary tokens. And you have to make sure that you are using the real Uniswap, not a fake app or whatnot.
I’ve used it at least ten times now, I use it inside Trust Wallet’s dApp browser, I haven’t had a transaction fail, and I have always gotten a fair exchange rate. When gas fees are low, average transaction costs are between $10-15, and the benefits of maintaining custody of your crypto arguably outweigh the trade cost.”
Uniswap review: Uniswap Fees
Uniswap has liquidity provider fees ranging from 0.01% to 1% on cryptocurrency swaps. It distributes the fees from each swap among the liquidity providers for that pair of cryptocurrencies.
There are four fee tiers on Uniswap. They typically correspond to the volatility of the cryptocurrencies in the liquidity pool.
| Liquiity Pool Types | Uniswap Fees |
|---|---|
| V3 governance (Very stable pairs) | 0.01% |
| Stable/Stable pairs like USDC/USDT | 0.05% |
| Stable/Blue chip pairs like USDC/ETH | 0.3% |
| Exotic pairs like ETH/DOGE | 1% |
To be clear, Uniswap does not set fees for its pools. When depositing cryptocurrency into a pool, each liquidity provider can select one of four fee tiers.
When a provider selects a pool, Uniswap automatically selects the fee tier with the most liquidity. They can, however, change to a different fee tier if they so desire.
The default fee tier for Uniswap’s pool with USD Coin and Tether (USDT), for example, is 0.01%. Because these are both stablecoins, the pool is thought to be very stable.
When depositing funds in this liquidity pool, a liquidity provider could choose one of the other fee tiers. However, they are unlikely to earn much money. Users will trade using funds from one of the many other liquidity providers that charge lower fees.
Uniswap token review
Uniswap introduced the UNI token to enable community ownership over the protocol, allowing stakeholders to vote on key protocol changes and development initiatives after years of successful operation and on its path to complete decentralization.
When Uniswap released the token in September 2020, it used a novel method of distribution in which 400 UNI tokens were “airdropped” to every Ethereum address that had ever used the protocol. The airdrop, which was worth nearly $1,400 at the time, was distributed to over 250,000 Ethereum addresses.
Uniswap’s governance token (UNI) was created to “officially enshrin[e] Uniswap as publicly-owned and self-sustaining infrastructure while continuing to carefully protect its indestructible and autonomous qualities,” according to the company.
According to coinmarketcap, Uniswap’s ranking is #17, with a live market cap of $4,194,126,339 USD. It has a circulating supply of 762,209,327 UNI coins and a maximum supply of 1,000,000,000 UNI coins.
The live Uniswap price today is $5.50 USD with a 24-hour trading volume of $66,721,530 USD. Uniswap has gained 4.14% in the last 24 hours.
If you would like to know where to buy Uniswap at the current rate, the top cryptocurrency exchanges for trading in Uniswap stock are currently Binance, BTCEX, CoinW, MEXC, and OKX.
Uniswap review: Uniswap API
In terms of customization, user-interface simplicity of navigation, and design, the trading platforms utilized by various exchange platforms differ from one another. It is because multiple criteria are used by different exchange platforms using different criteria while building their exchange.
Regardless of the variations, a good decentralized exchange platform should be user-friendly, simple to interact with, and have essential tools incorporated into its API like liquidity pools, swapping, etc.
Which is better Uniswap or PancakeSwap
Uniswap and PancakeSwap are two of the most popular decentralized exchanges (DEXs) by trading volume. Although they function quite similarly.
So it’s up to you to decide if you’ll choose Uniswap’s liquidity over PancakeSwap’s lower fees. So which one is it going to be? Let’s find out!
Uniswap
Liquidity pools are the backbone of Uniswap Exchange and one of the biggest draws for those looking to earn interest on their assets. Uniswap enables market makers to earn rewards in the form of cryptocurrencies by providing liquidity for the network to crypto traders.
PancakeSwap
Lower fees are the biggest advantage PancakeSwap has over Uniswap. This is because PancakeSwap runs on the more scalable Binance Smart Chain (BSC), which consistently handles over 50 TPS, with gas fees averaging less than $0.35 per transaction. You can check out this great article about PancakeSwap review.
Is Uniswap safe?
When you use Uniswap, your cryptocurrency is secure. Your funds are not kept on the exchange at all. You keep them in your own crypto wallet, which means you’re ultimately responsible for keeping your cryptocurrency safe.
However, there is another risk associated with Uniswap and similar exchanges. Because anyone can add a token to Uniswap and start a liquidity pool, it is a haven for scams and cryptocurrencies of questionable value. Unlike centralized exchanges, which approve all of their cryptocurrencies, Uniswap does not.
It also has a bug bounty program in place to incentivize cybersecurity researchers. Rewards will be allocated based on the severity of the bug disclosed and evaluated for rewards up to 2,250,000 USDC.
Uniswap review: Conclusion
Uniswap has succeeded in providing the much-needed DEX experience that traders have long sought in a world where hurdles and barriers to entry continue to limit adoption. According to several metrics, it has grown to be the largest DEX, with developers continuing to innovate and improve the user experience.
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