This Uniswap review is a perfect guide that will undoubtedly enhance your awareness and knowledge about Uniswap exchange.
Centralized exchanges are the most usual exchanges for trading. They allow great security, high liquidity, and powerful volume for trading.
On the other side, Dex’s are rising to give wiry competition to centralized exchanges.
Decentralized exchanges need no middleman for trading.
Due to the shortcomings of blockchain technology, It was very challenging to develop any Dex exchange that can contend with centralized exchanges and answer user needs.
Blockchain developers were constantly busy in uncovering new plans to produce a decentralized exchange that can be competitive.
The fruit of their aim is the Uniswap exchange.
Uniswap has risen as a most thriving Dex in this unprecedented defi campaign.
Watch Uniswap Tutorial:
Table of Contents
- What is Uniswap?
- How Uniswap works?
- Uniswap Features
- Uniswap Token List
- How To Use Uniswap
- Uniswap Liquidity Pools
- Frequently Asked Questions
What is Uniswap?
Uniswap is a Defi exchange that is made on Ethereum blockchain.
In 2018 Hayden Adams designed Uniswap. But the underlying methodology was first explained by Vitalik Buterin.
Uniswap is the most prevalent automated liquidity providing decentralized exchange also known as Dex exchange.
The escalating fame of Uniswap is because of the Defi boom as everyone is talking about decentralized finance just like in 2019 the hottest topic was IEO’s.
Uniswap lets you swap ERC20 tokens, meaning buy one token against others. Like give your Ethereum and buy USDT.
Uniswap also empowers you to earn from Uniswap pools.
Users can provide liquidity to these pools by depositing and keeping the same amount of both tokens in a pool to earn fees.
Anyone can put their funds in these liquidity pools.
Uniswap is a defi exchange and being a defi exchange you are owner and holder of your tokens that is the fundamental mission of Defi.
To empower users to have undivided control of their funds.
All your Ethereum based coins are stored in your wallets like meta mask or others, then the wallet is connected with the Uniswap for trading.
Uniswap doesn’t store any of your funds.
There is no order book in Uniswap trading. The exchange uses the liquidity that is granted to pools from users by keeping funds in pools, to match and fulfill trades.
Uniswap is an open-source platform and you can verify it on Uniswap GitHub.
As a defi project and a decentralized exchange, there is no listing process of tokens and no listing fees on Uniswap. Anyone can list their coins on Uniswap.
How Uniswap works?
Uniswap operates on a “Constant Product Market Maker”, which has no order book to match trades.
The whole mechanism of trading on Uniswap is based on liquidity pools.
These pools are financed by users who deposit the identical sum of two tokens in that particular pool.
For example in a pool of ETH-USDT, the user need to deposit 100 USDT and 100 USDT worth of Ethereum to make ETH-USDT pool work for him.
Anyone can effortlessly become a liquidity provider on Uniswap.
When any user will make a trade, a small fee is deducted from him, which is then distributed to liquidity provides according to their shares in that pool.
Suppose an example of USDT/DAI. If a person buys 100 USDT from a USDT/DAI liquidity pool, he will increase the USDT portion and decrease the DAI portion of the pool.
Considering it only trade on USDT/DAI pool, it is straightforward to understand that by this trade USDT price will go up and DAI price will decrease as USDT has been bought by giving up DAI coin.
That is how prices are determined on Uniswap Exchange.
The fees deducted from this trade will be distributed to users that are holding the same amount USDT/DAI to provide liquidity.
One crucial thing to examine while swapping token on Uniswap is that if a pool does not possess adequate liquidity then enormous fees can be charged for placing large orders.
So it is advised to keep order size small while swapping tokens.
Uniswap Impermanent Loss
Liquidity providers can easily earn fees for providing liquidity but they should be aware of the impermanent loss.
Let’s view an example to know impermanent loss.
Suppose a person A deposits 400 USDC and one Ethereum in a USDC/ETH pool.
The basic condition is that the quantity of both tokens should be the same. so at the current value, 1 ETH is equal to 400USDC.
It is called a pool because it consists of many people, consider that USDC/ETH pool has a total of 5 ETH and 2000 USDC.
Now total liquidity of the pool is 10,000 and person A has a 10% share in this pool.
Suppose that the price of ETH increased to 500 USDC, what will occur as the ratio of USDC, and ETH that should remain the same to provide liquidity, has now changed.
As the price of ETH increases, there will be more ETH in the pool now and less USDC.
People will start to withdraw their ETH from the pool to lock profits.
Person A ETH portion will start to reduce in USDC/ETH pool.
When the price of ETH increases, now if person A tries to withdraw his 10% portion from a USDC/ETH pool, The equivalent amount of ETH and USDC he will get at that time will be less as compared to a normal trade that could have earned him more rewards.
This is an impermanent loss.
Person A would have been far better by holding ETH rather than depositing it in an ETH pool.
However as liquidity providers get a portion of fees from every trade than happen on pools they are participating, such loss is covered with time.
For the more technical understanding of what is an impermanent loss, watch this video.
Uniswap offers some excellent features that are the cause of its growing fame.
The main characteristic of Uniswap is that it lets you swap different ERC20 tokens and with Uniswap pools, you can make rewards by providing liquidity.
other features are:
Uniswap List Token
You can have access to many new coins on Uniswap.
Centralized exchanges impose fees for listing coins but not in the case of Uniswap.
Anyone can register their ETH based token on Uniswap without any costs.
As a defi exchange Uniswap volume is going up and up every day.
More people are engaged in swapping tokens and participating in Uniswap Pools.
At the time of writing Uniswap trading volume is 153,734,499 $ in August 2020.
Uniswap Liquidity Pools
In August 2020 Uniswap liquidity in pools is 294,761,532 $.
Infinite pools are added continuously where people can reap profits in the form of fees.
Uniswap fees are very less as contrasted to other Dex’s. Uniswap only charges 0.30% per trade.
The coins that you want to swap on Uniswap are saved in your ERC20 wallets, Uniswap has no authority on your coins. Even if Uniswap gets hacked, hackers cannot reach your funds.
Uniswap Token List
As Uniswap is a decentralized exchange, everyone was empowered to place their tokens on it.
As a result, the likelihood of deception and scam was too much.
There were numbers of fake identical tokens similar to original ones.
It was very challenging for users to filter out legitimate tokens from the fraudulent ones.
To resolve this dilemma, Uniswap announced a community-driven Token list.
The idea of that list is to shield Uniswap users from frauds and fake coins.
Uniswap token list has been integrated into Uniswap interface and it contains:
- A standard list of ERC20 tokens to avoid scams.
- A homepage on tokenlists.org and community forum at community.tokenlists.org.
- ERC20 Coins list from CoinMarketCap, Zerion, Coingecko, Dharma, Kleros TCR, Synthetix, UMA, 1inch, Roll, Defiprime, Compound, and Aave are added initially.
How To Use Uniswap Token List
Practicing the Uniswap token list is uncomplicated.
When you will go to swap tokens, Uniswap will show a token list from the most trustworthy token list providers.
An advantage that was not available before. Uniswap integrated its token list on its interface on 26-Aug-2020.
The goal of the list is to avoid scam tokens and protect users.
It is a great step from Uniswap for its user security.
Pick any legitimate coin in the Uniswap token list from the top authentic list providers and start swapping your tokens.
More details on
How To Use Uniswap
Uniswap is straightforward to use, the methodology is simple and not hard to learn.
How to connect with Uniswap
To connect with Uniswap you need to link your wallet with the exchange.
Currently, Uniswap permits Trustwallet, Coinbase Wallet, Portis, Formatic, Walletconnect, and Metamask.
Metamask Uniswap Tutorial
Connecting Metamask to Uniswap is the most effortless task to do.
- First of all, install the Metamask extension in your browser.
- To install Metamsk go to MetaMask.io,. Select iOS or chrome applications. You can go directly to Google, Chrome, or Apple store to download and install Metamsk.
- After installing Metamask go to Uniswap and click on “launch app”
- Now from above click on “Connect Wallet”
- A list of Wallets will appear, select Metamask, or any wallet you prefer.
- You should be signed in on your wallet to connect it to Uniswap.
- A new window will appear, click “next” and then “connect” to finish your wallet connectivity with Uniswap.
- Enjoy your trading on Uniswap.
How To Swap Tokens On Uniswap
On Uniswap you can swap Erc20 tokens.
Uniswap has made it very comfortable to swap tokens.
- On the swap tab, select the token you want to swap in the “From” section. In our example, we want to Swap Ethereum (ETH).
- Select the quantity of token you want to swap. In the above image, we want to Swap 1 ETH.
- Now choose the token you want to swap to. From the “To” section.
- In our example, we have selected USDT.
- We will get an estimated 381.5 USDT.
- Click on “Swap” to confirm the transaction.
- In our ETH/USDT we have given away 1 ETH to get 381.50 USDT. That is swapping on Uniswap.
Crucial Points in Token Swap
- If any token you want to swap is not available in the Uniswap list, you can add the address of that token. The token will start showing, but you want to be extremely cautious when copy and pasting coin addresses as there are thousands of fake coins that are alike original tokens.
- Constantly take a more intimate look at the number of tokens you are swapping and the number of tokens you will receive.
- “Minimum Received” is the amount you will get even if the price started falling while the transaction is being processed.
- Price Impact: It is the difference between the Uniswap estimated price and market price.
- Liquidity Provider fee: It is the fees that you pay to pool participants that are contributing liquidity.
- Once you confirm your swap, a window of your wallet will appear. One crucial point to consider is gas prices. As these are Ethereum transactions you are obliged to pay the Gas amount. The more gas price you pay, the more speedily your transaction will be processed. That’s what traders do if the price of any coin is climbing very fast and they want to immediately enter into a trade. They pay more gas price as a result their transaction is filled on superiority.
Uniswap Liquidity Pools
The rising prominence of Uniswap is because of the introduction of Uniswap pools.
Uniswap pools have earned great recognition and are practiced extensively.
To engage in a pool you first require to select a pool pair.
You can watch profitable pool pairs on https://uniswap.info/
To engage in any pool it is an obligation to have a similar amount of both tokens.
Let us continue our above example of the ETH/USDT pair.
To participate in ETH/USDT pool you need to have an equal quantity of both tokens.
By retaining a comparable quantity of both tokens in ETH/USDT pool you are providing liquidity.
This indicates that people are going to trade on your funds as a consequence your ratio of ETH and USDT holding will keep changing.
Assume if someone wants to buy 100 USDT by selling its ETH.
The trader will come to ETH/USDT pool, He sells its ETH to get 100 USDT, as an outcome of this trade there will higher ratio of ETH in your pool and a lower ratio of USDT.
This whole concept is known as automated market making.
So if a person does the opposite sell USDT and buys ETH. The ratio of the pool will change accordingly.
That is how pools work on Uniswap.
How To Earn Profit Uniswap Liquidity pool
So how can you earn profit from the Uniswap liquidity pool?.
The answer is simple.
Uniswap charges 0.3% fees on every transaction that is made on it.
The fees are distributed among all the liquidity providers on the basis of their contributions to any particular pool.
People try to find the most traded pools, where trades are made frequently and more fees are charged.
The portion of the fees that a liquidity provider gets is the profit for him from that pool.
How To Withdrawl Liquid Tokens From Uniswap
Uniswap don’t keep your tokens. All tokens are held in your wallet like Metamask that is then connected to Uniswap for all transactions.
If you desire to withdraw any token, you can withdraw it from your wallet.
Frequently Asked Questions
How To Make Money On Uniswap?
People who are actively trading on Uniswap are earning a lot of money. You can make money on Uniswap by trading or by providing liquidity to pools.
Most of the new Defi token’s initial launch is on decentralized exchanges. As Uniswap is a top Dex exchange and token listing is free, Best defi tokens like DOT, YFI, JST, CRV are first launched on Uniswap.
When these token get listed on top centralized exchanges like Binance, their price skyrocket. Traders make good money by getting early into these defi tokens.
The other and very successful way these days to make money on Uniswap is by providing liquidity to its pool.
Getting into any pool is simplistic and anyone is allowed to get into any pool. But you must enter into renowned pools of popular coins like ETH/USDT, USDC/USDT, etc.
You can see pools with their returns, volume, and daily fees on uniswap.info
Is Uniswap safe?
There were a lot of risks when trading on Uniswap as everyone was able to list their token on Uniswap.
Hackers and scammers were pretty quick by producing copies of original coins to rob people funds.
Discerning this problem, Uniswap has now launched a token list. That token list is powered by trusted sources like Coinmarketcap, Coingecko, and others.
This list is integrated into Uniswap and now traders can choose legitimate tokens from the Uniswap list, circumventing any sort of scams.
Furthermore, all coins are kept in private wallets of users, Uniswap doest not store any of user tokens. Users are fully in charge of their tokens.
Why Transaction Fail On Uniswap?
There are some reasons because of which your transaction may not execute on Uniswap.
The transaction may fail on Uniswap if there is not adequate liquidity on the pool you are attempting to swap coins.
Another cause is that you do not pay sufficient gas fee or pay a little gas fee as a result transaction took a prolonged time then its deadline time.
The transaction may also fail if the price of the token falls suddenly and your trade does not fill determined conditions.
In case of failures, transactions are returned and you do not lose any funds.
How To Avoid Transaction Failure on Uniswap?
To bypass any failed transaction you can raise the gas price so that your transaction gets filled instantly.
Does Uniswap Have An App For Mobile Trading?
Uniswap doest not have any particular app for mobiles. But Uniswap supports you to connect your mobile wallet with Uniswap on mobile.
Go to your mobile browser, go to Uniswap, connect your mobile wallet, and start swapping coins on your mobile.
Uniswap support these mobile wallets, Metamask, Rainbow, Pillsr, Trustwallet, Math, Fortmatic, imToken, and Coinbase Wallet.
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I am the editor-in-chief of The Crypto Basic. Love to get involved in cryptocurrencies. I am in crypto since 2014. I like the way blockchain is progression, being adopted by large firms and in most parts of our lives. We are early adopters and followers of blockchain, and time will surely come when our success factor will be blockchain.