Uniswap (UNI)

Cryptocurrency Uniswap (UNI)

Uniswap is the most popular decentralized cryptocurrency exchange (DEX). It is used to exchange tokens based on Ethereum ERC-20 directly by users without the participation of the exchange. The platform is innovative and stands out quite significantly from traditional exchanges. The main advantage is that you don't have to go through the KYC procedure or even create an account. Users connect to the stock exchange using cryptocurrency wallets. Thanks to this, the platform is also much safer, because the assets are not kept on the stock exchange accounts, but directly on the users' wallets. Transactions, on the other hand, are carried out using smart contracts. Also, the entire interface is much simpler and less complicated than in classic exchanges. Uniswap does not have an orderbook and allows you to exchange ERC-20 tokens in an intuitive way. As an added bonus, you can add liquidity to specific cryptocurrency pairs. In return, users receive the transaction fees for the pair to be split. The project also introduced its governance UNI token, which gives decision-making in matters of further development of the platform.

Uniswap forecasts

UNI, although introduced to the market relatively recently, quickly gained in popularity and is already in a high 35th place in terms of capitalization. The highest valuation of the asset took place the day after the introduction of the token, i.e. on September 18, 2020, and amounted to USD 8.34. The daily turnover is almost $ 500 million. UNI is listed on 33 cryptocurrency exchanges, of which Boinbene (23%), Binance (15%), Huobi (13%) and OKEx (12%) are responsible for the largest turnover. On the other platforms, the turnover is much lower, and interestingly the decentralized Uniswap V2 platform takes only 9th place with a turnover of just 4%. Thus, a decentralized exchange token is exchanged much more often on centralized exchanges.

The history of Uniswap

The project was launched in 2018 by Ethereum's Hayden Adams as well as Noah Zinsmeister and Dan Robinson. The initial platform was Uniswap v1, which works, but there is still a new improved Uniswap v2 alongside it. Due to the significant development and hype for DeFi-related projects, the project gained the greatest popularity in 2020 and became the largest decentralized cryptocurrency exchange. Currently, over $ 2 trillion is invested on the stock exchange. On September 17, 2020, Uniswap released its UNI token in the form of an airdrop. Coins were distributed to all users who previously made at least one transaction using the exchange. It was quite a loud airdrop, mainly due to the fact that the value of the coins distributed reached up to $ 3,000 per person. The project is still evolving and attracting more and more users and capital.

The principle of operation of Uniswap

The stock exchange is distinguished by a very simple interface and connection via a cryptocurrency wallet. Thanks to this, assets are not stored on the stock exchange, only off on users' wallets, and each identifies itself with a unique wallet address. Any Ethereum wallet can be connected to the exchange, but Metamask is dedicated and definitely the easiest to use as a plugin in the browser. All transactions that take place on the stock exchange are smart contracts for the Ethereum network. It is a safe form, but requires payment of a fee on the Ethereum network, i.e. GAS. As a result, in addition to the network commission, the user has to pay a fee, which when the network is busy, can be even several dozen dollars. This made transactions of small amounts completely unprofitable, especially during the boom on the DEX exchanges. In technical terms, Uniswap uses price averaging mechanisms to prevent significant differences between their platform and centralized exchanges.

For the exchange itself, liquidity pools are used, which also raise the balance between the number of tokens. Each user can add their funds to such a pool, receiving a remuneration in the form of a part of the commission payment adequate to the funds in the form of UNI tokens. The process of adding liquidity is much more complicated and can result in a loss of funds. This is due to the mechanism that takes care of the balance of tokens. Simply put, the greater the fluctuations between the currencies of a given pool, the greater the loss of funds. For example, if the exchange rate changes by approx. 20%, the loss of the deposit will be approx. 5%. However, this is a considerable simplification and the exact process with charts is available on the Uniswap website. You should read and understand it carefully before deciding to add your money to the liquidity pool. An important fact is that only ERC-20 tokens can be exchanged on the exchange. You can also create your own tokens and add them to the exchange. The UNI cryptocurrency is also based on Ethereum. It is a governance token, the possession of which gives the opportunity to actively participate in decisions regarding the further direction of the platform's development.

Wallet for Uniswap

The UNI cryptocurrency can be stored on any wallet that allows you to store Ethereum ERC-20 tokens. Among others, MyEtherWallet, Metamask. Also, both Ledger and Trezor hardware wallets allow you to store UNI tokens. However, it is also impossible not to mention the possibility of storing cryptocurrencies in liquidity pools, thanks to which you can increase their number.