Explore our comprehensive crypto exchange review Uniswap and its recently launched DeFi UNI token, which has already made a splash in the crypto space, growing sevenfold in just a week.
Uniswap is simply a decentralized protocol for providing automatic liquidity based on Ethereum. Simply put, Uniswap allows you to automatically sell and buy ERC-20 tokens, relying on its ability to change the value of tokens.
The protocol effectively attempts to solve the liquidity problem on decentralized exchanges by allowing exchanges to exchange tokens without the intervention of buyers and sellers. The platform turned out to be one of the largest decentralized exchanges based on Ethereum.
Unlike most exchanges that charge transaction fees, Uniswap does not. It was created as a tool for free token trading. Another unique feature of Uniswap is its ability to use a simple math equation, token pools and Ethereum to connect buyers and sellers on the platform, execute trades and determine prices; unlike most exchanges, it is not automated.
Who founded Uniswap?
Hayden Adams created a widely used exchange based on Ethereum. Prior to founding Uniswap in November 2018, Adams worked as a mechanical engineer at Siemens. After being fired at Siemens, his Friend, Karl Floersh, who was working for the Ethereum foundation at the time, inspired him to penetrate the world of cryptocurrencies through Ethereum.
He created his first proof-of-concept, including a smart contract with a single liquidity provider, and allowed simple swaps. A mechanical engineering graduate at Stony Brook University, he is also inspired by Ethereum founder Vitalik Buterin.
What makes Uniswap different
The difference between Uniswap and other DEXs is mainly that Uniswap uses a pricing mechanism known as the Permanent Product Manufacturer (CPMMM) model.
When funding the Uniswap wallet, Ethereum or ERC20 based tokens can be used. This includes exchanging for a token to be used by launching a new Uniswap smart contract for a specific token and then creating a liquidity pool with a specific amount of token and the same ETH value. Uniswap uses a constant equation (x * y = k) to automatically determine the price instead of matching buyers and sellers like other crypto exchanges.
In the equation, x and y are equal to the number of Ethereum and ERC20 tokens provided by the liquidity pool, and k is taken as a constant. This equation uses the relationship between ERC20 tokens and ETH and the supply and demand application to pinpoint the value of that particular token.
For example, when a user buys USDT tokens for ETH, the USDT supply decreases and the ETH supply increases, resulting in an increase in the USDT price, which means that the price of a token in Uniswap can only increase in the case of exchanges. Basically, Uniswap balances the value of a particular token and exchange based on demand and supply chain.
Other highlights of Uniswap
Each token has its own smart contract and liquidity pool, and almost any Ethereum-based token can be listed on Uniswap with absolute freedom and without permission. Uniswap even goes as far as creating a smart contract and liquidity pool for tokens that don't have one. After these conditions are met, all users can trade the token or add an equal value of the token and ETH to the liquidity pool and earn 0,3% commission from the liquidity provider.
You can include tokens on the platform for free, since Uniswap does not require a management fee, and the inclusion of tokens is an independent process; typing function in the factory contract. This is done using the CreateExchange platform. The function then confirms the existence of an exchange agreement already started for registration.
Uniswap has two different contracts on its platform; The first is an exchange contract, which is unique in that it has a separate token and ether that can be exchanged at the same time. The other contract is a factory contract that mimics exchange contracts and includes ERC20 tokens in its log address.
How Uniswap UNI tokens are created
When an ETH / ERC20 trade occurs, the tokens are deposited into the Uniswap liquidity pool. A user who traded tokens receives a pool token that can be used like ERC20 tokens. These tokens can be freely exchanged or moved, and when funds are withdrawn, the pool tokens are destroyed by Uniswap.
Each pool token represents the user's share of the pool's total token assets. In addition, the user receives a 0,3% share of the pool's trading commission. ERC20 is used as the primary payment unit, for example, for benefits, interest, debt bonds and many other options.
How to exchange tokens
Uniswap tokens can be obtained on the platform uniswap.exchange... It is also necessary that the user has an Ethereum address as the exchange is based on Ethereum. After that, the user can now add tokens to the Uniswap liquidity pool. The user can choose any token to exchange with another, since there is a huge number of tokens on the platform. The user then needs to approve the transaction using their wallet and then confirm the swap. Yes, it's that simple!
Uniswap allows multiple payment interfaces to add funds to Uniswap pools without the need to access the Uniswap user interface. IntstaDApp Allows the user to deposit funds to Uniswap pools without using the Uniswap interface. Users can also use Zapper.fi to add funds using only ETH instead of the usual way to add ETH with another ERC20. This is in line with Uniswap's goal of creating a platform on which several official and unofficial resources build on the protocol.
Launch and distribution of UNI Uniswap tokens
The Uniswap UNI token was launched in September 2020 and provided 400 UNI tokens for free for every wallet that used the Uniswap protocol until September 1, 2020. More than 150 million UNI tokens are currently available, of which 66 million are in demand in the first 24 hours. lonely. Although Uniswap plans to distribute 40% of the tokens in the first year, it will slow the distribution by 10% each subsequent year until the total distribution of all tokens is reached.
1 billion UNI tokens will be distributed over 4 years with the Uniswap community, top beneficiaries (60%), 21,5% will be allocated to its employees and the remaining 18,5% to investors and advisors. This shows Uniswap's commitment to becoming a community-driven crypto ecosystem.
Is there a new trick up the sleeves of Uniswap?
Although Uniswap was launched in 2018, it has evolved since then. The first version of UNI's success is still being announced, but Uniswap plans to launch a new version of Uniswap V3, which is a massive upgrade from the already released V2. V2 allows you to trade ER20 / ER20 directly, excluding ETH from the equation where possible.
The new protocol also supports natively incompatible tokens such as OMG and USDT, and boasts major technical enhancements that make Uniswap more attractive to the cryptocurrency world. This is a stepping stone to more for Uniswap, currently the leading DeFi platform in total cost locked (TVL).
Uniswap is becoming a mainstay in the world of cryptocurrencies and realizing its potential: the UNI token jumped from a starting price of $ 1 to $ 7 in just the first week of its launch.