Uniswap is a hot trend right now. So why is Uniswap floor one of the best? decentralized exchange most popular today.
What is Uniswap?
This is a protocol that works on the Ethereum platform for token swaps. That way you can swap (convert) ETH ERC20 and between ERC20s (V2).
Uniswap was created by Hayden Adams in 2018. He was inspired by an article by Etherem co-founder Vitalik Buterin. It is community based because there is no need to pay the platform or the middleman. Serving the benefits of the Ethereum ecosystem.
Specifically, in the past few days, Uniswap has given away to anyone who transacts on this platform before September 1, 2020. (including failed transactions) 400 UNIs. At the highest time 1 UNI ~ 8.6 USD => 400 UNI ~ 3,440 USD (80 million).
Uniswap use automated market making protocol. Or rather, automatic liquidity. No order book or 3rd party required. So how can a trade happen without an order book?
How Uniswap works.
Centralized Exchanges (CEX) connect buyers & sellers through order book (order book). Tokens are priced through the lowest price a seller wants to sell & the highest price a buyer is willing to pay.
Uniswap uses an automated market-making protocol. These are smart contracts that traders can trade in. The price is calculated based on the instantaneous supply and demand of the 2 tokens in the pool. This price runs on the curve of the equation x * y = k. In there:
- x: quantity of token A
- y: quantity of token B
- k is a constant constant
Uniswap pros & cons.
Nothing new comes out perfect and Uniswap is no exception.
- No need to verify your identity (KYC). Just connect to the wallet and you're done.
- High liquidity (You can buy or sell anytime).
- Potential coins, hidden gems are always listed on Uniswap first.
- Careful coin scam, fake. I will show you how to get the right Contract below.
- Running on the Ethereum platform, the fees are quite high. Sometimes up to 20-30 USD / 1 swap. You need to watch when the fee is cheap to transact.
- The more you buy, the higher the slippage. If you buy over $10k, you should consider.
Unlike CEX, which operates on an order book, Uniswap works on a liquidity pool. That helps the liquidity of cryptos traded on Uniswap always "green".
Anyone can provide liquidity to Uniswap called Liquidity Provider (LP). In return they will receive 0.25% of swaps incurred on each transaction multiplied by % of the amount they have provided to that pool.
Uniswap V1 & V2.
Uniswap V2 has some changes compared to V1 as follows:
- Better security.
- Swapable from ERC20 ⇔ ERC20 tokens. In V1 you can only swap ETH ⇔ ERC20.
- The reward for LP is only 0.25% compared to 0.3% like in V1. Fee 0.5% will be retained by Uniswap for platform development.
A few notes before using Uniswap.
- Before swapping any token make sure you have added that token to your wallet. If not, maybe after the swap is complete you won't see that token anywhere.
- It is cheaper to use ETH to swap. Always deduct a certain amount of ETH as a fee or the transaction will fail.
- Always check GAS fees in advance at https://ethgasstation.info/ for fast & smooth transaction. You will still be charged the transaction fee if the transaction fails. Remember 1 successful transaction with slightly high fees is better than 3 failed transactions with low fees.
Uniswap User Manual.
First you go up coinecko.com Search for the token you want to swap. For example, here I want to swap HAKKA, so I will type Hakka in the search box and then press Enter. Then you scroll down to the Exchange section.
Choose pairs at Uniswap exchange. For example, here will be the HAKKA/ETH pair. The reason you have to go through Coinecko is to avoid clicking on fake contracts.
A warning pops up advising you to double check before swapping. Because if you swap to fake tokens, you can't sell them back, which means you lose money.
You can click the . button View on Etherscan to check once more. After you are sure, you tick the box I understand and press tiếp tục.
Next you click the . button Connect Wallet to connect to the wallet.
Select the wallet you want to connect. For example, here I want to connect Uniswap with Metamask.
Select an account on your Metamask wallet (if more than 1 account). Then press Next and Connect more done.
Enter the amount you want to swap. Remember to always deduct a little ETH as a transaction fee. This amount is more or less depending on the time. But I think I should leave at least $50 so that I can swap again later, so I don't need to load more ETH.
After clicking swap you need to confirm on the wallet again. The token after swap will be transferred directly to your wallet. Swap time is fast or slow depending on the number of GAS you set.
So, I just went through a few basic points of Uniswap and showed how to swap any token on Uniswap.