What is Uniswap?
Uniswap is a protocol for exchanging ERC-20 tokens on Ethereum. It eliminates trusted intermediaries and unnecessary forms of rent extraction, allowing for fast, efficient trading.
Where it makes tradeoffs decentralization, censorship resistance, and security are prioritized. Uniswap is open-source software licensed under GPL.
How does Uniswap work?
Uniswap is an automated liquidity protocol as in the case of Justwrapper and it is powered by a constant product formula and implemented in a system of non-upgradeable smart contracts on the Ethereum blockchain.
It obviates the need for trusted intermediaries, prioritizing
- Decentralization
- Censorship
- Resistance, and
- Security.
Uniswap is open-source software licensed under the GPL
Each Uniswap smart contract, or pair, manages a liquidity pool made up of reserves of two ERC-20 tokens.
Anyone can become a liquidity provider for a pool by depositing an equivalent value of each underlying token in return for pool tokens.
These tokens track pro-rata LP shares of the total reserves and can be redeemed for the underlying assets at any time.
Pairs act as automated market makers, standing ready to accept one token for the other as long as the “constant product” formula is preserved.
This formula, most simply expressed as x * y = k, states that trades must not change the product (k) of a pair’s reserve balances (x and y).
Because k remains unchanged from the reference frame of a trade, it is often referred to as the invariant.
This formula has the desirable property that larger trades (relative to reserves) execute at exponentially worse rates than smaller ones.
In practice, Uniswap applies a 0.30% fee to trades, which is added to reserves. As a result, each trade actually increases k.
This functions as a payout to LPs, which is realized when they burn their pool tokens to withdraw their portion of total reserves.
In the future, this fee may be reduced to 0.25%, with the remaining 0.05% withheld as a protocol-wide charge.
Because the relative price of the two pair assets can only be changed through trading, divergences between the Uniswap price and external prices create arbitrage opportunities.
This mechanism ensures that Uniswap prices always trend toward the market-clearing price.
How to Use Uniswap Exchange?
Uniswap as a complete decentralized protocol for automated liquidity provision on Ethereum can leveraged by anyone to either:
- Swap ERC-20 tokens
- Add Liquidity to Uniswap pool and earn money
- Add ERC-20 tokens to Uniswap
Before you can start using Uniswap you need to first, connect with your defi ERC- 20 Token enabled wallet.
Example of ERC-20 Wallet:
- Metamask
- Trustwallet
- Coinbase wallet
- Portis
- Wallet Connect
- Fortmatic and a lot more.
A Guide Using Metamask Wallet: Install Metamask (Web 3 wallet). You can install it as a Google Chrome extension. All trades will happen through this decentralized wallet.
Go to the uniswap.org and Click on Launch App
You will be directly taken to the Swap/ Pool page. Select the version of Uniswap you want to use. Version 2 is preferred.
Connect your Metamask wallet or any other acceptable wallet option of your choice as shown in the picture below to Uniswap using “Connect to a Wallet”
Metamask connecting with Uniswap
How to Swap ERC-20 Tokens with Uniswap
In case of Swap, if you are trading, select the input token
Select output token
I selected MATIC
Swap and the Output token will be in your Metamask wallet.
How to Add Liquidity to Uniswap
Before explaining watch this short video tutorial that teaches how uniswap liquidity pool works, and how to add liquidity to uniswap pool.
To become a Uniswap Liquidity provider, after loading Uniswap via your defi wallet, go to add liquidity.
Select the tokens you want to put in a pool.
Thanks, Its easy, safe, and truly decentralized.
Uniswap Airdrop: Is It Still Active
Yes, Uniswap Airdrop is still active If you have traded before the 1st of September on Uniswap.
Uniswap Airdrop: How to Claim Your 400 (UNI) Coin
This video guide teaches you how to claim your uniswap airdrop token if you have traded before the 1st of September on Uniswap.
Step by step guide to claim uniswap airdrop token (UNI)
- Open the Uniswap App
- Connect your ETH wallet to Uniswap.
- If your wallet is eligible, you will see a pop-up window in the Uniswap app showing the message “UNI has arrived”.4Click on “Claim your tokens” and finalize the claim.
- Gas fees are currently very high – if you lower them, your transaction may get stuck.
- UNI is tradeable on Coinbase, Binance, Huobi, and many more.
- Join Bulliscoming Facebook Community (optional)
Conclusion
Uniswap is a complete decentralized exchange and from stats, it will go a long way in the market competition.
This is because it solves the big problem of trading/swapping without funds moving from a dapps.