So, today, I'll share my thoughts on an exchange that has blown my mind during the last few weeks.
1 The importance of decentralized exchanges
2 What is UniSwap?
3 What makes uniswap different from other dexs?
4 How can I make steady returns from pooled liquidity?5 What is UUniswap Airdrop hype? niswap toktoken7 Conclusio
1 The importance of decentralized exchanges:
Let's be honest, we -as a crypto community- suffer from a serious irony which is that we pride decentralization and financial freedom while at the same time we buy, sell, and trade our crypto assets on centralized and custodial exchanges that care about nothing rather than their juicy bottom line!!
Every day we go to Binance or Kucoin, we take the risk of our hard-earned crypto being stolen by hackers or our account being closed by the platform owners.
Well, we all know how goes the saying "Not your keys, not your crypto", yet what forces us to reluctantly rely on centralized platforms is perhaps the low liquidity and weak functionalities of the decentralized platforms.
However, there is one decentralized exchange that seems to manage to broke this scenario and get legs in crypto space...
Yes, I'm talking about Uniswap...
2 What is Uniswap?
In a nutshell, It is an open-source and decentralized application that facilitates the on-chain exchange of ERC-20 tokens.
It was launched without ICO or any other funding and was only backed by an idea and a community. Yes, th, there is no need a multi-million dollar ICO to build a great product!
Using the smart contract technology, users can connect to Uniswap through popular Web 3.0 wallet like Metamask.
It's distinguished with a simple user interface and a decent level of liquidity, and most importantly, you remain in control of your assets and keys without relying on any third-party entity.
3 What makes Uniswap different from other dexs?
Well, as mentioned earlier, Uniswap has managed to achieve some ample levels of liquidity that we are not used to seeing on decentralized exchanges.
Last month, Uniswap managed to handle more daily and monthly volume than the most popular US-based exchange Coinbase. What a great milestone. Right?
In comparison to only last year, you can see the explosive growth achieved by decentralized exchanges (Dex) in general.
And in the graph below(according to Duneanalytics), you can see how Uniswap dominates most of the liquidity volume compared to the rest of the decentralized exchanges. (pink represents Uniswap).
This is another statistic from Coingecko shows similar results in Q3 2020.
Why is that?
Well, Uniswap depends on that anyone is welcome to become a liquidity provider.
The purpose of that is to crowdsource and increase liquidity on the Uniswap protocol. The more there is, the more likely users can trade their assets without a lot of slippages.
Another worth-mentioning thing is that Uniswap has launched its version 2 protocol this year.This version has many updated features that are beyond the scope of this review but let me mention a bit of backstory that I find interesting.
Earlier this year, the Defi space underwent a serious problem called "Flash loan attacks" which enable attackers to exploit the vulnerabilities in smart contracts to manipulate prices and bank hundreds of thousands of dollars.
Uniswap V2 has successfully addressed this issue by implementing a time-weighted oracle service, a technology that has been praised by the legend Vitalik himself.
4 How can I make steady returns from pooled liquidity?
Liquidity pools are what make Uniswap unique and they are also the mechanism through which you can make a profit with Uniswap. They are essentially pools of tokens that sit in smart contracts and made up of an equal value of Ethereum and the ERC-20 token being traded. If you contribute liquidity to a pool you will hold a certain percentage share of that pool. If a user trades a trading pair on Uniswap, the trader pays a 0.3% fee, and that fee is proportionally distributed amongst involved liquidity providers.
The way to join a liquidity pool is that you need to deposit an equal dollar value of both tokens you want to get involved with, then you have to select the pool you want to contribute to, connect with your wallet, and confirm. That's it
5 What is Uniswap Airdrop hype?
2020 was a year that most of us want to forget. Right?
However, there is one event in 2020 I will never forget, which is the launch of Uniswap native token(UNI).
The launch was married with the distribution of a minimum of 400 UNI tokens to all users whoever had used the platform prior to 1 Sep 2020, so all users were given a huge amount of 1200-1600 USD depending on the price of UNI at the time. Not only that, prior to the launch of this token, it was listed on over a dozen exchanges and saw trading volume reached close to 5 billion during only a single day!
The price shot up from 1$ on the release to over 7$ in a very short time.
So, the big question is what potential does UNI have, and does it deserve all that crazy hype?
well, the answer is probably yes, and let me explain why...
6 Uniswap token:
UNI token is the governance token for the Uniswap protocol that means it gives its holders governance rights and enables them to participate in the governance of the Uniswap protocol.
UNI can be delegated and used to vote on all protocol updates, changes, modifications, and improvements through the governance portal.
You can earn UNI token by contributing to the following pools that Uniswap V2 supports:
At genesis, 1 billion UNI tokens have been created and will be distributed over the course of 4 years.
The initial four year allocation is as follows:
60.00% - (600,000,000 UNI) to Uniswap community over a period of four years 21.266% - (212,660,000 UNI) to team members and future employees 18.044% - (180,440,000 UNI) to investors with 4-year vesting 0.69% - (6,900,000 UNI) to advisors with 4-year vesting
After 4 years, there will be a constants protocol inflation of 2%. This helps to ensure that those who participate in Uniswap governance will be rewarded, so if you stake UNI to vote or you supply liquidity, then you will get a share of that protocol inflation and grow with the ecosystem.
In my humble opinion, this is a smart economic model, it provides an incentive for the community members to collectively work to grow Uniswap.
And surely, a more successful Uniswap leads to a more valuable UNI token.
7 Conclusiorankly, I'm a fan of Uniswap. Having the ability to not only easily swap tokens but also earn returns from supplying liquidity was really alluring to many people including me.
Its user base, against the backdrop of the Defi boom, has crazily grown, and the indicator clearly does not plan to stop.
The exchange is doing an excellent job and works flawlessly.
Yes, if I want to mention a problem with Uniswap it would be that it is seriously consuming the resources of the Ethereum network but that would be addressed with the upcoming launch of the much-touted Ethereum reum2.0 Wi interesting to see what happens with that especially in light of the potential move to Uniswap V3.0
What do you guys think about Uniswap?
Do you think it is a worth-investing project?
Were you lucky enough to receive their wonderful airdrop? 🤑
Let me know in the comments below
Once again, I'd like to thank @steemitblog, @steemcurator01, and @steemcurator02 for this great initiative.