Overview of Dexs(Decentralized Exchanges)
Since the birth of cryptocurrencies, centralized exchanges have been in charge of almost 100% of asset liquidation on the space. Exchanges like Binance and coin base has been spearheading these changes with large market cap and colossal 24hrs volumes. However, despite the many advantages of centralized exchanges like quick access to fiat currencies and eas of use, the system has been subjected to series of attacks and loss of investors fun like Mt. Gox in 2014 and Quadriga in 2018 and also a most recent twitter hack involving twitter handles of popular exchanges and figures.
2020 is quickly shaping up to be the year for decentralized exchanges to take the mainstage. With the launch of notable dexs like Uniswap, dYdX, Balancer, and Curve, These DEXs have quickly taken the defi tokens to mainstream adoption as a center stage Defi markets. With optimized usability, deeper liquidity, and emerging composability, the DEX ecosystem is as strong as ever. This explosion on dexs has revolutionized a much-needed competition between the centralized exchanges, as they aim to capture a substantial share in various markets.
DEX is an innovative type of exchange platform that allows people to make transactions without any intermediaries. They can place orders and find each other, with total control of their assets.
Unlike a centralized exchange that requires extensive data from its users and acts as a custodian for its investors, Dexs are quite the opposite as users are in total control of their funds. The custodial system entails that purchased cryptocurrency on the exchange only appears in your account, but to own it you need to transfer it to your external wallet, which may result to be a difficult task if there are problems with the exchange. However, If you use a non-custodial system, all your assets go to your wallet and you can trade directly from it by connecting your wallet to a DEX platform.
Top Features of DEXs(Decentralized Exchanges)
DExs are quickly gaining recognition on the global rate, In the past year alone, DEXs have made serious improvements in both usability and liquidity. These improvements show a level of significant maturity and that they are ready to compete with their preexisting counterparts. Here are a few features that catch the eye in Dexs:
- As a non-custodian platform, ownership of underlying assets are never revoked
- The dex system is very cost-efficient with transactions amounting to almost nothing, allowing users to cross swap assets and coins in a decentralized manner.
- Duet to its decentralized nature dexs is very safer when compared to centralized exchanges, they also have a lesser probability of having serious technical issues. Some nodes may go down, but the whole system will keep functioning.
- Most DEXs do note require any sign-ups, and largely come with no counterparty risk.
- Dexs are completely anonymous and free of paper trail as users you only need to use your public address. Users simply connect a wallet of their choice to start trading. No profile or background information is required.
Welcome to Uniswap
Uniswap offers a simple one-click user-friendly interface to swap any two Ethereum assets against an underlying liquidity pool. Uniswaps makes uses of , market rates for any two selected assets, instead of order books. As a non-custoain platform, users who wish to trade their assets simply connect their web 3 wallets like metamask, trust wallet for mobile phones. Once the selected input(ETH) and output asset(DAI) has been selected you authorize the trade, Uniswap automatically processes the transaction and updates your wallet balance.
Trading with Uniswap is trustless and permissionless thanks to liquidity pools which allow anyone to create or seed a market by supplying it an equal value of the two ERC20 tokens being paired. Liquidity providers earn an equivalent portion of the 0.3% trading fees each time the trade is carried out.
Liquidity providers on the Uniswap protocol
Liquidity providers on the uniswap protocol supply capital to any pool by submitting the collateral for both sides of a market. This means if you are looking to supply the capital to the DAI/USDC market, you must submit an equal amount of DAI and USDC to maintain the Constant Product AMM(Constant Product Market Maker Model).
Uniswap uses a variant called the “Constant Product Market Maker Model.”This feature enables the market to always maintain liquidity on matter how large the order size nor how tiny the liquidity pool. Once liquidity is supplied, uniswap grans users liquidity tokens which keeps a record of how much of any given liquidity pool. Liquidity providers on the uniswap protocol can redeem their liquidity tokens at any time.
Advantages of uniswap
Uniswap is one of the best and most active DEx in the system due or its efficiency and proved use case in the defi sector and crypto world at large. Uniswap grants users direct access to defi coins and tokens built on the Etherum blockchain and best suited for small-traders, Uniswap posses zero listing fees, requires no native tokens, and some of the cheapest gas cost of any DEX. Uniswap allows for flash swaps between two ERC2o tokens seamlessly.
Recently Aave introduced a Uniswap Money Market this project allows users to post UNI LP tokens as collateral for a loan, creating a leveling ground for crypto lending.
Various Dapps on the defi sector and other projects could easily integrate uniswap as a front end for theirducts.
Uniswap swap is on the front end of the DEX evolution and its been doing a great job so far with ist decentralized services. I personally believe in the uniswap protocol.
I got to know about uniswap a few months ago and I have made my first token purchase and wallet connection(trust wallet) on the app and Iill say I am imprpressed and would recommend this exchange for any cryptonvestor I know both retail or heheestor.
This post was made in response to #steemcryptochallento Defi*.