What is Uniswap- an introduction to the most popular DeFi marketplace

1. What is Uniswap Protocol?

Uniswap is a protocol on Ethereum for swapping ERC20 tokens.

Uniswap is one of the most popular Defi protocol that rose to top Defipulse ranking in recent months. Traditionally, token swaps require buyers and sellers to create liquidity; Uniswap creates markets automatically. Unlike most exchanges that charge fees, UnisWap was designed with a very low fee structure without any fees.

Uniswap solves the liquidity problem by allowing automatic token swaps and is one of the most popular decentralized exchanges in the DeFi.

Uniswap UNI token is listed on a couple of exchanges. You can buy UNI on Bitpanda easily with Credit cards, bank transfers, or with other cryptocurrencies, at low fees.

uniswap pool
Uniswap Protocol Analysis

UnisWap is an open-source project with a decentralized trading platform for tokens. There are a number of different types of exchanges, but it is the only one with the ability to self-sustain – sufficient in terms of liquidity, performance, and user experience. Many projects have tried to address the problems of centralized exchanges, but, apart from user experience and performance issues, the main problem is the lack of liquidity. Decentralized exchanges with these inherent problems make it difficult to push for mass adoption.

Traders can exchange Ethereum tokens on Uniswap without having to trust anyone with their money. Anyone can lend their cryptocurrencies to the liquidity pool and collect a fee. This is done by an equation that automatically determines and balances the value based on actual demand. This is the first fully decentralized protocol for automated liquidity provision in the Def.

2. What are the utilties of Uni token?

The primary utility of the UNI token is governance over the Uniswap protocol and the funds in the governance treasury.

Another utility of UNI token is revenue sharing.

3. How Uniswap Protocol works


Uniswap is an automatic liquidity marketplace. There is no order book or central party required for the transaction, and Uniswap allows users to act as a one-stop-shop for any type of exchange, be it a token exchange or a trading platform. It anchors automatic liquidity and allows the use of Uniswaps without requiring orders or central parties for companies.

To enable trading without an order book, Uniswap has developed a model called the liquidity pool, which is created by liquidity providers. Anyone with an Ethereum address can contribute to the liquidity of exchange and make money from it. It allows users to exchange ERC20 tokens, including the native ETH token, without intermediaries. The system provides a decentralized pricing mechanism that essentially smoothes the depth of the order books.

We will discuss in more detail how this works in a future post, with more details on the liquidity pool and other features of Uniswap.

First of all, it is important to note that users can seamlessly switch between ERC-20 tokens without the need for an order book. As the Uniswap Protocol is decentralized, the listing process is fully decentralized and there is no liquidity pool available for traders. 

The price of a token on Uniswap varies according to market demand, not demand from the buyer or seller.


You can simply create a token and it can be listed on Uniswap without authorization. To contribute to the liquidity pool, you need an equivalent value of ETH and ERC20 tokens. Each token has its own rules and requirements, such as a minimum of 1 ETH, a maximum of 2 ETH. Once you have your token, anyone can exchange or contribute it, earning a small percentage of the total amount of tokens available for trading on UniWap.

4. What are the fees on Uniswap Protocol?

Traders pay a 0.30% fee on all trades.

This amount is split between:

iLquidity providers: 83.3% (0.25% of the amount traded)

Protocol: ยท 16.6% (0.05% of the amount traded)

5. How to use Uniswap Protocol?

First, you need to install Metamask . Metamask can be installed as a Google Chrome extension. All trades will happen through this wallet.

How to use Uniswap Protocol?
install metamask
How to use Uniswap Protocol
Make sure you see Metamask in Google Chrome after installation

Second, access Uniswap website here, click on Launch app in the top right corner.

Uniswap website here, click on Launch app in the top right corner.
Uniswap website here, click on Launch app in the top right corner.

There are a lot of scammers that try to scam people with fake Uniswap URLs. Make sure the URL is uniswap.org, or simply click on this link.

NOW you are in Uniswap pool page

NOW you are in Uniswap pool page
NOW you are in Uniswap pool page

Click on “Connect to a wallet” on the top right corner to connect to a wallet of your choice. You will see the options to connect to a wallet.

Connect to a wallet of your choice

If you already have ETH and the tokens you want to trade in Metamask, then it is very convenient. You can also choose a different wallets than those showing in the list by clicking on WalletConnect, a wallet connecting services which supports Rainbow, Metamask, Trust, Imtoken, Argent, Pillar, Safe, Math.

I use Trust Wallet, so it is easier for me to do it from my phone.

I am connecting to my Trust Wallet
I am connecting to my Trust Wallet

Click “Connect”, it automatically link to your Trust wallet. Alternatively, if you want to use desktop version, simply connect your wallet to Uniswap using QR code. You just need to go to Trust Wallet, choose “Wallet Connect”, scan the QR code on Uniswap. It works the same way. it took me a while to figure that out so I guess it helps if you explain this, too. ๐Ÿ™‚

My trust wallet is connected to Uniswap now.
My trust wallet is connected to Uniswap now.

Now you should be able to start using Uniswap

Swap:

  • Choose a token you have (From)
  • Choose a token you want to swap to (to)

I choose ETH and DAI. Below is the screenshot. It is very important that you click on the Transaction Setting button on the top right corner to set the parameters for the transaction. Failing to do this might result in you paying a lot of transaction fees unexpectedly. I made that mistake the first time I used Uniswap, so don’t be like me. ๐Ÿ™‚

Below is the default setting, you can adjust the slippage tolerance it how you like it. Your transaction will revert if the price change unfavorably more than this percentage. Please bear in mind, however, that your transaction might not get through if you set the slippage tolerance too low.

Swapping tokens on Uniswap

The successfully swapped token will be in your Metamask.

If you wish to own Uni token, buy it here easily with other cryptocurrencies, bank transfers, SEPA, or credit cards.

Pool:

Choose pool, or click here, it will lead you to this interface.

Uniswap pool
how to use Uniswap
Uniswap pool

Click add Inquidity

Adding liquidity to a pool on Uniswap
Adding liquidity to a pool on Uniswap

6. How to swap tokens on Uniswap Protocol?

Every time funds are deposited into the pool, a pool of tokens is created. The pool token represents a small percentage of the total amount of funds in the liquidity pool and, like ERC20 tokens, can be exchanged and used or moved freely. When the money is recovered, all pool tokens will be destroyed or burned, but you can move and use them.

Every time funds are deposited into the pool, a pool of tokens is created. The pool token represents a small percentage of the total amount of funds in the liquidity pool and, like ERC20 tokens, can be exchanged and used or moved freely. When the money is recovered, all pool tokens will be destroyed or burned, but you can move and use them.

You can access the Uniswap protocol by forwarding it to your Uniswap Exchange. It is only a matter of choosing which tokens you want to exchange. You also need an Ethereum address (for example, a wallet like MetaMask), then you need to verify the transaction in your wallet, confirm the swap, and remember that there is an additional Ethereum fee for each swap. Armed with this, you can insert and exchange the tokens into the Uniswap liquidity pool.

Since the introduction of Uniswap in late 2018, the protocol has gained great traction, but much of the recent interest is due to an important upgrade that now allows direct ERC20 to ERC20 swaps, as well as the introduction of a new protocol – wrap – around the Ethereum protocol., and the DeFi boom. Uniswap V2 also adds technical improvements that make this more desirable and supports a number of new features, such as a safer wallet and better user interface.

As liquidity, mining and yield-mining platforms gain dramatically in popularity in 2020, Uniswap will see a corresponding rise in interest rates, as many DeFi platforms allow its liquidity providers to earn additional returns from their LP tokens. With exchange fees paid to the liquidity provider of 0.3%, the platform becomes more attractive for all crypto assets contained in a platform. The Uniswap protocol now exceeds the market capitalization of the most popular cryptocurrency platform on the internet, Ethereum.

7. Where to buy Uniswap UNI token?

Uni swap tokens are offered on centralized and decentralized exchanges. You can buy UNI token on Bitpanda. Check out this guide on how to open an account with Bitpanda and buy UNI token there.