This article compiles aspects of the largest decentralized exchange (DEX), Uniswap, including its operational principles, advantages and disadvantages, and usage tutorials, to help readers grasp this important DeFi application.
Uniswap Overview
Uniswap is currently one of the largest decentralized exchanges (DEX) in the cryptocurrency space, built on Ethereum and founded by Hayden Adams in 2018. Uniswap provides basic exchange functionalities, supporting the exchange of all ERC-20 tokens. However, it utilizes an innovative Automated Market Maker (AMM) protocol, enabling users to trade cryptocurrencies without traditional order books or centralized intermediaries, offering high decentralization and censorship resistance. It encourages liquidity providers to deposit cryptocurrencies and create liquidity pools to facilitate transactions, rather than matching buyers and sellers directly in the spot market.
Uniswap Development History
Uniswap’s AMM automated market maker design traces back to a Reddit post by Ethereum founder Vitalik Buterin in October 2016, proposing a prototype for a blockchain-based decentralized exchange. Hayden Adams started developing Uniswap in accordance with Vitalik’s post after just two months of learning smart contract development. Uniswap received $100,000 from the Ethereum Foundation in August 2018, deployed its v1 version in November, v2 in May 2020, and v3 in May 2021, with v4 announced for release later this year.
Uniswap Operational Principles
Uniswap facilitates trades using the AMM protocol, which eliminates the need for intermediaries and matches trades based on mathematical formulas within smart contracts. It distributes trading fees as rewards to liquidity providers (LPs), who contribute to liquidity pools by depositing pairs of tokens.
Uniswap Pros and Cons
Advantages:
– No KYC requirements enhance user privacy and security.
– No token listing thresholds, allowing all users to list tokens.
– User-controlled private keys reduce risks compared to centralized exchanges.
Disadvantages:
– Lack of traditional order matching can lead to uncertain token swap prices.
– Trading fees on Uniswap may be higher than centralized exchanges.
– Higher risk of fake tokens due to minimal listing requirements.
– Smart contract reliance exposes it to potential hacking risks.
UNI Token Overview
UNI is Uniswap’s native governance and utility token, introduced in September 2020 through an airdrop following competitive pressures from SushiSwap. Holders of UNI tokens can participate in liquidity mining, governance proposals and voting, and occasional airdrops.
UNI Tokenomics
UNI had an initial allocation of 1.5 billion tokens, with 60% allocated to the community, 21.51% to team members, 17.8% to founders, and 0.69% to advisors. The total supply is capped at 1 billion tokens, with a 2% long-term inflation rate after a four-year vesting period.
Uniswap Usage Tutorial
This article provides tutorials on using Uniswap for cryptocurrency swapping (Swap) and liquidity mining operations.
Swap
1. Visit the Uniswap website and connect your wallet.
2. Navigate to the “Swap” tab and select the desired cryptocurrencies.
3. Set slippage tolerance and transaction deadline preferences, then confirm the swap.
Liquidity Mining
1. Click on the “Pool” button and select “Add liquidity.”
2. Choose the token pair to provide liquidity, e.g., ETH-USDT, and confirm the transaction after reviewing fees.
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Note: The translations provided are in adherence with the original content and intended meaning.