The Ultimate UniSwap Review (For 2022)

Uniswap is an innovative decentralized exchange protocol that aims to solve decentralized exchanges’ liquidity problem by allowing the exchange platform to swap tokens without relying on buyers and sellers creating that liquidity. Uniswap exchange incentivizes its users to maintain the exchange’s liquidity, providing portions of the transaction fees and newly minted UNI tokens to those who participate.

UNI token is used to fund Uniswap. It’s a governance token, so owners can participate in decisions on network upgrades and policies, with each vote being proportional to the amount of UNI cryptocurrency they stake.

You can read our UniSwap Review to discover everything you need about the Uniswap Project, its pros, cons, token and how to begin making UniSwaps.

Let’s dive right into it!

Decentralized Exchange

Alternatively, decentralized exchanges are known as DEXs. They allow crypto traders to transact directly without the need for a custodian. Decentralized exchanges can be used as an alternative for centralized ones. These exchanges use liquidity pools to replace full-fledged orders books. Users can trade in a private and safe environment. A smart contract is a code-written agreement that facilitates transactions in DEXs.

The services offered by centralized exchanges are similar to the ones provided by banks. The bank safeguards its clients’ funds and includes surveillance and security services. In contrast, decentralized exchanges, like UniSwap,  offer autonomous on-chain transactions at marginal costs by leveraging smart contracts.

Traders must protect their funds, and assume responsibility for any loss. Customers’ funds or assets that have been deposited are given an official notice. IOU (I Own You) via decentralized exchange portals. A blockchain-based token called an IOU has the same value and can be traded on any network.

Ethereum is home to some of the most well-known decentralized exchanges.

UniSwap App Review

Overview

UniSwap is an automatic liquidity protocol, and it’s one of most well-known decentralized exchanges in crypto. UniSwap, an Ethereum-based protocol is the UniSwap Exchange An autonomous liquidity system creates liquidity for ERC-20 tokensThe newest trading platform, which eliminates the requirement for certified intermediaries and prioritizes security and scalability.

UniSwap provides a fully self-regulated, centralized environment in which users have complete control over their funds. It is not like a centralized market where they must give up their keys.  This means that no one company can manage or control the platform.

UniSwap became the first widely used permissionless DEX  to let users trade any Ethereum based token directly, without any withdrawal or deposit to a Centralized order book. Uniswap is an automatic market maker that uses a special algorithm to determine the market rate and removes all order books. Uniswap offers the highest market rate by allowing users to select an input token and an output token. 

UniSwap, which allows users to trade cryptocurrency and exchange assets for cryptos, has become one of the most famous Ethereum-based exchanges. The exchange doesn’t hold assets and lacks an order book; this makes UniSwap safe compared to traditional exchanges.

Anybody can trade ERC-20 tokens using the UniSwap protocol. Trading fees are earned by liquidity providing to the protocol.

Review UniSwap Background

UniSwap was founded by Hayden Adams. Hayden is a talented young designer/developer. Hayden, along with a smaller team of 10 people, built UniSwap’s DEX using a grant from Ethereum Foundation in the amount of $100k.

UniSwap secured a seed round of $1M from paradigm in April 2019. UniSwap released UniSwap 2.0 in May 2020.

UniSwap raised $11M in Series A funding, launching its native token UNI as well as solidifying its position on Ethereum’s top dex.

UniSwap Versions

UniSwap’s user base continues to grow, and UniSwap launched new versions each time.

UniSwap v1

UniSwap Version 1 was released on Ethereum’s mainnet, November 2, 2018. UniSwap V1 only supported the exchange of ETH–ERC 20 pairs. To swap USDC with DAI users would first need to trade USDC for Ethereum, and then for ETH to receive DAI. 

UniSwap V1 enabled the use of LP tokens. Liquidity provider tokens are given to liquidity providers who add liquidity to any pool. The LP tokens are then able to be traded or staked for rewards. Trade fees can be charged to reward LPs.

UniSwap V2

UniSwap V1’s Proof-of-Concept was hugely successful and boosted the network’s ability to launch the new UniSwap V2 by May 2020.

UniSwap V1’s major drawback was the “ETH bridging” problem, i.e., the absence of ERC20-ERC20 token pools, which resulted in high spillage and escalated costs when a user wanted to swap one ERC20 token.

Uniswap 2 was an improvement in the user interface. ERC20-ERC20 pools were also introduced to solve the ETH bridging dilemma. UniSwapV2 has significant differences from UniSwapV1. These include the use of wrapped ETH as an alternative to native ETH, flash swaps, native price estimates, and UniSwap’s ability to utilize native ETH for core contracts. Traders can still use ETH through helper agreements.

UniSwap V2 flash swap

UniSwap flash-swap lets users withdraw any amount ERC20 tokens, without having to pay an upfront fee. However,  they could either pay for the tokens withdrawn or pay for a portion and return the rest or return all the withdrawn tokens at the end of the transaction execution.

UniSwap has also implemented a protocol charge. The role of community governance in turning on and off this fee is vital. The protocol fee, which is 0.3% of the trading fee, is paid by UniSwap to fund the platform development and shaping the future roadmap.

UniSwap V3

UniSwap released UniSwap V3 on the L1 Ethereum Mainnet in May 2021. In March 2021, the original announcement stated that L1 optimism would follow soon.

UniSwap V3 offers a more flexible fee structure than V1 or V2. It also has greater capital efficiency and accuracy. Much higher than V2, liquidity providers can earn high capital returns to deliver liquidity at 400x capital efficiency.

UniSwap V3 is designed to facilitate low-slippage trade execution and surpass both centralized exchanges as well as stablecoin-based automated markets makers.

UniSwap (V3) Features

Concentrated liquidity: Liquidity providers can estimate the AMM’s shape, since they are able to create unique price curves that reflect their preferences. LP’s capital can be centralized within custom price ranges, enhancing their liquidity at desired prices. Concentrated liquidity reduces the capital required by traders. This is a feature that ensures a higher capital efficiency for the asset pool. ERC20 tokens do not work in the V3 pool contract. It requires that all contracts have additional logic so fees can be reinvested and distributed.

Active liquidity: Liquidity is automatically taken out of the pool and will no longer earn rewards when the market experiences price changes beyond the LP’s specified price range. Waiting for the market’s price to rise, liquidity is shifted towards less valuable assets to ensure the well-being of UniSwap trading community LPs. To begin earning again rewards, LPs will be able to update their price ranges in order to match the current market price.

Flexible Fees

UniSwap V1 flat fees were 0.3%All costs were allocated to LP Rewards.

UniSwap V2 charges a total of 0.005%. reserved for the network’s development.

UniSwap V3 now at the government-governed flexibility of three different fee tiers

• Stablecoins such as DAI/USDC at 0.05%
• Standard non-correlated pools such as ETH/DAI incur 0.3%
• 1.0% for pairs that are not correlated

The protocol fee is turned off automatically. However, it can be activated through governance to pay a specific pool a protocol fee. This cost can range from 10%-25% of LP Fees.

Liquidity Pools

UniSwap can be described as an automated liquidity protocol. Automated Market Marker is a smart contract that provides liquidity pools/reserves against which traders can trade. Tokens can be deposited into an Ethereum-based smart contracts to create liquidity pools. A pool could include stablecoins like DAI, USDT and DAI. The AMM fee is charged to traders that use it. This fee is divided among liquidity providers according the amount they stake in the pool.

Two types of smart contract are used in UniSwap’s ecosystem: an exchange and a factory contract. The exchange contract’s purpose is to hold a pool consisting of specific tokens. This is where users can create new exchange agreements. These pools contain pairs of tradable currencies; for example, an investor might put ETH and UNI into a liquidity pool on UniSwap; they’d then get a percentage of the trading fees each time ETH is swapped for UNI or UNI for ETH.

UniSwap’s liquidity pools have little to no price impact for the vast majority of transactions due to underlying mechanisms.UniSwap uses the constant product market maker model that enables the exchange always to provide liquidity, irrespective of the size of the liquidity pool. This market maker model works by increasing the quantity of assets in the liquidity pool. The spot price for any asset will increase as more is purchased. While large orders can have an increased price impact but are not subject to liquidity shortages, this is not a problem for the system. UniSwap has an aggregate supply for smart contracts. This means that the probability of slippage in any pair will be lower if the pool is larger. 

Uniswap makes it easy to identify the factors that you want to mitigate. Place an order at a maximum price order.

Liquidity Providers

UniSwap’s liquidity providers (LPs) allow it to offer crypto trading. By providing liquidity, LPs earn crypto because they receive a cut of the exchange’s transaction fees. By submitting collateral for both sides of the market, LPs can provide capital to any liquidity pool; this means that you must offer an equal amount of DAI and USDC if you’re looking to provide capital to the DAI/USDC market to maintain the Constant Product automated market maker.

UniSwap grants users liquidity tokens, which record how much of any given liquidity pool you’re responsible for when liquidity is supplied. Tokens can be redeemed by liquidity providers at any moment for the underlying collateral.

UniSwap collects a 0.3% transaction fee, which is split between all liquidity providers in order to encourage them. These fees are then immediately added to the market, at transfer time. This results in greater spreads throughout the board. Liquidity providers are granted ownership of a greater pool of capital by granting them pro-rata stakes. Simply put, more market transactions equals more revenue for liquidity providers.

Transaktion Fees

UniSwap has a trade fee. Before UniSwap V3 implemented fee tiers that are based on liquidity pool volatility, it was 0.3%.

• Very Stable pairs – 0.01%
• Stable pairs – 0.05%
• Most pairs – 0.30%
• Exotic pairs – 1.00%.

Flat fees of 0.3% are slightly more than the industry standard of 0.25%. The exchange offers a good offering, however.

Low gas can lead to failed transactions. The exchange is often very busy. Even if you have enough ETH to pay the transaction fees, trades may fail. Your Ethereum will be reverted to your account if the transaction is unsuccessful. However, after deducting gas fees, no refunds are possible.

UniSwap withdraw fees are more competitive than those charged by other exchanges. They charge lower trading fees, but can be costly to pay for withdrawals. Only transactions that have been completed are subject to network fees. 

UniSwap: What to do?

UniSwap allows you to trade or purchase crypto. You also have the opportunity to earn interest. UniSwap can be used by you only if your crypto wallet is connected to the network. Then, follow these steps:

Select the Swap option and then choose the crypto that you would like to trade or the one you would prefer to receive.

The pool option allows you to open new positions and make deposits in any of the two cryptos that you would like to trade with UniSwap pools, such as ETH/USDT. If you’re unsure what to stake, you can check out the top pools for options.

CoinStats provides access to UniSwap and other decentralized apps that allow you to quickly and efficiently manage crypto assets.

Many popular crypto wallets are free, including Trust wallet, Coinbase wallet and Metamask wallet. CoinStats Wallet can be used to store cryptocurrency.

Once your wallet is set up, you can generate an email address to which your crypto will be sent. Once you have your wallet, create an address and start trading on the exchange.

Risques

Scam tokens and falling for fraudulent projects such as rug pulls are the most dangerous risks when trading on UniSwap. A token that is fraudulently claimed to be part of a legitimate project can be called a scam token. Before you begin crypto trading, make sure to verify and check the address of your token contract.

Last Thoughts

UniSwap is able to provide the DEX experience traders long sought in a world with many obstacles and barriers to crypto adoption. 

UniSwap is an excellent choice if you’re interested in leveraging your crypto stakings to grow your holdings. However, as an investor, it’s wise to consider the cryptocurrency market’s high volatility and whether you’re comfortable with the risks involved.