Connect with us

Cryptocurrency

Investing In Uniswap (UNI) – Everything You Need to Know

mm

Updated

 on

Securities.io is committed to rigorous editorial standards. We may receive compensation when you click on links to products we review. Please view our affiliate disclosure. Trading involves risk which may result in the loss of capital.

Uniswap (UNI) is the primary token for the Uniswap DEX (decentralized exchange). Uniswap is the largest DEX in the world in terms of market capitalization at this time. It’s also the most popular Ethereum Dapp in the market. Uniswap plays a vital role in furthering innovation and adoption across the crypto market. As such, the platform experienced record growth this year. A recent Dune Analytics report puts the current market share of Uniswap up 63%.

Specifically, Uniswap is a protocol that allows buyers and sellers to exchange ERC-20 tokens in a trustless and permissionless manner. ERC-20 tokens are the most popular style of token currently. They reside on the Ethereum network and are interoperable between all ERC-20 compliant wallets, exchanges, and Dapps. These tokens have seen a sharp increase in use since DeFi (decentralized finance) has been on the rise.

DEX

As the world’s top DEX, Uniswap represents a fundamental shift in the market. DEXs offer traders a safer alternative to large centralized exchanges that operate in a custodial manner. These exchanges keep large amounts of users’ cryptocurrency in-network wallets. These wallets are prime targets for hackers seeking a hefty payday. Opposingly, DEXs are non-custodial. They never hold your funds directly. In this way, Uniswap inherits the benefits of blockchain and removes the drawbacks found in centralized platforms.

What Problems Does Uniswap (UNI) Solve?

Uniswap was built to tackle some of the toughest problems facing the market. Its decentralized nature helps to eliminate the power and control that has been accumulated by major exchanges such as Binance and Coinbase. Additionally, Uniswap plays a critical role in providing new businesses access to international liquidity.

Uniswap User Growth

Uniswap User Growthvia THE BLOCK

Liquidity

Any project can seed a liquidity pool utilizing Uniswap. All a developer needs to do is to provide their project token and a corresponding value of ETH to start the pool. This open strategy enables new projects to release their tokens directly to the market and attract the attention of a wider audience.

The added liquidity also helps to solve the problem of high spreads for illiquid assets on order-book exchanges. New projects can seed liquidity pools and build investor confidence in the project while also providing ROI opportunities via arbitrage trades.

LP Rewards

Uniswap users can participate as a liquidity provider and earn rewards from trading fees. Notably, a percentage of all trading fees gets redistributed among the liquidity providers proportionally to their share in the pool. In this way, normal users can secure a passive income without having to relinquish ownership of their crypto directly.

Benefits of Uniswap (UNI)

Uniswap brings significant benefits to users and the market as a whole. Uniswap rose to stardom due to its open nature and simplistic interface. The trading window for Uniswap is basic. You can execute trades with a click and the entire network is remarkably flexible due to its characteristics.

Flexible

Anyone can easily swap two Ethereum assets against an underlying liquidity pool using this network. Additionally, any project can create or seed a market by supplying it with an equal value of the two ERC-20 tokens being paired. However, this open nature also means you need to do your due diligence on all projects. There are a lot of scams and rug pull tokens that have joined the network.

Censorship-Resistance

Uniswap has no central authority to block users and seize their funds. There is no firm deciding if you have traded too much or what companies you can invest in. It’s a truly global decentralized market that provides equal access to all. In this way, the platform fully captures the essence of decentralization.

More Trading Options

Since Uniswap operates in a decentralized nature, there are usually price differences between its token listings and that of centralized exchanges. These differences can equal big returns for those who arbitrage trade between CeFi and DeFi. Today, there are tons of traders that earn profits exploiting price discrepancies between Uniswap’s price quotes and the rest of the market.

Uniswap Growth

Uniswap Growth

Secure

Uniswap is an open-source project that has undergone serious review by the development community. All the smart contract coding is secure and the platform is non-custodial, so hackers gain no profits from attacking it. You still need to be wary of rug pulls and scamsters when using Uniswap because there are no quality control measures in place for new projects.

Private

DEXs provide you with more privacy protection than centralized exchanges. These protocols are permissionless, require no KYC (know your customer), and allow you to trade without having to register and log in to the market. The entire structure of these platforms is geared to anonymity in this way.

Compatible

Uniswap keeps in-line with the ERC-20 token standard requirements. Additionally, the platform supports third-party API integrations. These protocols give investors the ability to utilize outside tools in their trading strategies. Today, there are multiple third-party interfaces, trading bots, and market management tools built to improve Uniswap’s UX.

How Does Uniswap (UNI) Work

Uniswap eliminates the traditional order book model and introduces an automated market maker (AMM) protocol that allows users to trade with a smart contract called a liquidity pool. This approach provides open access to the market. Anyone can swap tokens, add tokens to a pool to earn fees, or list a token on Uniswap.

Uniswap pools tokens into smart contracts and users trade against these liquidity pools. This automated liquidity protocol pairs every token against ETH. Interestingly, ERC-20 to ERC-20 swaps are transactions that convert ERC20a to ETH, and then to ERC-20b in a single transaction.

Price Discovery

DEXs like Uniswap struggled to find the best price discovery engines in their early days. The original version of Uniswap relied on arbitrageurs for price discovery. The latest version of Uniswap does away with this model and instead integrates advanced oracles. Oracles are off-chain sensors that can communicate data to and from the blockchain.

Uniswap V2 router contract

Developers can add new tokens to Uniswap utilizing the Uniswap V2 router contract. This smart contract is crucial to Uniswap’s open approach to market development. Notably, anyone can see these contracts on the Ethereum blockchain.

Liquidity Pools

Uniswap pioneered the use of liquidity pools. These pools help spur innovation by allowing new platforms access to capital. There are thousands of liquidity pools in use on the platform at this time. Also, liquidity providers earn profits by simply putting their funds into these liquidity pools. Specifically, users deposit tokens into a liquidity pool smart contract and receive pool tokens in return. These tokens can be traded for ETH instantly at any time.

Uniswap (UNI) token

The entire system utilizes UNI as its primary token. UNI is an ERC-20 token that is compatible with the Ethereum ecosystem. Currently, UNI is traded on various other popular exchanges, including a number of top-performing centralized exchanges like Coinbase Pro.

Uniswap Money Market

Uniswap recently ventured into the DeFi sector with its Money Market feature. This system allows users to post UNI LP tokens as collateral for a loan. These short term loans are repaid with interest. Specifically, liquidity providers earn a percentage of this interest for lending out their digital assets via the lending pools.

History of Uniswap (UNI)

The history of Uniswap (UNI) begins in 2016. It was at that time that Ethereum’s Founder, Vitalik Buterin, proposed the concept of a decentralized automated market maker. It was only a year before another well-known crypto developer took up the project. Hayden Adams made the concept a reality with some help from the ETH community. Specifically, he received various grants including a $100,000 grant from the Ethereum Foundation.

Hayden Adams

Hayden Adams Uniswap (UNI) Founder

Today, Uniswap plays a vital role in the market. The recent explosion in DeFi platforms has made Uniswap even more valuable. These new projects depend on Uniswap to enter the market in a seamless manner. Consequently, Uniswap is an important launchpad for the entire DeFi sector.

How to Use Uniswap (UNI)

Uniswap is different than using a centralized exchange. For example, there is no registration and no KYC. To get started, all you need to do is connect a supported Ethereum wallet. To accomplish this task, simply click “Launch App” on Uniswap, then “Connect to a Wallet.” Notably, Metamask is a free ERC-20 wallet that integrates nicely with Uniswap. Once you’re connected, you can begin trading.

How to Buy Uniswap (UNI)

Buying UNI is easy. The reputation and longevity of this token make it available on most major exchanges. Binance provides a variety of UNI trading pairs. To get started, you need to register for an account. The registration is quick and straight forward. However, you will need to verify your identity before you can participate in trades.

Once you are registered, you need to fund your fiat account. This is done through a bank transfer or via a debit card. Now that your account is active and you have funds available, you are ready to convert your fiat over to crypto. Its recommended that you convert to BTC. Now that you have BTC, you can trade BTC for UNI directly. The entire process takes around 20 minutes the first time.

Best for

Advanced Traders

Best for

USA Traders

Best for

Ease of Use

Trading Fees

0.10%

Trading Fees

0.16%

Trading Fees

0.125%

Promotions

10% Cashback

Discount Code: EE59L0QP

Promotions

None

Promotions

None

How to Store Uniswap (UNI)

UNI tokens are easy to store. You can keep these versatile digital assets in any ERC-20 compatible wallet.

If you seek to make a major investment in UNI or if you are planning on HODLing this crypto for long periods of time, a hardware wallet is the best option. Hardware wallets keep your crypto stored offline in “cold storage.” This strategy makes it impossible for online threats to access your holdings. The Ledger Nano S or the more advanced Ledger Nano X both support Uniswap (UNI).

Uniswap – A Pioneering Force in the Market

Since day one, Uniswap has helped to push large scale cryptocurrency adoption. Nowadays, there are a bunch of DEXs that have copied this unique platform’s strategy. However, none has seen the levels of success achieved by this decentralized network. For these reasons, you can expect to see Uniswap (UNI) continue to hold great value in the market for years to come.

Spread the love

David Hamilton is a full-time journalist and a long-time bitcoinist. He specializes in writing articles on the blockchain. His articles have been published in multiple bitcoin publications including Bitcoinlightning.com

Advertiser Disclosure: Securities.io is committed to rigorous editorial standards to provide our readers with accurate reviews and ratings. We may receive compensation when you click on links to products we reviewed.

ESMA: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Investment advice disclaimer: The information contained on this website is provided for educational purposes, and does not constitute investment advice.

Trading Risk Disclaimer: There is a very high degree of risk involved in trading securities. Trading in any type of financial product including forex, CFDs, stocks, and cryptocurrencies.

This risk is higher with Cryptocurrencies due to markets being decentralized and non-regulated. You should be aware that you may lose a significant portion of your portfolio.

Securities.io is not a registered broker, analyst, or investment advisor.