What is Uniswap?
Uniswap is an 'AMM' which is an Automated Market Marker. It is a protocol on Ethereum that offers automated liquidity. To put this in a straightforward language, the protocol reserves Ethereum-based tokens in massive amounts and this allows Uniswap to give valuable services that had been unavailable to the system.
Contrary to how other exchanges function, which is requesting a fee before service, Uniswap was built as a tool for the crypto community to make transactions without middlemen or platform fees. Unsurprisingly, this has disrupted the crypto space as it is a good tool, a means of giving back to the crypto community to help push for innovation and growth of the crypto-economy.
Uniswap also does not rely on matching buyers and sellers to complete trades and transactions. Instead, it employs simple math equations, tokens pools, and ETH to execute the exact same task.
Presently, there are numerous cryptocurrencies, and most of them are designed on the Ethereum blockchain network. Ultimately, Uniswap was designed to add value to the Ethereum Network.
(Note that any token that is created on Ethereum is known as an ERC-20 token.)
How to use Uniswap exchange?
In the world today, some of the many issues that plague Centralized Exchange are arbitrary fees, gross mismanagement on multiple levels, and the case of hacking.
The introduction of decentralized exchange solved a lot of these issues but it also generated new ones. The major issue is the lack of liquidity. A lack of money moving around an exchange that makes trading slower and less efficient.
The crypto world's solution to this problem has been Uniswap. Its major aim has been to create a solution to the decentralized exchange's liquidity problem by enabling the exchange of swap tokens without having to depend solely on sellers or buyers.
It has been embraced fully by the crypto community redefining how transactions are carried out and birthing a completely new age of Uniswap descendants.
However, before we advance on the topic of Uniswap's functionality, we will begin with an introduction to what Uniswap is, its history, and how it has easily grown to become one of the most preferred decentralized exchanges (DEX) on Ethereum.
Who created the Uniswap?
In 2017, Hayden Adams began on a project termed Uniswap that was inspired after he viewed a post uploaded by Ethereum founder Vitalik Buterin a year earlier. In the post, Vitalki Buterin had proposed an idea for a decentralized exchange (DEX) that would operate with an on-chain AMM with specific and distinct traits. His work was received with critical praise and it progressively won grants and support including a $100,000 grant from the Uniswap launch at the Ethereum Foundation, in November 2018. Soon, the protocol's objective towards liquidity became functional and began to amass practical volume.
How does Uniswap functions?
The main distinction that sets Uniswap apart is how it unravels the major issue of order-book exchanges and its high spreads for liquidizer assets. This is referred to as the “Constant Product Market Maker Model.”
The reason why this problem even occurs is there is little to no incentives for specialized market makers to deliver liquidity on thinly traded assets. This is not the case with Uniswap because everyone can become a market maker just by depositing their assets into a common pool thereby generating fees for themselves which is decided by the amount of trading activity on their tabs. However, the major disadvantage of this protocol is that there can be serious slippage for heavy orders because the quantity demanded will increase as the price paid increases.
Tokens can be put into Uniswap by just investing an equal amount of the ETH and the ERC20 token that is being traded. Let's use this illustration; if an individual had the intention of making an exchange for an altcoin called Bat Token, they would have to initiate a fresh Uniswap smart contract for that Bat Token and thus generate a liquidity pool with a hypothetical amount which could be the value of $6 in ETH and the value of $6 in BAT TOKEN.
Just as we mentioned earlier, what Uniswap does differently is that rather than linking buyers and sellers to deduce the Bat Token price, Uniswap employs a constant equation; x * y = k.
From the example above, x and y in the equation equal the amount of ETH and ERC20 tokens that are accessible in the liquidity pool while k is the constant value. Uniswap in using this equation utilizes the equilibrium between supply and demand and ERC20 tokens and the ETH to infer the cost of the given token. When another individual purchases a Bat Token with an ETH, the resulting supply of Bat Token will decrease and the supply of ETH will increase i.e the price of Bat Token will go up.
What all of this means is that Uniswap token prices will only fluctuate if a trade happens. Uniswap constantly finds the balance between the token values and their swapping based on the amount people are ready to buy and sell.
How are Uniswap tokens formed?
A Uniswap token is created when a contributor funds a Uniswap liquidity pool with ETH or ERC20 tokens. These tokens are immune to hindrances and can be moved, used, or freely exchanged within other DApps. Anytime these funds are recovered by the contributors, they are eliminated and removed. Tokens in the liquidity pool equal the individual's percentage of the pool’s complete assets and the eventual trading fee of 0.3%.
The DEX scene of Ethereum is thriving at the moment and Uniswap appears to be the protocol to beat. Its native built crypto earning opportunities and impressive trading user interface combined with its sturdy reputation positions it as one of the most innovative projects within the crypto world. This means it will very likely be very prominent in the coming years.
The expectations for this DEX is for further integration between its distinctive token swapping system and other upcoming DeFi developments.
EazySwap, a sub-platform of BitForex Crypto-currency Exchange will launch on September 5, 2020. EazySwap has one of the most professional and advances semi-decentralized matching Protocols, all the trading records and data will be able to trace by the ERC-20 Blockchain system, EazySwap also provides the most user-friendly structure which designed to solve the "High Gas Fee" problem, while still remain its decentralized advantage. 0 gas fee is charged for any transaction in the system. also, EazySwap will be rewarded up to 80% of the trading fees to each liquidity pool provider.
EazySwap currently supports ERC20 based token and many more mainnet token will be supported soon.
With a low barrier of listing requirements for the project, a unique rewarding system for the user and liquidity provider and one of the most professional and advance semi-decentralized matching Protocol with 100% trading data on-chain structure, EazySwap hope to booth up the Defi market and your participation will make us together achieve this historical and revolutionary moment.
BitForex is an exchange service platform that can be classified as one of the Top 10 cryptocurrency exchange services. It is focused on providing millions of users with a digital currency trading and investment tool that is not only safe but also professional and convenient. BitForex has a high customer-oriented culture and state-of-the-art financial technology.
BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts, derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.