In the success of the cryptocurrency space, one cannot ignore the impacts of exchanges and their contribution to its adoption. Exchanges make it possible for crypto users to buy, sell and trade their digital assets. Exchanges can be centralized like Coinbase and Binance and decentralized like SushiSwap and Pancakeswap. A decentralized exchange (DEX) allows crypto users to trade cryptocurrency via peer-to-peer trading. This means that DEXs enable them to buy and sell crypto without a third party or broker. However, while DEXs have been growing in popularity recently, Uniswap’s performance has been outstanding.
What Is Uniswap?
Uniswap doubles as cryptocurrency and a DEX built on the Ethereum blockchain. Its Blockchain is open source and allows anyone to view and contribute to it, while its token holders govern it. As a DEX, it enables users to perform peer-to-peer market making on its platform. Like every typical DEX, these transactions do not require the need for a third party or a broker. The elimination of such interference makes it cheaper to operate and use for users. One unique feature of the platform is its deployment of an introductory numerical statement. This allows buyers and sellers to exchange assets without deciding costs and external parameters that may hinder them. The platform currently supports the exchange of any ERC-20 token or related which conforms to the Ethereum standard.
Uniswap also functions as an Automated Market Maker (AMM) using smart contracts. Also, unlike other DEXs, Uniswap uses Constant Product Market Maker (CPMM) as its evaluating model. The CPMM is a variation of AMM, which operates without an order book. With smart contracts, the platform is also very efficient in trading while avoiding liquidity issues. The Uniswap platform is also permissionless and open to all with no restriction. Uniswap receives backing from Paradigm Hedge Fund as a decentralized protocol and doesn’t make money. All fees go to liquidity providers, with the founder earning nothing off the platform. The native and utility token of the platform is UNI, whose holders are in charge of the platform’s governance.
How Does Uniswap Work?
The platform currently allows users to participate in its DEX by creating a new market using smart contracts. These new markets help to exchange new pairs of crypto assets. Uniswap users can also use the platform to swap digital assets via decentralized existing markets. The Uniswap platform is heavily reliant on smart contracts, which currently serve various purposes in the platform. Smart contracts also facilitate trading the variant amount of digital assets swapped via liquidity pools. These blockchain-based smart contracts are also used to auto-balance the system after every trade. Uniswap users also participate in the DEX by providing liquidity, which will yield their rewards. Liquidity providers create a market by depositing an equivalent value of two ETH or equivalent ERC-20 tokens.
These pools consist of stablecoins such as DAI, USDC, or USDT, but it isn’t compulsory. In return, liquidity providers get rewards proportionate to their share of the entire liquidity pool. These rewards can be redeemed for the share they represent in the pool. Uniswap blockchain is also like a ledger, responsible for updating trading activity within the platform. Uniswap currently operates with the proof-of-work consensus mechanism, synonymous with Ethereum. Unfortunately, Ethereum is currently transitioning into a proof-of-stake mechanism, which will improve the overall performance of the Blockchain. To participate in the Uniswap platform, the minimum requirement is to possess a digital wallet with Ether inside. This is because Ethereum collects transactions fees that incur within the Uniswap network.
Why Should I Use Uniswap?
Uniswap like other decentralized exchanges have some features that makes it unique in the market. The Uniswap DEX currently enables users to exchange various amounts of digital assets without third-party interference. Uniswap also allows the use of smart contracts in the platform also ensures that asset trading is efficient and cheap. The platform users earn rewards for not selling and holding on to their digital assets. The platform also rewards users who choose to lend their crypto with part of gas fees generated in the network. Due to its decentralized system of governance, the platform is open for all to join and participate.
Limitations Of Uniswap
While Uniswap appears to be very advantageous for users, it has some limitations that users need to be wary of when carrying out their activities. Uniswap runs on the Ethereum blockchain, unlike its competitors, who run on the Binance Smart Chain. The disadvantage of this is that Uniswap users pay more gas fees when compared to other users like PancakeSwap. Another disadvantage of Uniswap is that it only supports the exchange of ERC-20 Ethereum-compatible digital assets. The proof-of-work consensus mechanism used in the Blockchain is energy-consuming and resource-intensive. Uniswap users must own ETH, as it is the only currency one can use to pay processing and transaction fees on the platform.
What Is The $UNI Token?
UNI is the native token of the Uniswap protocol, and it empowers holders to participate in Uniswap’s governance. Owning the token allows Uniswap users to participate in its governance in a neutral and trustless manner. The total supply of UNI is 1 billion coins, which will be made available over four years. After four years, Uniswap will introduce a 2% inflation rate to control the release of new tokens. 60% of the token’s total supply is for community members, while 21.5% is for team members.
Part of the community distribution will happen via liquidity mining. Those who provide liquidity to Uniswap pools will receive UNI. 17.8% of this distribution is for investors, while advisors will have to settle for 0.69% of its total supply. At writing, its circulating supply is 689,198,846 UNI. The token is compatible with many digital wallets, including Coinbase Wallet, the MetaMask wallet, TrustWallet, Ledger, and Trezor. It is available for sale on many exchanges, including Coinbase, Binance, Kraken. You can also trade for it on Uniswap DEX by buying ETH into your wallet and connecting it to the DEX.
How To Buy UNI Token
Like every highly-rated token, UNI is available on Binance. To buy the token, you will need to follow the steps below:
Step 1 – Sign Up
Signing up on Binance is the first for new users. This process is usually seamless and complete after supplying a few KYC details. You will also need to verify the information you provided. It is worth noting that only verified accounts will have access to the Binance trading platform. However, existing users will only need to log in to their accounts.
Step 2 – Fund Your Account
After creating an account and logging in, you will need to swap either fiat or crypto using the Binance exchange view. Unlike other cryptocurrencies, you cannot use a debit/credit card to purchase UNI directly. You will need to pair it with BNB, BTC, BUSD, USDT, or EUR. You will have to purchase some cryptocurrencies to make the process swift and smooth.
Step 3 – Pick A Pair
Once you have your crypto, head to the exchange section of Binance and select the UNI pair, you want to trade. For easy access, you can choose UNI/BUSD. You can change your pairing by clicking the current market pair in the top left part of your screen.
Step 4 – Create An Order
After that, you will create a market order on the right side of the exchange view and spot. Ensure to choose the market as your order type and confirm the amount of BUSD you want to trade. At the click of buy, your order is complete.
Is Uniswap the best DEX in 2022?
While the performance of Uniswap DEX has been remarkable since the beginning of 2022, its competitors are becoming stronger. The DEX currently runs on the energy-consuming and expensive proof-of-work consensus mechanism, which is a limiting factor concerning its performance. Unlike its competitors, SushiSwap and Pancakeswap, currently running on Binance Smart Chain, Uniswap is quite expensive for users. Another limitation of the DEX is that users must own ETH tokens to pay for transaction and processing fees.
Unfortunately for the DEX, its competitors already implement flexible processes that allow users to utilize native tokens for gas fees. However, the project is still growing stronger as its total value locked is now at $7,838,673,214. Fortunately, Uniswap remains an innovative exchange protocol residing on Ethereum and will benefit from the proposed network upgrade. The full launch of Ethereum 2.0 in 2022 should also propagate Uniswap to become faster and more scalable. However, at writing, Uniswap DEX is competing strongly to emerge as the best DEX in 2022.
Should I Buy Uniswap in 2022?
Cryptocurrencies remain very volatile assets, with a high possibility of your investment ending up worthless in the future. UNI is currently not exempted from such investments, as it is also a high-risk investment with room to grow. However, considering the recent performance of the token this week, its performance is still considered decent. It’s market capitalization is at a whopping $11,560,672,843.63, amidst 24hour trading volume nearing $337,906,646.81.
The token is still far from its all-time high (ATH) of $44.97 attained in May 2021, but it looks like it’s back to the top. CoinMarketCap’s market rank is at 24th position, as it currently trades at around $11. However, according to WalletInvestor, UNI will end 2022 for $28.5 if it continues at this pace. DigitalCoin is less optimistic and believes the coin will trade for less than $21 by December 2022. However, Uniswap DEX is currently the largest in terms of trading volume, and this status quo will not change soon. Should UNI’s performance continue in this upward trajectory, investors would not make a loss on the token in 2022. However, nothing is certain with cryptocurrencies, and investors should commit funds they can spare.
Conclusion
Uniswap doubles as cryptocurrency and a DEX built on the Ethereum blockchain. Its Blockchain is open source and allows anyone to view and contribute to it, while its token holders govern it. Its users participate in the DEX by providing liquidity, which will yield their rewards. Liquidity providers create a market by depositing an equivalent value of two ETH or equivalent ERC-20 tokens. UNI is the native token of the Uniswap protocol, and it empowers holders to participate in Uniswap’s governance. According to WalletInvestor, UNI will end 2022 on the $28.5 mark if it continues at this pace.
