The world of digital currencies has come a long way and it has grown in its value. It won’t be wrong if we say that cryptocurrencies are one of the most mainstream investment platforms today. People have finally started to recognize the potential of digital assets and such has been the success of the crypto space, that today, the global crypto market stands at $2 trillion. And as trading, investments, and transactions in the crypto space increased, it led to the launch of many new cryptocurrencies, crypto wallets, and crypto exchanges to trading platforms. When we talk about crypto exchanges then you must have heard about platforms like Binance and Bitfinex. They are among the most popular cryptocurrency exchanges in the world today. They have won the trust of their traders over the years and not only offer seamless crypto transactions but also provide maximum security to all your tradings and assets. However, these two are not the only ones that do that. There are other exchanges like Uniswap. This exchange is not so mainstream yet but is gaining popularity and acceptance over the crypto space at a good speed. Therefore, this article is to help you understand what Uniswap is and how to use it. What is Uniswap? Uniswap is a decentralized exchange platform built on the Ethereum blockchain. It was invented by Hayden Adams. Uniswap is an example of one of the core products in the DeFi ecosystem, the decentralized crypto exchange, or DEX. Uniswap allows users to transact without the use of intermediaries, providing a high level of decentralization and resistance to censorship. It is open-source software. The crypto exchange platform is attempting to solve the liquidity issue faced by decentralized exchanges by allowing them to trade tokens without relying on buyers and sellers to have liquidity. Uniswap also uses a simple math equation and pools of tokens and ETH to do the same job as most exchanges, which match buyers and sellers to decide prices and execute trades. According to the most recent statistics, Uniswap is the fourth-largest decentralized finance (DeFi) site, with over $5 billion in crypto assets stored on its platform. And because of its innovation and uniqueness, it has been gaining popularity very fast. How does Uniswap Work? Uniswap works with a design called Constant Product Market Maker, which is a variant of a model called Automated Market Maker (AMM). By supporting Uniswap with an equal amount of ETH and the ERC20 token being exchanged, any token can be added. Uniswap is made up of two smart contracts: one for the “Exchange” and another for the “Factory.” If certain requirements are met, these are automated computer programs that are programmed to perform particular functions. Uniswap is based on the automated liquidity protocol. This is how it solves the problem of centralized exchanges. Users of the Uniswap platform pool their funds to form a fund that is used to conduct all trades on the platform. Each token listed has its pool to which users can add, and the prices for each token are determined by a computer-run math algorithm. And with that, a buyer or seller does not have to wait for an opposite party to appear to complete a trade. They can instead execute any trade instantly at a known price provided there’s enough liquidity in the particular pool to facilitate it. Following the Uniswap v.2 update, a new protocol fee was implemented that can be switched on or off by the group and sends 0.05% of every 0.30% trading fee to a Uniswap fund to fund future growth. This fee option is currently disabled; however, if it is activated in the future, LPs will begin to receive 0.25% of pool trading fees. How to Use Uniswap? If you want to use Uniswap, then the process is quite simple. First, you must make sure that you have an ERC-20 supported wallet setup such as MetaMask, WalletConnect, Coinbase wallet, Portis, or Fortmatic. When you have one of these wallets, you can add ether to it to trade on Uniswap and pay for gas– which is also called Ethereum transaction fees. Speaking of wallets, MetaMask is one of the most commonly used wallets with Uniswap. Let’s talk about how to set up your wallet on MetaMask and then set it up with Uniswap. What is MetaMask? To start in simple words, MetaMask can be described as a browser extension that also serves as an Ethereum wallet. It can be installed like any other browser plugin. One of the main reasons why MetaMask is gaining so much popularity is that, unlike other Dapps, it is not difficult to use. MetaMask is lowering the entry barrier to the wonderful world of dApps and making the decentralized platform more accessible to the general public. After you connect your … Continued
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