Steemit Crypto Academy Week 4 || UniSwap DEX || Crypto Professor: @gbenga

Introduction

Uniswap, unlike other exchanges, is Ethereum's decentralized exchange (DEX). It is one of Ethereum's biggest Automated Market Maker which was launched on November, 2nd 2018. Unlike exchanges such as Binance, Poloniex, Huobi, Kraken, and so on, Uniswap is completely decentralized with no central authority or leadership but rather it is operated by a set of programs on the Ethereum Blockchain.

Uniswap has two contracts on the Ethereum blockchain which works for the Pool and the Swap. With Uniswap exchange, traders can trade directly two ERC-20 tokens between one another in a decentralized manner where the price of the token is determined by the liquidity available.

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Note: Only ERC-20 tokens are supported, meaning that tokens from other blockchains such as the Binance chain and the Tron blockchain are not going to be supported.

Uniswap uses two Contracts, "the Exchange" contract for automatic swapping of tokens and the "factory" contract for the pool automation and payout. There is no one to determine the order book or manually determine when a trade will be filled.

Uniswap Solving Problem

• Liquidity:
  This has been the problem of several centralized exchanges and why so many coins and tokens on these exchanges have been delisted but with Uniswap, this problem is solved. To solve this, Uniswap uses an Automated liquidity protocol where liquidity providers are rewarded for providing liquidity to the liquidity pool. These funds are used to create order books in the market and for each trading pair, there is a pool where users can provide liquidity for. Currently, Uniswap charges 0.30% for a transaction, and liquidity providers get this money in full for providing liquidity. Since the exchange is decentralized, there is no authority making any profit from it but in the future, Uniswap might have to start keeping 0.05% of the fee for future development, but this feature can only be turned on by the community via unanimous voting. Pool share can be withdrawn at any time by liquidity provider.

• Price Determination.

Uniswap does not use an order book style to determine price, rather it uses an automated market maker where the price of a pair is determined by demand and supply. The price fluctuates with respect to how many tokens are available in the pool. When a person is about to list a coin, an equal amount of the token and Ether are placed in the pool creating a constant amount to be used to determine the price. when a user puts in more ether to buy the token, the price of the token goes up as more tokens are leaving the pool while if the tokens are being sold and ether is leaving the pool, the price of the token reduces with respect to the constant amount in the pool.

Mathematically
A * B = C Where "A" is the number of Token, "B" is the number of Ether, "C" is constant.

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How to use Uniswap

• Visit https://uniswap.org
• Then click on “Use Uniswap” at the top right-hand corner of the screen.
• Click on “Connect wallet”.
• Log into your wallet with Metamask or any other supporting wallet and allow it to connect.
• Select which token you’d like to swap, enter the amount and click “swap.”
• A preview window of the transaction will appear for you to confirm the transaction.
• Wait for the transaction to be added to the Ethereum blockchain.
• Your token will be swapped.

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Uni Token

The Uni token is the native token for the Uniswap exchange and it is used for governance as the more Uniswap token (UNI) being held will determine the more rights to vote. The Uni token was launched in September 2020 and an airdrop of 400 UNI was distributed to previously existing users who trade on Uniswap. A maximum supply of 1 Billion UNI token will be in circulation but currently, there are 311,737,132 UNI in circulation. 150 Million UNI was distributed in the airdrop.