Hello guys and good day to you all, today we will be discussing about Decentralized Finance Ecosystem as well as a Project/Protocol in the Ecosystem.
Crypto Prof @gbenga has already given an insight on Introduction to Defi and Yield Farming, follow the link below introduction to DeFi and yield farming

Revision on what a DeFi is.

Defi is one area in cryptocurrency that has attracted lots of attentions. It is a blockchain-based form of finance that does not depend on a central finance such as banks, exchanges, or any other centralized platform to offer traditional financial instruments, but instead, makes use of smartcontracts, the most common being Ethereum.

DeFi

Decentralized Finance (DeFi) is the concept that leverages decentralized networks to transform old financial products into transparent protocols that run without being controlled by a centralized body.

It merges the services of traditional banks with decentralized technologies such as blockchain, which is sometimes called an Open Finance due to its inclusive format. Also, the DeFi community seeks to create alternatives to every financial service currently available in the sense that every user will enjoy and taste free usage of financial system without being overheaded or controlled by someone else.

These services include items such as savings and checking accounts, loans, asset trading, insurance, and much more.

The importance of DeFi

DeFi has played an important role in the cryptocurrency world in the sector of finances for lots of reasons.
Firstly, due to the fact that all we need to participate in the DeFi sector is a smartphone, the functionality and reach of money has been expanded and also, there are lots of potentials to expand the global economy.
Consequently, analysts see this sector as one of the most important currently under development in the crypto space.

There are lots of importance on Defi technology but let's go with the above one.

Now let's talk about a DEX project

There are lots of lots of Defi projects/exchanges that are running on different systems such as Ethereum, Tron e.t.c.....

For today, I will be talking about a Defi project, uniswap. Go through https://www.block123.com/en/feature/awesome-ethereum-defi-decentralized-finance-list/ where I got list of different Defi projects.

What is uniswap

This is a protocol for automatic token exchange built on the Ethereum blockchain. It is an exchange platform for cryptocurrencies.

It is a simple smart contract interface for swapping ERC20 tokens. A formalized model for pooling liquidity reserves.

An open source frontend interface for traders and liquidity providers.

A commitment to free and decentralized asset exchange.

Who invented Uniswap?

Uniswap was created by Hayden Adams, who was inspired to create the protocol by a post made by Ethereum founder Vitalik Buterin.

Now, let's talk about how it works

1. Traditional trading: how it works
2. Uniswap vs Coinbase Example
3. Automated market making
4. How to start trading on Uniswap
5. Why use Uniswap?

How it works.

For us to fully appreciate Uniswap and decentralized exchange, it helps to first understand how traditional trading works using the Coinbase services.

Characteristics of traditional trading:

1. There is a trusted middle man to execute your trades (Vanguard, Coinbase)
2. There is an order book filled with buyers (bids) and sellers (asks) that determine the value of your trade
3. You don't directly hold your own assets - the middle men hold them on your behalf
4. You are required to provide personal information and be known to trade

How does uniswap differs? Here are 4 interesting examples of how Uniswap differs.

1. Uniswap is highly decentralized because you trade directly from your own Ethereum self-custody wallet (e.g. MetaMask) using the Ethereum blockchain.
2. There is no order book!
3. You directly hold your own token in your own wallet. No custody middle man.
4. Your personal identity is not required to use Uniswap or Ethereum directly.

Automated Market making

How exactly does uniswap figure out what the trading price is in any moment if it isn't using an order book??
For this automated market making design to work, Uniswap replaced order books with a new, novel concept: liquidity pools.

How to start trading on Uniswap

Uniswap is an open-source protocol, meaning that anyone could create their own frontend application for it. However, the most commonly used one is https://app.uniswap.org or https://uniswap.exchange.

1. Go to the Uniswap interface.
   

2. Connect your wallet. You can use MetaMask, Trust Wallet, or any other supported Ethereum wallet.
   
   These are the different ways you can use to connect your wallet.
   

3. Select the token you’d like to exchange from.
   Select the token you’d like to exchange to.
   Then click on Swap.
   

4. Preview the transaction in the pop-up window.

5. Confirm the transaction request in your wallet.

6. Wait for the transaction to be confirmed on the Ethereum blockchain. You can monitor its status on https://etherscan.io/

It's a simple process

Why use Uniswap?

We've covered how Uniswap is different than traditional trading and exchanges, but why is it useful?

Where are the areas where someone might prefer Uniswap over a custodial alternative like Coinbase?

1. It's non-custodial.

2. It's completely permissionless
   Trading on traditional exchanges requires permission in at least two forms:
   You have to be approved to trade or transfer by providing your identity and sensitive personal information
   The assets that are available are selected at the discretion of the exchange
   On Uniswap, you don't need to be approved to trade, transfer or invest in liquidity pools.
   Anyone in the world with an internet connection and an Ethereum wallet can participate. Users who value privacy or those living in countries with restrictive capital controls may appreciate this aspect of Uniswap and decentralized exchange.

3. It has unique trading pair support

Final thoughts

Uniswap is one of the breakaway success stories of Ethereum and DeFi. It has become one of the most important parts of the DeFi ecosystem and has proven that decentralized applications can compete (and sometimes win) versus centralized alternatives.

It will be exciting to watch what innovations the Uniswap team comes up with next and seeing the project grow as crypto becomes increasingly mainstream.

A big thanks to the @steemcryptoacademy proffs and to Prof @gbenga for this week's homework.