Crypto Academy Week 7 - Homework Post for [@gbenga] Uniswap A Decentralized Finance Ecosystem
Hello @everyone i have attended the lecture of sir @gbenga about Introduction to Defi and Yield Farming. If you have not attended the lecture yet then come and join this class and learn important things about Defi and Yield Farming. As i have learned many new things which i did not know even i did not heard about them. So without wasting your time attend this lecture and learn new things and add it to your knowledge.
I am going to discuss about the Uniswap A DeFi Project and exchange. It has become very famous due to its features. So Without wasting time let's start learning about Uniswap.
What is Uniswap?
Uniswap is a Decentralized Finance Application (dApp) based on the Ethereum blockchain. It is basically a decentralized cryptocurrency exchange which is running on the Ethereum Blockchain. As from the name opf the "Uniswap" it i sclear that it is a amazing service based on the ethereum blockchain which provides you the facility to swap coins.
Some Important Features
- Uniswap provides an automated service that there is no any third party between the transactions.
- So In the Uniswap all the transactions are decentralized.
- Anyone can exchange their tokens in the uniswap as it is open for all.
- By using uniswap anyone can launch his own ERC-20 token.
- Uniswap does not charge any fee to launch your own ERC-20 token.
- As uniswap is made by a specific team but It is run only through by the community not from a single person or company. So the investors run it all the time.
How does Uniswap work?
The old exchanges work with the help of an order book. But the Uniswap has revolutionized that ols method with a modern and fastest method of transactions. This method is called is known as Constant Product Market Maker It works with the smart contracts.
Automated liquidity protocol
Uniswap provides automated liquidity pools to its holders. And the traders trade against these liquidity pools. As uniswap is open-chain platform so anyone can become a liquidity provider who can deposit an equal value of two tokens in the liquidity pool. And when the traders trade they have to pay transaction fee. This transaction fee is provided to the liquidity provider.
These liquidity pools are generally made up with the stablecoins such as DAI, USDC, and USDT. But it is not a hard and fast rule. In this way liquidity providers receive “liquidity tokens,” which specify their share in the whole liquidity pool provided by them.
- Example: As i have provided a screenshot from the uniswap. If i input 1000 ETH against the DAI stablecoin and you can see that my share in the liquidity pool is 2.3%. I can become a owner of the 2.3% liquidity pool by holding 1530750 DAI.
Explanation Of Working Of Uniswap With The Help Of Example:
Consider the ETH/USDT liquidity pool. Let suppose ETH pool as "x"and the USDT pool as "y". Uniswap multiplies these quantities each other and calculate the total liquidity pool of these two quantities. Suppose this obtained mulitiple is "k". This obtained value is a constant quanitity. It means total liquidity in the pool also remains constant.
How token price is determined
In the uniswap token price is determined in a simple way. Suppose someone buys 1 ETH for 500 USDT. By purchasing ETH he increases the liquidity pool of USDT and on the other hand liquidity pool of ETH decreases at the same time . It means that the price of ETH will go up.
- Example: It is a common fact that if there is anything whose quantity decreases in the market then automatically its price is increased.
Similarly if there is less quantity of the ETH in the liquidity pool which is here a specific market between ETH and USDT. In this way the price of the ETH in the pool increases . And we also know this that the liquidity pool is constant. When we pay for the ETH and buy it it decreases and hence the quantity of the USDT increases because the product of these quantities remains the constant all the time.
How does Uniswap make money?
Dear fellows Uniswap is not making money itself. Now you the question arises that who get the transactions fees? So listen to me that all the fees obtained from the token swaps transactions go to the liquidity providers. So the founders do not get anything from the trades done through this protocol.
Transaction Fees
In my opinion the transaction fee in the uniswap is very low which is about 0.3%. This is the fee which is then provided to the liquidity providers
- Example: If we trade in the uniswap of $100 then we have to pay only $0.3 as the transaction fee. Which is very small and this fee is then given to the liquidity providers. It depends upon the share of the liquidity providers in the pool. And it is automatically added to their share pool.And they can withdraw it any time.
How to use Uniswap
Uniswap is an open-chain protocol which anyone can use. It is very simple and easy to use. I have provided some of the steps here to use Uniswap with the help of screen shots.
Firstly you have to go to https://app.uniswap.org or https://uniswap.exchange.
(Screenshot From Uniswap) There you will see an option to connect your wallet. You can connect your wallet by using MetaMask, Trust Wallet, or any other supported by the Ethereum wallet.
Then select the token that you you want to exchange there.
- Also select that token you would like to exchange to.
- Finally click on Swap.
- You will seee a pop-up window there. And preview carefully your transaction in the pop-up window.
- Then you will receive a request in your wallet and you have to confirm that transaction request in your wallet.
- It will took a bit time so please wait untill the transaction has been confirmed on the Ethereum blockchain.
- If you want to monitor your transaction status then you can monitor it on the https://etherscan.io/.
Different Supported Wallets
As Uniswap is very vast and leading decentralized so you can Log In there by using these wallets:
- Metamask
- Coinbase Wallet
- WalletConnect
- Fortmatic
- Portis
If you have one of these wallet then you can easily swap your assets in the uniswap.
The Uniswap token(UNI)
UNI is the token of the Uniswap protocol. And It gives right its holders to govern the uniswap. It means that if uniswap team publish a proposal then the UNI holders can vote this proposal and approve it or reject it..
Almost 1 billion UNI tokens have been minted at present. 60% of those UNI tokens are distributed to the existing Uniswap community members, while 40% will be given to the team members, investors and to the advisors in four years.
Community distribution occurs through the liquidity mining. This means that UNI token will be distributed only to those who will provide liquidity to the following Uniswap pools:
ETH/USDT
ETH/USDC
ETH/DAI
ETH/WBTC
At present the UNI token is very stable and it is trading at the current price of the $28.99 which is very amazing.
According To The Coinmarketcap
According to the coinmarketcap
| CoinMarketCap | Uniswap(UNI) |
|---|---|
| Market Cap | $15,200,200,230 |
| Fully Diluted Market Cap | $29,121,194,918 |
| Volume | $631,751,439 |
| Circulating Supply | 521,963,480 UNI |
| Market Rank | #8 |
UNISWAP DeFi Protocol Team
Uniswap has very big team who is managing it all the time and facilitating almost all its users. The team is very caring and loving and publishing all time news and report on the Uniswap social media platform accounts.
| Uniswap Team | Social Media Platform |
|---|---|
| https://twitter.com/UniswapProtocol | |
| Discord | https://discord.gg/5Wfqau |
| https://www.reddit.com/r/Uniswap | |
| Uniswap | https://gov.uniswap.org/ |
Through these channels anyone can contact the team and clear each and everything. In this way anyone can understand this DeFi Protocol, its vision and all detail about the project of the uniswap.
Conclusion
Uniswap is modern exchange and defi protocol built on the Ethereum blockchain. Uniswap allows everyone to exchange tokens with an Ethereum wallet without the involvement of any central or third party. It is completely managed by the community.
Words Of Appreciations For
@steemcurator02
@steemitblog
@gbenga
Thanks for being a part of my class and for participating in this week's assignment. I hope you learned from the class as the aim of the school is to teach and allow people to learn alongside.
Remark 6
Thank you sir for providing lectures.