Steemit Crypto Academy Week 7// Introduction to DeFi and Yield farming (Uniswap DEX// Homework submitted to @gbenga
Thank you @gbenga for this week lectures.
The Steemit Crypto Academy is really an eye opener and a lots is being taught here. Kudos @steemcurator and every one involved.
Defi is a combination of two Words, they are Decentralized and Finance. Decentralized means it need no central authority to access, no middleman, finance on the other hand is anything involving money systems. So marrying we say Decentralized Finance is a system of finance in which the requirements this central authority or middleman is eradicated making everyone able to access their monies.
Sorry Professor that you had to spend hours in the bank, but it normal in Nigeria, this is why as a Steemit Crypto Professor, you also need to teach them. DeFi can handle all of that crab anyway. Uniswap is one of the profound decentralized exchanges in the DeFi ecosystem.
Introduction on Decentralized exchanges (DEX)
Decentralized exchanges trades takes away the problem of sign up, no interference from a third party exchanges, the transaction occurs between you and the issue, your wallet and the issuers wallet, unlike our conventional bank, where you have to wait for almost the whole day to get your transactions completed, DEX users just two wallet (the sender's and the receiver) it is fast, secure, verification happens in second and open source. Like we will always say, who doesn't like a good thing?
Though relatively a system as stated in the lecture but we believe the world will come to accept having realised the benefits. DEX facilities movement of cash no cryptocurrency from one wallet to the other within the shortest possible time.
Uniswap DEX (Decentralized exchange)
Uniswap is a decentralized exchange protocol built on the Ethereum blockchain,meaning it has no need for a third party organizations, it allows for token swaps and are powered by the help of Unicorns and most importantly, it is an open source protocol. It is an automated liquidity protocol, it gives anyone the leverage of lending to the platform thereby providing liquidity to the platform. Most centralized exchanges can not do without there order book but with Uniswap the order book is not needed but uses what is called Automated Market Marker.
Hayden Adams who the Uniswap cogfounder built upon an technological idea given by Vitalik burterin the Etherum Co-Founder to create Uniswap in 2018 and had since been one of the most important DEX in the DeFi ecosystem.
How it works
As earlier stated, Uniswap functions on the Automated Market Marker model, it displaces the need for an order book like the centralized exchanges (an order book is that which carries and displays the list of transactions to be attended to.), thanks to smart contracts. Traders can then trade against reserves held by the AMM.
swapping process thereby providing liquidity
In Uniswap anyone can be a liquidity provider, infact the liquidity reserves are created by the users. Once a liquidity provider deposits ETH or ERC-20 tokens in the pool which usually comprises of stable coin, e. g Usdc, the provider recieves tokens in reward for doing so and can be redeem at will.
How are rewards calculated on each pool
Uniswap employs two variables in a pool say a and b, consider a pair of ETH/Usdc in a pool:
Let's call Eth (a portion of the pool),a and the stable coin Usdc b, since it uses the Constant Product Market Marker, the Product of this two variables are found to obtain a constant value say k, which is the reward for that pool.
So we get a*b=k.
Uniswap goverance token
UNI is the native token of Uniswap exchange and it gives holder governing right within the project. With this right holder can then vote on changes in the protocol. UNI tokens are also important because it is used to pay incentives to those who provide liquidity to the Uniswap platform.
Merit and demerits of the Uniswap
For merit, I believe makes swapping coins easy especially ERC-20 based coin. It has also completely ruled out the need of a centralized body or the middleman.
Wether or not uni will stand the taste of time depends largely on innovations it has on ground because there alot of competition currently eminent in the market.
Prices can be manipulated to steer their course.
Scam tokens could be available on the exchange.
Conclusion
In conclusion, Uniswap is a popular exchange and currently ranked #8 according to coin market. It is a very important DEX in the ecosystem and will stand the test of time. Most importantly, I has removed totally the need of the middle as in Centralized Exchanges.
Thank you Prof.
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.
One journey I dislike wholeheartedly is going to the bank. It is often a wasted day trying to plead to get my funds because everyone in the bank claims to be too busy and the banking system isn't allowing customers to solve their problems by themselves online just like Defi.
You didn't discuss much on Uniswap and I was hoping to read comprehensively on this.
Rating 5
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Thanks