Crypto Academy Week 4 Homework Post for [@gbenga] Homework submitted by @tmighty

I want to use this opportunity to appreciate @gbenga for his dedicated teaching since the start of the 5week crypto course. It's been a great experience to have been your students.

The homework task give by the prof for the 4th week was that we discuss fully one ofbthe projects built on the Ethereum blockchain.
According to my research, there are hundreds of projects built on the Ethereum blockchain e.g the chainlink, makerDao, yahoo finance and so on. Forbthe purpose of this homework task, I am going to discuss the Uniswap protocol.

UNISWAP

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The Uniswap protocol was created by Hayden Adams in 2018. But the underlying technology that inspired its implementation was first described by Ethereum co-founder, Vitalik Buterin.

Uniswap is one of the decentralized exchange protocol built on the Ethereum blockchain. It is a set of computer programmes that run on the Ethereum blockchain and allows for decentralized tokens swap. It works with the help of unicoins.

Traders can change their Ethereum tokens on Uniswap without having to trust anyone with their assets. Thee is no order book or a centralized party required to execute trades allowing users to trade without intermediaries. This makes Uniswap have a high degree of decentralization.

Uniswap works with a model that involves liquidity providers creating liquidity pools. This system provides a decentralized pricing mechanism that solves the bridges the gap of order book absence.
Because uniswap protocol is decentralized, there is no listing process. Essentially, any ECR-20 token can be launched as long as there is liquidity poo for any one who trades on the app. Because of the availability of liquidity pool (crypto reserve area) , uniswap doesn't charge listing fees. Uniswap protocol acts as a kind of public good. It is used freely by anyone without charges.

HOW UNISWAP WORKS

Uniswap works with a design called Constant Product Market Maker, which is a variant of a model called Automated Market Maker (AMM).

Automated market makers are smart contracts that hold liquidity reserves (or liquidity pools) that traders can trade against. These reserves are funded by liquidity providers. Anyone can be a liquidity provider who deposits an equivalent value of two tokens in the pool. In return, traders pay a fee to the pool that is then distributed to liquidity providers according to their share of the pool. Let’s dive into how this works in more detail.

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Liquidity providers create a market by depositing an equivalent value of two tokens. These can either be ETH and an ERC-20 token or two ERC-20 tokens. These pools are commonly made up of stablecoins such as DAI, USDC, or USDT, but this isn’t a requirement. In return, liquidity providers get “liquidity tokens,” which represent their share of the entire liquidity pool. These liquidity tokens can be redeemed for the share they represent in the pool.

The liquidity pool being talked about is the pairing of Ethereum with other stable coins. Let's take ETH/USDC for example.
We have two portions of the pool here, the ETH portion and the USDC portion. What Uniswap does is to multiply the two portions to calculate the total liquidity in the pool. Where the total liquidity remains constant.

If a trader wants to buy 2ETH with 200USDC. Once the ordee is executed, the ETH portion of the coin will increase while that of USDC decreases. Because ETH is now more in the pool, the price begins to fall. Until some portions of ETH is sold out in the total pool, the price will remain down. This is the mechanism that determines pricing in the crypto market generally.

HOW UNISWAP MAKE MONEY.

Uniswap does not make money. It is a decentralized, non-profit making protocol that doesn't have a native token of its own. All fees go to ths liquidity providers and non of the founder ls get a cut from the trades that happen through the protocol.

The current transaction fee paid out to the liquidity providers is 0.3% per trade either buy or sell. By default, these are added to the liquidity pool which the liquidity providers can redeem at any time depending on the share of the total liquidity provided by each of the providers.
A portion of the fees may be dedicated to the development of uniswap in the future.

How to use Uniswap.

Uniswap is open to everyone and anyone who is interested in making trades with it as it is an open source protocol. You can create an account on it for swapping and/or tradingexchange of Ethereum tokens.

After creating your account either in its official site or application, you can follow the steps below to use it.

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• Go to the Uniswap interface.
• Connect your wallet. You can use MetaMask, Trust Wallet, or any other supported Ethereum wallet.
• Select the token you’d like to exchange from.
• Select the token you’d like to exchange to.
• Click on Swap.
• Preview the transaction in the pop-up window.
• Confirm the transaction request in your wallet.
• Wait for the transaction to be confirmed on the Ethereum blockchain. You can monitor its status on https://etherscan.io/.
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This is my entry on the homework by professor @gbenga.
Thanks for reading.

Cc: @steemcurator01, @steemcurator02, @gbenga, @trafalgar, @mmmmkkkk311 @bright-obias, @focusnow, @whitestallion, @ctime, @bluesniper, @fuli, @karja, @ngoenyi, @emjeak.

I am @tmighty