1 month ago By Oluoma Aneke
In our Uniswap review, we found Uniswap to be one of the best-decentralized exchanges available. Like most decentralized exchanges, you are responsible for the security of most of your assets. Uniswap is a Dex that makes trading of Cryptocurrency easy and quick.
In this review, we will look at Uniswap, its features, pros, cons, safety, and a general overview.
Uniswap is an Ethereum-based Decentralized exchange that enables users to swap their crypto and provide liquidity to earn rewards. Decentralized exchanges enable peer-to-peer trading on blockchains. In terms of decentralized crypto exchanges, Uniswap is one of the biggest and there are over 600 Ethereum-based Cryptocurrencies available to trade and a bridge to the Polygon network. Uniswap is known as an Automated market maker because it sets prices and executes trade using smart contracts. There is no central body governing Uniswap because it is a decentralized exchange.
Uniswap works using a smart contract to hold and manage liquidity pools. Liquidity pool is a collection of crypto funds, which is contributed by users and in turn locked in a smart contract. After each transaction, Uniswap will take a small fee and distribute it among a pool of liquidity providers. The liquidity providers help Uniswap offer crypto trading efficiently.
Uniswap originally has a flat fee of 0.3% but with the release of Uniswap V3, the fee tiers are determined by the volatility of the liquidity pool. Uniswap distributes the fee among the liquidity providers after each trade. The fee tier can range from 0.1% to 1.00%. For very stable pairs, the fee is 0.01%, for Stable pairs, 0.05%, for Most pairs 0.30% while exotic pairs are 1.00%. However, most of the crypto pairs are within the range of the 0.30% fee tier. For pairs with one or two of the more volatile, high-risk cryptos, they are usually expensive.
With this, Uniswap fees can be said to be competitive and reasonable. The costly part of the fees on Uniswap is the Ethereum gas fees.
You can make trades on Uniswap through the web application on a mobile browser. There is no mobile app option on Uniswap. Through the website, you can connect a mobile digital wallet, provide liquidity, and place trades with your phone. While using the mobile wallet application, you will have to approve the transaction. You must have at least a supported asset like Ethereum or USD coin in your wallet.
As seen in most decentralized exchanges, Uniswap is not responsible for users’ assets. Rather the asset is stored in the user’s digital wallet like Metamask. Uniswap doesn’t offer insurance for lost assets. Also, the liquidity pools are built on the Ethereum blockchain and protected by Cryptography since it is decentralized.
Uniswap doesn’t require account creation from Customers so there is no Know Your Customer Verification. To trade on Uniswap, you need a digital wallet like Metamask that is Compatible with the Ethereum network. You also need to connect the wallet to the Uniswap application.
The lack of KYC will most likely favor traders who like private activities but bear in mind that exchanges without KYC are prone to get into regulatory issues.
The liquidity pool in Uniswap contains two cryptocurrencies. You can deposit or stake your cryptocurrency into the pools and in turn, become a liquidity provider. For every trade, Uniswap charges a fee, and the fee is distributed among liquidity providers. This means that staking with Uniswap will be an additional way of earning a passive income with your Cryptocurrency.
Once you connect your crypto wallet, you can trade or stake your Crypto. When you want to Trade, select the Swap option and choose the crypto you want to trade and the one you want to receive.
If you want to stake your Crypto, you have to select the “Pool Option”. Then proceed to open a new position. After that, deposit any two cryptocurrencies of your choice that have an existing Uniswap pool. Moreover, if you are not sure of the crypto to stake, you can check out the top pools.
If you are trading with Uniswap, you can select any digital assets that are compatible with Ethereum. The assets are known as “ERC-20 assets).
You can earn passive income by staking your funds with Uniswap.
Uniswap favors both crypto traders and those who want to earn as liquidity providers.
The transaction fees on Uniswap are low and can compete favorably with most exchanges.
There is a vast number of Cryptocurrencies you can select from. Uniswap supports over 600 cryptocurrencies.
While trading on Uniswap, you can’t pay using fiat money. This is a limitation common to most decentralized exchanges. For you to purchase your crypto, you will need to have crypto in an existing crypto wallet that you will connect to Uniswap.
New traders might find it difficult to understand how Uniswap works.
Uniswap doesn’t have insurance covering the lost assets of users. So, if you lose your assets due to your mistakes or due to fraudulent activities, Uniswap won't refund you.
Uniswap doesn’t have a mobile app. This leaves you with the option of trading only through the web platform.
The gas fees are high. Uniswap is built on the Ethereum blockchain and the gas fees are high. The high gas fees on Ethereum can be linked to the congestion on the Ethereum network which is due to their popularity. If you must transact with Uniswap, ensure that it is a high transaction because of the high gas fee associated with the Ethereum blockchain. The gas fees are up to $30 to $50 depending on the congestion at the moment. Until Ethereum fully transitions to the proof of stake system, the gas fees will be high.
You might experience impermanent loss when staking your crypto with Uniswap. Staking is a good way to earn passive income but the value of your crypto might drop at any time and this will lead to loss.
You can trade with Uniswap in a few simple steps.
You will first have to buy Ethereum from any crypto exchange. This is because Uniswap is based on the Ethereum network.
Transfer Eth to your Ethereum wallet. With Metamask, you can buy, send and store your cryptocurrency. You can also choose a hardware wallet-like ledger.
Connect your wallet to Uniswap. Once you put ETH in your wallet, you can switch to the Uniswap web page. Scroll to the right, at the top most corner, there is an option to connect your wallet. From the option choose from the supported wallets. If you selected Metamask, you can use the Metamask Chrome extension to log in automatically. If you are using other wallets asides from Metamask, you will need to fill in some information.
You are now ready to make a trade or provide liquidity. Move to the pool tab at the top of the screen if you want to provide liquidity or stake your crypto. If you want to trade, select the amount of ETH you want to trade, and from the currencies available, choose the one to swap with.
In Uniswap and most of the decentralized exchanges, you are responsible for protecting your assets. The main reason for this is that you will store your assets in your crypto wallets. Generally speaking, your assets are safe on Uniswap but you are prone to running into risks. Also, have in mind that people can randomly start liquidity or add a token in Uniswap just like in other Dex. So before investing in any crypto or liquidity pool, it is important you research well.
Uniswap is a great option for people who want to trade or stake with a high amount of crypto. Trading in small quantities is not entirely beneficial because of the high gas fees. Uniswap is a great option if you want to earn passive income through staking, but bear in mind that they might be an impermanent loss.
You can go ahead and transact with Uniswap because no case of fraud or lost assets have been recorded with them.