The decentralized infrastructure that has been built thanks to Ethereum blockchain and smart contracts can lead to the next revolution in the financial industry. In the new era, some projects try to provide the most secure platforms for decentralized financial applications. Uniswap is one of them that provides a transparent, censorship-resistant financial infrastructure in Ethereum blockchain.
What Is Uniswap?
Uniswap is an automated liquidity protocol based on the Ethereum blockchain. In other words, the protocol automatically proves liquidity on Ethereum. One can consider it as a decentralized exchange (DEX) based on Ethereum.
As an open-source software licensed under GPL, Uniswap removes some common barriers in DeFi like intermediaries and prioritizing challenges. It focuses on the censorship-resistance and decentralization to increase the security of dApps as more as possible.
Uniswap hosts smart contracts that each of them is responsible for managing a liquidity pool. Each liquidity pool includes two ERC-20 tokens’ reserves.
“Anyone can become a liquidity provider for a pool by depositing an equivalent value of each underlying token in return for pool tokens. These tokens track pro-rata LP shares of the total reserves and can be redeemed for the underlying assets at any time,” according to Uniswap documentation.
Uniswap V2 was launched on March 23rd, 2020. The first version will continue to work on Ethereum blockchain, but V2 consists of many new technologies and features to improve the protocol’s use case. Price oracles and Flash Swaps are two of the most important new features in Uniswap V2.
Is Uniswap safe?
Uniswap focuses on security as one of the core values and features of its platform. The development team has made multiple efforts to audit and verify the safety of the platform.
The audit report for Uniswap V2 is accessible here that focuses on the security aspects of the second version.
The open-source nature of Uniswap helps it benefit from community participation. The source code and documentation are accessible for everyone on GitHub.
Uniswap also runs a bug bounty program that rewards developers and hackers for finding vulnerabilities in the platform. The recent bug bounty program that focuses on vulnerabilities in Uniswap V2 offers rewards up to $10,000.
Uniswap provides multiple applications and services for developers and end-users. They are all focused on the financial use-case of blockchain – especially Ethereum. The services help users and developers alike to connect to the primary protocol.
Uniswap application is a web-based one that provides necessary tools like Swap and Pool. You can swap ERC-20 token of Ethereum using the Swap feature and connecting wallets. Uniswap app supports Metamask, WalletConnect, Coinbase Wallet, Fortmatic, and Portis.
Uniswap provides analytics tools for developers to export reports and status data about the protocol. You can see the overall liquidity and 24h volume of the network on the main page. Other information covers top tokens in the Ethereum blockchain.
When a user clicks on each token in the Uniswap Analytics, some info like Total liquidity, 24h volume, and transactions in the past 24 hrs will be shown. It also indicates Top Pairs for each token. You can get reports and information about specific Ethereum addresses in Uniswap Analytics.
Unisocks with $SOCKS token is one of the more exciting services built on Uniswap protocol. $SOKS is a token paired to one real pair of socks. The initial price of this token was $12 that raised to about $370 in 2020. Users can buy and sell this token or redeem it to receive the real pair of socks.
Uniswap provides an exchange for buying and selling $SOCKS. You can connect your Ethereum wallet to the exchange and buy that token with ETH.
Unipig focuses on the use-cases of Uniswap on Ethereum Layer 2. This exchange focuses on gamification concepts to show the UC improvements of Ethereum layer 2.
How does Uniswap App work?
Uniswap application is currently the most famous service in the protocol. You can use it to swap tokens. To swap token, follow the steps below:
1. Open the Uniswap app at app.uniswap.org
2. Click on Connect to a wallet at the top right corner.
3. After selecting the preferred wallet, follow the instructions specific for each one to connect the Ethereum wallet.
4. You can see the ETH balance at the top right corner of the application. It also shows the balance in the From section in the Swap menu.
5. Select preferred tokens in the From and To menus. Many ERC-20 tokens are supported in the app. Be sure to check the contract address for each token before swapping. You can also insert the contract address instead of the token name.
6. Enter the value you want to swap, and the application shows the amount you’ll receive in the second token.
Users can create new exchange pairs in Uniswap using the Pool feature. You have to deposit equal amounts of ETH and the preferred token to make a pair. Other users will trade using your provided liquidity deposits that result in earning in those tokens for you.
Conclusion about Uniswap
Uniswap tries to offer the freedom of trading and financial activities using the robust infrastructure of Ethereum. The decentralized exchange use-case on this protocol has many applications for those who don’t like traditional exchanges. Although there is a limitation because it only supports ERC-20 tokens, Uniswap can easily swap tokens in that blockchain community.
With the launch of Ethereum 2 on the horizon, Uniswap V2 can become a more dominant service providing better user experience to users.
The real path for all blockchain projects leads to fully decentralized platforms. Protocols like Uniswap can pave the way for this goal by providing easier p2p trading without intermediaries.
The ease of use and gamification concepts like Unipig and Unisocks is cherry on the cake to attract more users to the new finance ecosystem.