A Unicorn Riddle
Why did the unicorn enter the restaurant? — Because it was lunch time!
We are proud to announce that Lunch Money (LMY) is available on Uniswap. 🥘🥙🍛🍲🥖🥞🌯🥨🥗🥝
If you don’t see LMY in the dropdown search right away, you may need to input the LMY contract address to initiate activity.
Uniswap is a Decentralized Exchange completely hosted on the Ethereum blockchain created to automate the exchange between ETH and ERC-20 tokens. It also supports ERC-20 to ERC-20 trades. KYC is not required and unlike centralized exchanges, you will always have total control of your cryptocurrency. One of the best things about Uniswap is the gas prices, which are significantly cheaper than most decentralized exchanges.
Unlike a regular exchange, Uniswap doesn’t use an order book. Instead, it uses an automated market-making mechanism that guarantees liquidity.
Each ERC-20 token traded on Uniswap has a pool of Ethereum and a pool of the token(in this case let’s use LMY). The price of LMY is related to the ratio of the size of the ETH pool, to the size of the token pool. For example, if someone sells LMY for ETH on Uniswap, the amount of LMY increases and the amount of ETH decreases. This decreases the price of the token incrementally.
Whenever someone buys LMY for ETH, the amount of the token on Uniswap decreases and the amount of ETH increases, pushing the price up. The price of LMY is dictated by the automated market-making algorithm to make sure that the amount of ETH multiplied by the pool of LMY tokens remains the same constant product.
Strange but Sweet Liquidity
The unique mechanism also guarantees liquidity. As an order gets larger, the price of the trade rises so that liquidity will always be there. It provides small to medium trades with relatively low spreads (However it does mean large orders may experience high volatility).
This mechanism is automatic, no manual traders are needed to create order books. Instead, the price is adjusted through arbitrage. Every time the price of LMY lags the market, it becomes profitable to make a trade that brings the price closer to the market.
This market-making mechanism also makes for a relatively simple exchange design. Generally when it comes to smart contracts, simpler is better in many ways. Simpler code generates lower gas fees and also is good from a security standpoint. Simpler code is easier to audit, easier to test, and has a smaller attack surface.
“Uniswap Isn’t Your Ordinary DEX” by Danger Zhang https://link.medium.com/6S39gfX8H2
Invest in Lunch Money!
Do drop us any questions, comments or feedback . Reach out to the core team on telegram at @lunchmoneytoken or twitter @lunchtoken