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How does Uniswap work?

Uniswap is an Ethereum based exchange that allows anyone to swap ERC20 tokens. Traditionally, token swaps require buyers and sellers to create liquidity. Uniswap creates markets automatically.

The surge of DEX popularity

What is the difference between DEX and CEX?

ERC20 tokens and Uniswap

Smart contracts in Uniswap

Pros and Cons of Uniswap

  • No need for KYC. Uniswap users do not need to prove their identity. No matter how huge the trading volume or activity on the platform is, there will be no need to show your ID. The system operates on the basis of smart contracts and without any supervisory authorities on top;
  • No registration. You don’t need to create an account, use your e-mail and password either, because there are simply no accounts or personal accounts on Uniswap. You will only need to enter a password from your MetaMask wallet;
  • Almost instant execution of swaps. Uniswap users do not wait for orders to be executed as it happens on the centralized exchanges. Instead, they exchange tokens, and the speed of the process depends on the amount of fee;
  • Wide range of tokens. As we have already mentioned, you can list any token on Uniswap. Usually, coins appear there noticeably earlier than on major exchanges, and this is an opportunity to get profit;
  • Simple interface. It’s very easy to understand and it takes only a few clicks to make a transaction. If you already have MetaMask or experience with other online wallets, there will certainly be no problems with Uniswap.
  • Swaps can sometimes be too expensive. Token exchange process works through smart contracts, which spend much more gas than usual transfers. So if now you have to pay 1–2 dollars for an ordinary ETH transaction, in the case of Uniswap you should set up to give 4–5 dollars and more for an operation. If Ethereum network turns out to be busy, prepare to give away tens of dollars;
  • Investing requires a serious strategy. Given the high commission for swaps, you’ll have to think carefully about the tokens and funds you plan to invest in them;
  • Scammers. The free listing is actively abused by scammers who create coins with a similar ticker and hope that inattentive users will buy a useless fork instead of the original;
  • The platform is not suitable for large trades. The larger the purchase amount, the more the so-called premium is accrued on it.

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Jeffrey Hancock

Blockchain enthusiast developer and writer. I love video games, blockchain and the hot symbiosis of these two worlds.