The Best Crypto Exchanges to buy and invest in Uniswap (UNI)

The Best Exchanges to buy and invest in Uniswap (UNI)

Do you want to buy and sell Uniswap (UNI)? Now you are looking for an exchange to invest in Uniswap (UNI) tokens?

Check out the 3 best exchanges to invest in Uniswap (UNI) today.

Just two months after launch, Uniswap has already achieved significant trading volume.

Created by Hayden Adams in 2018, Uniswap says the inspiration for the project came after Vitalik Buterin (co-founder of Ethereum) first described the underlying technology on a forum. Uniswap is a simple concept that seeks to provide automated on-chain liquidity to cryptocurrency traders.

Uniswap caused a DeFi boom, sweeping the cryptocurrency market. Now, thanks to this solution, it has earned a reputation in the cryptocurrency space as one of the most active decentralized exchanges.

Buy Uniswap on Bybit

What is Uniswap?

Uniswap is a decentralized exchange designed to allow traders to trade or swap ERC-20 tokens directly from their wallets. In particular, if an ERC-20 token is not listed on a major centralized exchange (CEX), it is very difficult and impossible to exchange this token for another ERC-20 token.

Most of these tokens are listed on other DEXs like EtherDelta, but they lack sufficient liquidity and provide a non-intuitive user interface, which is inconvenient. For these reasons, Uniswap has emerged as the best-decentralized protocol that automatically provides liquidity and even improves the Ethereum ecosystem for ERC-20 tokens.

Open Bybit’s Account

How does Uniswap work?

Unlike centralized exchanges that rely on market makers to provide liquidity, Uniswap operates on a decentralized automation framework that automatically uses smart contracts to provide liquidity. Smart contracts act as automated market makers and balance liquidity supply requests from traders who wish to provide exchange services.

Uniswap has no order books or centralized intermediaries. Being an open source software, anyone can create a liquidity pool and become a liquidity provider for uniswap. Additionally, as a permissionless protocol, ERC-20 tokens can be listed on the platform without anyone’s permission as long as they have a liquidity pool.

Go to Bybit’s Official Website

Uniswap liquidity pool

Uniswap’s liquidity providers create a market by depositing two tokens of equal value (e.g. an ETH and an ERC-20 pair or an ERC-20 coin and another ERC-20 coin pair) in a smart contract that holds a liquidity reserve. In return, the smart contract issues incentives in the form of liquidity tokens to redeem a percentage of their contribution to the pool of liquidity providers.

Traders who wish to swap tokens to access this liquidity pay a fee to the liquidity pool. Those fees are distributed among liquidity providers according to their contribution to the pool.

Buy Uniswap on Bybit

How does Uniswap Pricing work

Uniswap uses a pricing oracle to pull data from various transactions and aggregate prices for trading pairs. A pricing oracle is a decentralized system designed to resist manipulation. It’s not good for hackers to hack Uniswap, and it’s expensive.

For example, a trader wishing to swap ETH to USDT will request access to the ETH/USDT liquidity pool to execute the trade.
This Uniswap liquidity pool is designed to keep both ETH and USDT in equal price, ensuring a constant balance.

By removing ETH from the pool, the trader essentially reduces the supply of ETH to USDT, thus increasing the price of ETH relative to USDT.

Pricing Oracle collects all data from these transactions and aggregates it to calculate a price for each token pair on the platform.

Open Bybit’s Account

How to use Uniswap?

Anyone can use uniswap to earn commissions by trading ERC-20 tokens or providing liquidity. Uniswap works similarly to exchanges, but internally, it differs from other exchanges in its unique design. The basic framework of uniswap allows individuals to exchange tokens without KYC (Know Your Customer) regulations, entrusting tokens or verification by intermediaries.

Moreover, because Uniswap is an open source platform, anyone can build applications on top of Uniswap and get more features from this protocol.

Go to Bybit’s Official Website

How to make money with Uniswap?

Here’s how to achieve your return on investment (ROI) with Uniswap as a cryptocurrency trader.

1. First, create a cryptocurrency wallet. You can choose which wallets you want to connect to Uniswap, but currently, the most convenient option is the Metamask wallet. You can connect to the Uniswap blockchain directly from your browser.
2. The next step is to buy a small amount of ETH knowing that Uniswap is an Ethereum-based protocol that only works for Ethereum-based digital assets.
3. Connect your wallet to Uniswap. Once your wallet is set up, the next step is to go to Uniswap.org and click the ‘launch app’ button. You can connect Uniswap to your wallet through the interface.
4. You can now access the token swap interface to exchange ETH in your wallet for ERC20 tokens of your choice. If you choose ERC20 tokens
   and exchange them for your ETH, you will basically send ETH to the liquidity pool and withdraw the exchanged ERC20 tokens from the pool.
5. After confirming all the details, confirm the swap and a popup will appear in MetaMask to confirm the transaction. It can take several minutes for a transaction to be confirmed on the blockchain.

Buy Uniswap on Bybit

Liquidity provider

If you want to provide liquidity to Uniswap, you must have both ETH and the ERC20 tokens you want in the same wallet.
The value of ETH and ERC20 dollars in your wallet should be the same.

Once you have set up your wallet, follow the procedure outlined for swapping tokens, but instead of clicking the swap token button, click the “Pool” button.
Then, connect Uniswap to your wallet, select the amount of tokens and Ether you want, and add it to your liquidity pool.

When a transaction is confirmed on the blockchain, it will show the percentage contributed to the pool
and the ETH percentage for the selected ETH20 token. The ETH to ERC20 ratio may change when traders trade in the pool,
but the overall dollar value of the coins that provide liquidity to the pool remains constant.

Eliminating liquidity is simple. Go to the ‘Pool’ tab and select ‘Remove liquidity’ from the menu. Now select the ERC20 tokens you used to provide liquidity and the amount of liquidity you want to remove. Once you approve a transaction, you will receive a share of the transaction fees accrued on the platform equal to the contribution you have made to the pool.

Open Bybit’s Account

Risk of permanent loss

Uniswap liquidity providers should be aware that once liquidity leaves the pool, the market price of the token becomes more volatile, which can affect existing returns and result in permanent losses.

For example, if a liquidity provider deposits 1ETH and 100 USDT (equivalent to $100 ETH) into a pool with 10ETH and 1000USDT, the liquidity provider now has a 10% stake in the pool. However, if the price of ETH goes up to 400 USDT and the pool overflows with ETH as arbitrage traders withdraw USDT, the ratio of ETH to USDT in the liquidity provider’s wallet will change, but the value will remain the same.

Thus, if a liquidity provider decides to remove liquidity from its pool while the price is high, the trader will experience a loss or essentially an opportunity cost. In this case, the ETH value against USDT in the liquidity provider’s wallet will change to 0.5 and the ratio will change to 0.5ETH and 200USDT instead of the original 1ETH and 100USDT. While it may appear that the liquidity provider has made a profit of $400 (i.e. 200 USDT plus 0.5 ETH), the liquidity provider actually has a total of $500 in their wallets if the liquidity provider had not contributed to the pool. I lost 100 USDT.

To avoid the risk of permanent loss, you can also look at this technical explanation of how permanent loss occurs, but the best solution is to add and remove liquidity from the pool only when the token price is relatively stable.

Go to Bybit’s Official Website

Advantages and disadvantages of using Uniswap

As with any technology, the best way to understand Uniswap is to start using it. One of the main advantages of Uniswap is that traders can trade directly from their wallets without any third-party verification. Additionally, the platform is secure as it is a managerless platform and the protocol does not hold any funds.

Moreover, as evidenced in the audit report published by Uniswap, Uniswap’s smart contracts have been audited multiple times. Exchanges designed to be permission-free provide quick and easy access to new tokens. Compared to centralized exchanges, this platform features a low fee of 0.3% per transaction compared to a typical 0.5% fee.

Some of the potential risks, including uniswap, are skyrocketing gas prices when the Ethereum network is congested, as we saw in August of this year. Also, since there is no user verification, anyone can trade, provide liquidity, and list tokens, scammers can easily create fake tokens. The good news is that you can easily identify scammers with little research.

Overall, Uniswap is good news for crypto enthusiasts who have long relied on centralized trading methods. To date, Uniswap has successfully raised $ 11 million in Series A to develop Uniswap version 3.0.

Buy Uniswap on Bybit