Uniswap is an automated decentralized token exchange based on the Ethereum blockchain and launched in 2018. The project was developed by Hayden Adams in the United States. The United States is in many ways one of the first cradles of cryptocurrency, and several well-known cryptocurrency exchanges such as Coinbase, Kraken and Gemini originate from here. These exchanges have played a significant role in the development and popularization of cryptocurrencies on a global level.

The principles of operation of Uniswap

• Absence of intermediaries

On decentralized exchanges (DEX), such as Uniswap, trading takes place directly between traders' wallets, without the participation of intermediaries or centralized structures. Instead, trading is carried out on the basis of smart contracts, which are algorithms running on the blockchain. Smart contracts monitor the fulfillment of certain conditions of the transaction, and when these conditions are reached, the transaction is executed automatically.

Unlike centralized exchanges (CEX), where the exchange acts as an intermediary, on DEX, the exchange only provides a platform for exchange, and trading operations themselves are carried out directly between participants. This provides a higher level of decentralization, security and transparency, as there is no need to trust a centralized structure for storing or managing funds.

• Decentralized storage of funds.

On centralized exchanges (CEX), as a rule, separate wallets are created for each coin. However, when trading on such exchanges, you actually transfer the management of your assets to a third party – the exchange. This means that you do not manage your funds one hundred percent, since the exchange has access to your funds and can set various restrictions.

For example, in June 2022, after the collapse of prices for bitcoin and altcoins, the Binance exchange limited the ability of users to withdraw bitcoin. Such restrictions may affect your ability to manage your assets in the event of an emergency.

In contrast, on decentralized exchanges (DEX) such as Uniswap, you store your funds in your own wallet linked to an exchanger through applications such as Metamask, WalletConnect, Coinbase Wallet and others. This means that you have full control over your assets and can dispose of them at your discretion without the intervention of third parties.

• Lack of registration

On decentralized exchanges (DEX), you do not need to register or verify your account, as is often the case on centralized exchanges (CEX). Instead, to start exchanging your coins for DEX, you just need to link your wallet (for example, Metamask, TrustWallet and others) to the exchange.

This means that you can start trading on DEX immediately after connecting your wallet, without having to provide personal information or undergo any verification procedures. This approach ensures greater anonymity and privacy for users while maintaining full control over their own funds.

Exchange Features

Token Exchange

On the Uniswap exchange, which is decentralized and does not have exchange orders or order books, the cryptocurrency exchange process is implemented through an exchanger. To make an exchange, the user goes to the "Exchange" section in the top menu. A form opens there with two fields: the upper one for selecting and specifying the amount of cryptocurrency that the user wants to exchange, and the lower one for selecting the desired cryptocurrency that the user wants to receive.

After selecting both cryptocurrencies, the system calculates the amount in USD and shows the current exchange rate of the selected pair, as well as the gas per transaction in USD. Clicking on the gas amount allows you to see the details of the swap, including the expected amount, the effect on the price of tokens, the result of the transaction, taking into account slippage and the network commission. 

Next, the user clicks "Exchange", confirms the transaction and, if necessary, approves the transaction through his wallet. In the settings section, accessible by clicking on the gear button, you can set additional parameters such as acceptable slippage, transaction expiration, enabling the auto-routing API and "Expert mode".

In the "Expert mode", the protocol allows the creation of transactions with a high impact on the price without additional confirmation of transactions. Thus, Uniswap provides a flexible and easy-to-use interface for cryptocurrency exchange with a wide range of features and settings.

Tokens

The "Tokens" section on Uniswap is a kind of screener of cryptocurrencies available for exchange. This section allows the user to select the blockchain and sort the information by different time intervals (hour, day, week, month, year). The table shows market statistics on cryptocurrencies, including the following data:

• The name of the cryptocurrency and the ticker (abbreviated designation): The identifier of each cryptocurrency.

• Current market price: The price of the cryptocurrency at the moment.

• Dynamics over the specified period: The change in the price of the cryptocurrency over the selected time interval.

• TVL (Total Value Locked): The total amount showing how many tokens are locked in Uniswap smart contracts, expressed in USD.

• Volume: The number of transactions for the sale of the specified cryptocurrency for the selected period, expressed in USD.

• A small graph: A graphical representation of the dynamics of the cryptocurrency price over a specified period.

When you click on the line with the cryptocurrency of interest, the asset page opens, where the following information is available:

• Extended chart: A detailed chart of the change in the price of cryptocurrencies.

• Quick swap form: A user-friendly interface for instant exchange of the selected cryptocurrency.

• Market statistics: More detailed data about the cryptocurrency, including trading volume, liquidity and other important metrics.

• Brief information about the cryptocurrency: Description of the cryptocurrency, its features and key characteristics.

• Important links: Useful resources and official websites related to this cryptocurrency.

This section helps users to quickly find and analyze the necessary cryptocurrencies, as well as make exchanges directly from the same page, which makes trading on Uniswap more convenient and efficient.

NFT Marketplaces

The Non-interchangeable Tokens (NFT) section is available on Uniswap, which is a way of trading and researching digital collections integrated with the OpenSea marketplace. Users can browse popular NFT collections, as well as use the search to find specific items. The main page of the section provides information about various collection metrics, such as the minimum floor price, trading volumes, number of items and owners. Clicking on the collection of interest opens a page with detailed statistics, links to external resources and a list of items with the ability to sort by various parameters. This approach makes the NFT search, analysis and trading process more convenient and accessible for Uniswap users.

Pools

Pools on Uniswap provide an opportunity for passive earnings, where the user provides tokens to the protocol for conducting exchange transactions. For this participation in the pool, the user receives a portion of the commission charged by the protocol for the swap. To join pools, open the corresponding section in the Uniswap main menu and click "New position".

The first step is to select a pair of tokens, for example, ETH and 1INCH. Then the commission is indicated, which will be charged to users if the protocol uses tokens from the created pool. Uniswap recommends choosing commissions comparable to those offered by other providers. Too low a commission can lead to insufficient income, and too high can lead to ignoring our pool.

The "Deposit amounts" field indicates the number of coins that the user provides to the pool. In addition, there is a "Price range" block, which determines the prices at which the provider allows the protocol to use the provided tokens. The more accurate the range is to market prices, the more often the protocol will access the pool, which will increase the income of its organizer. However, this setup involves certain risks, and it is recommended that you study the manual and analyze the quotes before creating a pool.

After setting the settings, just click "Add liquidity" and the pool will be launched. This approach provides users with the opportunity to earn on commissions generated during the token exchange process in the pool.

The UNI token

The UNI token, based on the Uniswap protocol, was released in September 2020 and quickly appeared on the Binance listing. This token plays a key role in providing liquidity on the Uniswap exchange, where users can exchange various ERC-20 tokens through liquidity pools, instead of traditional exchange orders.

With a total issue of 1 billion coins, UNI ranks 18th in the Coinmarketcap ranking. Its market capitalization is $5.2 billion, and its daily trading volume is approximately $157 million. At the time of creation of this material, the cost of the UNI token is $ 7.04. In the past, its price reached $ 31.3 in September 2021, and the historical maximum was $ 44.92, recorded on May 3, 2021.

UNI is available for trading on a variety of large crypto exchanges such as Binance, Coinbase, FTX, Kraken, and KuCoin. The possible growth potential of UNI may be due to participation in Ethereum Layer 2 and the accumulation of tokens by whales, which may lead to a new price increase.

Commissions and fees

Uniswap offers a fixed trading commission of 0.30%, which is slightly above the industry average (approximately 0.25%). This is a decent offer, considering that many exchanges charge different commissions from takers and makers. Some platforms, although they offer low trading commissions, then charge high withdrawal fees, which may not be profitable for users. In contrast, Uniswap only charges a network fee when executing a transaction, which varies depending on the current network fee rate. For example, the BTC withdrawal fee is about 0.000812 BTC, which is about 15-20% of the average BTC withdrawal fee in the industry.

Thus, when it comes to withdrawal fees, Uniswap offers a competitive offer, offering the user transparent and predictable conditions for trading and withdrawing funds.

Safety

Centralized exchanges such as Binance sometimes become targets of cyber attacks, which can lead to compromised security and leakage of user funds. However, security on decentralized exchanges (DEX) works differently. Gaining access to your funds through DEX does require hacking your wallet, and this is only possible if you have access to your data, such as password, private keys or passphrases. Therefore, it is important to keep this data confidential and not share it with third parties.

It is also worth noting that on DEX, users do not provide their personal data to the exchange, since registration and verification are not required. This means that it is almost impossible to steal personal data from DEX, since they simply do not exist in the system. Thus, decentralized exchanges provide users with an additional level of anonymity and protection of personal data.

Conclusion

In conclusion, Uniswap is a decentralized cryptocurrency exchange where assets are exchanged directly between users through smart contracts without intermediaries. Liquidity is provided by liquidity providers who can add new ERC-20 tokens by opening pools of liquidity. Despite the high gas fees on the Ethereum blockchain, the situation may improve with the launch of Ethereum 2.0. Uniswap's functionality is limited only to cryptocurrency exchanges, and users cannot place orders or engage in margin trading. However, in the third version, there is the possibility of a limit range order for liquidity providers. The project also has its own UNI management token, which allows holders to participate in the management of the ecosystem and make decisions about its development through voting.