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What is Uniswap?

7 mins read

Uniswap is a decentralized exchange that allows you to trade 24 hours a day without the need for a central administrator.

In addition, it has been in operation since 2018, and not only handles more than 1,500 types of virtual currencies, but you can also start trading without verifying your identity.

The operation itself is for non-profit purposes and there are almost no fees.

Uniswap is different from traditional cryptocurrency exchanges in that it does not trade tokens with the intervention of a third party, but allows immediate token exchange at a fixed rate.

In other words, the user himself trades tokens within the exchange automated by the protocol.

Uniswap uses contract addresses as a liquidity pool to exchange and manage tokens, and by providing inventory, it is possible for an unspecified number of people to exchange pooled tokens.

DEX (Distributed Exchange) includes Cyber and 0x in addition to Uniswap, but Uniswap is especially decentralized, and Uniswap is very popular due to its high liquidity.

However, as of March 2021, Uniswap has not been approved by the Financial Services Agency, and it is necessary to understand that it is a service with a higher transaction risk than the centralized exchanges.

In that respect, it can be said that domestic cryptocurrency exchanges that have been approved by the Financial Services Agency can be relieved.

 

Features of Uniswap

The features of Uniswap are roughly divided into the following three.

 

 

Realized highly liquid DEX (Distributed Exchange)

In the first place, DEX is an abbreviation for Decentralized Exchanges and refers to decentralized exchanges.

Most of the domestic cryptocurrency exchanges are centralized exchanges.

Therefore, it is a system that deposits funds on an exchange and asks them to trade.

Since the operation is also for profit, the user must bear the cost of the transaction fee.

However, DEX does not have a central administrator and is a non-profit company, so there is no need to bear the disadvantages of users.

In addition, since DEX does not require identity verification, you will be able to start using it smoothly without the need for troublesome identity verification procedures.

However, DEX is still less recognizable than centralized exchanges and has less liquidity due to fewer users trading.

On the other hand, Uniswap uses a wallet app to manage assets, so there is no need to worry about hacking, and the system security itself uses Ethereum’s block chain technology, so security is guaranteed.

Therefore, Uniswap is more secure than the conventional DEX, and it is attracting attention because of its security, and it is now a hot DEX.

Moreover, by providing liquidity to the pool, it compensates for the biggest disadvantage of low liquidity, which is a characteristic of DEX.

 

You can get rewards by depositing funds in Uniswap

Uniswap has a system called liquidity mining, so you can get a reward called “UNI”, which is a dedicated governance token, just by depositing funds in a specific pool.

The acquired UNI is priced and can be swapped.

The biggest feature of Uniswap is that you can get UNI just by pooling Ethereum related tokens.

 

Anyone can list ERC20 tokens on Uniswap

As mentioned earlier, Uniswap does not have a central administrator, so there is no cryptocurrency listing review.

Therefore, anyone can list any disguise currency.

In other words, you can list ERC20 tokens, so you can trade currencies that you no longer have the opportunity to trade.

However, it is hard to say that Uniswap is the mainstream.

Who account for the virtual currency trading is you have not already, the coin check is recommended.

Coin check is also very convenient because it has unique options such as virtual currency for lending and a mechanism to reduce transaction risk and increase assets.

 

Risk of investing in Uniswap

There are three risks to investing in Uniswap:

  • Hacking causes funds to flow out
  • Funds go OX due to complicated operation
  • Governance token price fluctuations

 

Risk of outflow of funds due to hacking

Uniswap manages its assets individually through wallets, but the risk of hacking is not zero.

The risk of hacking is lower than that of centralized exchanges, but if a smart contract causes trouble, the risk of being hacked increases.

In fact, in April 2020, Uniswap and Lendf. Me, a lending platform, were hacked to steal more than $ 25 million of cryptocurrencies.

 

Risk of GOX funds due to complicated operation

GOX means that when a user deposits his / her own funds at an exchange or a third party, he / she can escape with the funds at the deposit destination.

It is unlikely that Uniswap will perform GOX company-wide, but Uniswap is more difficult to operate than a centralized exchange and asset management is complicated, so there is a risk that some people on the management side will GOX. I can think of it.

In addition, Uniswap is gaining popularity among DEX, so it is more liquid than before and its market capitalization itself is rising.

Therefore, consider the possibility of GOX and pool it in Uniswap.

 

Governance token price fluctuation risk

Uniswap’s governance tokens are more liquid than regular currencies, so there is a higher risk of price fluctuations in token pairs.

If the price fluctuation of the token pair is high, you may lose money.

In addition, the displayed APY (annual yield) changes each time, so there is no guarantee of yield.

Therefore, we recommend that you always consider the price fluctuations of governance tokens when trading.

 

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