What is Uniswap, and who invented it?
To provide a very simple definition: Uniswap is a decentralized exchange built on the Ethereum network, used for exchanging ERC-20 tokens. Uniswap is a protocol invented by Hayden Adams, but there is a lot of credit to Vitalik Buterin, the creator of Ethereum, for coming up with the original idea.
At its core, Uniswap is designed to help solve exchange liquidity issues, creating an environment to buy and sell tokens using the “Constant Product Market Maker Model”. Uniswap uses a constant equation x * y = k where x and y represent the quantity of ERC-20 and ETH tokens available in the liquidity pool and k is a constant value. This equation coupled with supply and demand determines the price of a token at any given time. Since Uniswap is based on this constant model, price on a token can only change if trading occurs. More information here in Uniswap documentation.
What is all the rage about?
Recently, Uniswap gained a lot of popularity with tokens like $TEND, $YFI, and $WAIF attracting a large community on Twitter. These tokens can easily be traded using the Uniswap protocol, and below on this article, there is a step by step Uniswap trading tutorial. Any ERC-20 token can be listed on Uniswap as it is a permissionless, decentralized protocol. Each ERC-20 token must have its own smart contract, and liquidity pool. Once a token has established a unique and secure smart contract, along with a liquidity pool, this token can be traded on Uniswap. Uniswap is relatively user friendly, easily connecting to Ethereum wallets such as MetaMask to swap tokens or add tokens to a liquidity pool.
Tutorial: How to exchange a token on Uniswap (Example with $WAIF)
- First, create a wallet at Meta Mask and then head over to Uniswap. You will select “connect a wallet” at the top right, and then connect it to an Ethereum wallet of your choice. In this case, I am using Meta Mask. Meta Mask wallet is relatively easy to set up, and if you set up a new wallet, ensure you backup your private key offline.
- Find an ERC-20 token of your choice to exchange, in this case for the purpose of this tutorial, I am trading ETH for WAIF tokens. You may need to custom import the token you are trading on Uniswap. If you are custom importing a token into Uniswap, simply add the project’s token address to the search bar of Uniswap and go through the steps to import the token.
- Be weary of fees on the transaction, as trading fees on the Ethereum network recently have been higher than normal. Once the transaction is confirmed, the traded tokens will appear in your wallet of choice. From there, you can hold, trade, send, etc with your purchased tokens. https://zerion.io/ is a popular DeFi portfolio tracker that I use and enjoy.
- Once the transaction is confirmed the tokens will appear in your wallet. DeFi has been gaining rapid popularity due to the crazy market volatility, allowing traders to profit. However, where there are large gains, there are also large losses, always be sure to use proper risk management.
To wrap up, Uniswap is a new, popular decentralized exchange on Ethereum. The tutorial above is rather brief, as it is relatively easy to exchange tokens on Uniswap. Be careful, and use proper risk management, as Uniswap is a new tool.
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