Strong points
Discover the main characteristics of the decentralized exchange Uniswap below.
Uniswap
Uniswap
Uniswap is a DEX, that is to say a decentralized exchange. It was started in 2018 by a software engineer named Hayden Adams . The latter would have “converted” to crypto following a post on Reddit by a certain Vitalik Buterin (creator of Ethereum). Moreover, the link between Ethereum and Uniswap was created from the start. The Ethereum Foundation is one of the financiers of the Uniswap project.
The exchange operates on the Ethereum blockchain . Currently, it is the largest DEX with 2.4 billion euros in trading volume on average over 24 hours (Coinmarketcap data). In terms of its exposure to social networks, Uniswap is present on Discord, Reddit, Twitter and Linkedin.
To function, the platform uses an ERC-20 token, the UNI token . At the time of writing this guide, the UNI token is among the top 20 globally in terms of capitalization.
Uniswap is therefore a decentralized exchange, but what does that mean actually? What is the difference with a crypto platform like Binance (see Binance review ) for example? The main difference is that on Uniswap you can only trade cryptos with each other . On a CEX, you can buy cryptos directly by bank card with fiat currency. On Uniswap this is generally not possible. You can only buy the cryptocurrency of your choice with another crypto or stablecoin by choosing the appropriate trading pair . The easiest way is to use the platform’s native token, the UNI token, to do your trading.
Another difference with CEXs is that the cryptos available on Uniswap are owned by other users. The cryptocurrencies available on Uniswap are divided into “Liquidity Pool” or LP . Each LP contains two cryptos. For example, the ETH/USDT LP contains only Ethereum coins (ETH) and Tether stablecoins (USDT). Users create these pools themselves and are rewarded in return. The balance of these LPs is maintained according to a precise mechanism. To simplify, if one of the cryptos in the pair constituting the LP decreases sharply in number, then its price increases in order to keep the balance.
Finally, unlike CEXs, users of the UNI token can participate in governance . However, this last aspect linked to decentralization must be put into perspective in the sense that the “entrance ticket” to submit a proposal is very high (1 billion tokens).
Uniswap
Uniswap
Uniswap is the largest decentralized exchange today. Also, unsurprisingly, you find a very large number of tokens available via the Liquidity Pools mechanism mentioned above. It is difficult to find exact figures on the number of cryptos available. Based on available information, it appears that Uniswap offers around 900 stablecoins and tokens with over 1,600 trading pairs available. Suffice to say that you have the choice on Uniswap!
On the other hand, Uniswap only offers ERC-20 tokens , that is to say, tokens that work on the Ethereum blockchain. Soon, BEP-20 tokens will also be available since Uniswap has integrated the BNB Chain. Concretely, this means you cannot access cryptos that operate on blockchains other than Ethereum or Binance. Bitcoin (BTC), Cardano (ADA), Solana (SOL), and Dogecoin (DOGE) are some examples of cryptos that are not available on Uniswap.
In practice, it is possible to buy Bitcoin on Uniswap using its “Wrapped” variant, WBTC or Wrapped Bitcoin, but this is therefore not as easy as on centralized exchanges.
Apart from this aspect, the large choice of tokens offered by Uniswap is a good thing for users. On the other hand, this also means that you find everything on Uniswap… For example, you can buy tokens without any interest which are only there for the purpose of speculation, tokens commonly called “Shitcoins”…
Some CEXs offer a whole range of crypto services and products. With a DEX, services are more restricted.
The main activity on Uniswap involves buying , selling and trading cryptocurrencies . As mentioned above, the platform makes a very large number of assets available. But actually, how to buy cryptos on Uniswap?
Uniswap is an application that belongs to decentralized finance and hosted on the Ethereum blockchain. So, until 2020, to buy another crypto, you inevitably had to go through the ETH “box”. Let’s take an example. Let’s say you want to exchange a DAI coin for USDT. Back then, you had to first buy ETH and then convert it to USDT. In May 2020, the exchange implemented version 2.0 which removed this brake. The exchange between cryptos could therefore be done without having to buy ETH. Unsurprisingly, this version boosted the popularity of Uniswap.
Currently, the DEX is in version 3.0. This update made it possible to integrate the principle of “Concentrated Liquidity”. To put it simply, it allows users to lock less funds in LPs while receiving the same reward. This update therefore improved the efficiency of the Uniswap mechanism.
The other major service offered by Uniswap is to participate directly in its operation through Liquidity Pools (LP). These pools are made up of two cryptos or tokens or a stablecoin with one crypto (or token). The balance (k) of the pool is maintained by the following formula: x*y=k where:
Depending on the trading operations in progress, x and y will vary. However, the platform sets up a mechanism to ensure that k, for its part, always remains stable. How ? By playing on the price of the cryptos in question.
Let’s take the example of the ETH/USDT LP to better understand. For the example, let’s say this pool consists of 10 ETH and 1,000 USDT. This means that one ETH is equal to 100 USDT. In addition, the product x*y gives a value k equal to 10,000. Let us now imagine that following several transactions, the number of ETH has increased to 5. To maintain the same k, there are now 2 in the pool 000 USDT. This means that the price of ETH therefore increased from 100 USDT to 400 USDT. The price of ETH having increased, this will encourage the ETH sale operation which will allow the price of ETH in the pool to fall again. And so on…
If you participate in an LP, you receive income for locking cryptos. According to the Uniswap website, 0.3% of the trading volume is redistributed proportionally to all LP participants.
The advantage of DEXs is that they are cheaper than CEXs for several reasons. In fact, their operation involves far fewer people than a CEX. If we take the case of Binance, thousands of people work behind this exchange. Additionally, the company has infrastructures around the world. All of this comes at a significant cost. However, this is not the case on a DEX like Uniswap.
In addition, exchanges are carried out peer-to-peer, that is to say without an intermediary. Unlike CEXs, funds here are provided directly by users via Liquidity Pools. This is not the case on CEXs which must provide the necessary financing for trading. Again, this represents a cost.
Finally, on Uniswap, you do not have to open an account. You do not have to make money deposits to start trading, as is the case on CEX. In fact, everything happens by exchange, you just need to enter your wallet address. All this means that trading on Uniswap does not involve significant fees.
Trading on Uniswap incurs 0.3% fees. These fees are used to finance pool participants. The Uniswap site also mentions 0.5% protocol fees. These fees will be included in the 0.3% and will therefore represent one sixth of this. These fees therefore do not change anything for traders but only impact the money received by pool participants. However, the site indicates that these fees will only be applicable in the future.
Via certain applications, it is possible to use certain Uniswap services on your phone. However, you should know that the Uniswap platform does not currently have an official mobile application. The web platform is mobile friendly nonetheless.
As explained above, Uniswap does not involve an account per se. You simply have to use your wallet(s) directly. Uniswap therefore does not offer different account levels.
The year 2022, with its numerous hacks and attacks, has unfortunately reminded us how important it is to check the security level of a platform before using it. In addition to security, the legality of the platform must also be studied. This involves the regulations that the platform follows and the licenses it has. So, where do these views stand for Uniswap?
A centralized exchange logically gives you a lot of information about its security. For example, it indicates which protocols the exchange uses and the media used to store customer cryptos. For all the reasons mentioned above, this does not apply to Uniswap. Security is much easier to “understand” on Uniswap; why?
Remember that on Uniswap, you do not make deposits but only exchange. This means that the platform does not have to put in place any special security measures to protect your cryptos. For what? Since Uniswap only does exchanges and has no custody, everything happens on the blockchain, in this case, on Ethereum. When trading on Uniswap, all transactions take place on the Ethereum blockchain. To put it simply, we can, therefore, summarize by saying that the level of security of Uniswap is, in fact, that of the Ethereum blockchain. When we know the characteristics of the Ethereum blockchain in terms of inviolability, this can only be reassuring!
In fact, the only real security risks are related to your use. For example, as mentioned above, you find all kinds of tokens on Uniswap. Certainly, Uniswap regularly carries out checks on the tokens that the platform offers. However, without being scams in the strict sense of the term, certain tokens listed have no interest and present significant risks of depreciation. Since Uniswap provides access to all of these tokens, you could bet on a dubious token and lose money. However, here again, this is your responsibility as a user and not that of Uniswap. Moreover, in the case of an exchange with an “exotic” token, the platform sends a warning message to remind you of the risks involved.
Another risk when using Uniswap is that some fraudulent sites pretend to be Uniswap without being so. Again, it is your responsibility as a user to verify that you are using the official Uniswap platform.
Finally, it should be noted that Uniswap has a reward program for all developers who highlight security vulnerabilities . In January 2023, the Dedaub firm announced that it had received €10,000 from Uniswap for highlighting a vulnerability in a smart contract . This highlights the attention Uniswap places on its security. No, Uniswap is not a crypto “jungle” that leaves you alone!
Regulations are important for an exchange. Indeed, a license or at least an official registration shows that a platform is acting completely legally. In addition, this is a guarantee of trust for users. A registration, let alone a license, is not something an agency validates without verification.
But the question of regulation is increasingly becoming a sensitive subject in crypto. For what ? Regulatory agencies, particularly American ones, are tightening the screws on exchanges. This is why we are seeing more and more articles in the news concerning disputes between CEXs like Binance for example and the SEC or the NYDFS. Often, the hard point concerns the legal status of cryptocurrencies . For regulators, cryptos (or at least some) are part of the “security” category. As such, they must be registered before being listed on an exchange.
For a DEX, again, things are different. For the SEC for example, these same rules do not apply to DEXs. Indeed, for the regulatory agency, developers who create crypto exchange software or applications but who then withdraw are not part of the framework. Concretely, according to the SEC, these platforms are not subject to the same rules as CEXs . In other words, you better understand why DEXs are doing well at the moment. So don’t look for potential licenses for a DEX, it doesn’t exist. However, as is often the case, the framework provided by regulators may need to change. Also, it is possible that in the future, DEXs like Uniswap will be concerned by regulators, particularly American ones.
Uniswap
Uniswap
Now that you are more familiar with Uniswap, you may want to get started with crypto trading on this DEX. But how to do it ? DEXs have a less fluid interface than CEXs and are therefore more difficult to use, especially if you are new to crypto. That’s why we’re providing you with a step-by-step guide on how to buy crypto on Uniswap below.
As explained above, there is no actual account opening on Uniswap. The only thing you need to do is open the Uniswap home page . The DEX therefore presents a more direct way to exchange cryptos and, what is more, respectful of your personal data. Unlike the following pages, this page is not translated into French.
The next step is to click on the “Launch App” button . You then arrive at the application itself. Here you can change the language. The interface offers around thirty languages including French. The selected language will be taken into account from the following page. For now, you need to click on “Get started” . You then arrive on a page which offers you to exchange cryptos.
As mentioned above, this step does not exist on a DEX.
As mentioned above, this step does not exist on a DEX.
On the page associated with the crypto exchange, you must:
For each of the cryptos or tokens, you can then provide the quantity. Then you need to click on the “Connect wallet” button . There, Uniswap will offer you the three wallets that are compatible with the platform, namely:
This choice is not too restrictive in the sense that these are three wallets very commonly used in crypto. Once you have connected your wallet, all you need to do is provide the address and proceed with the exchange.
Since very recently, the Uniswap exchange has also been present on the BNB Chain , the blockchain created by (the CEX) Binance. This allows Uniswap services to be opened beyond just Ethereum users. In addition, users will be able to benefit from lower fees than on the Ethereum blockchain. Incidentally, this also allows Uniswap to enter the territory of its major competitor in the DEX category, namely PancakeSwap.
At first glance, the Uniswap platform is aimed more at crypto-savvy users. Indeed, as mentioned above, the interface is not necessarily the most user-friendly for someone new to the crypto world. Certainly, Uniswap offers an FAQ to explain certain basic concepts. However, the support provided is not of the same level as that of the CEX which generally contains tutorials, etc. But above all, using Uniswap requires that you already have cryptos and also a wallet. We understand well, these steps are not necessarily within the reach of a beginner in crypto. In addition, the exchange lists hundreds of tokens. As explained above, not all of these tokens are recommendable. Also, you must first acquire a crypto culture to know how to detect potentially dangerous or risky tokens.
On the other hand, Uniswap services are easy to use once you take these steps. Also, if you learn the fundamentals of crypto, you will quickly be able to use Uniswap services. Additionally, you will be able to enjoy fast transactions with low fees.
There is no dedicated customer service with a phone number on Uniswap. At best, there is a page (in English) called “Help center” which allows you to relay a question. On this page you will find an FAQ. If you can’t find your answer in the FAQ, you can ” Submit a request”,
To do this, you will be asked to provide:
Uniswap is a decentralized exchange or DEX. It is the largest DEX on the market today. With its recent opening on the BNB Chain, Uniswap is attracting more and more users. As a DEX, this exchange only offers the exchange of cryptos and tokens. Before using its services, you must already have cryptos and a wallet.
Uniswap scores big points on its security in a context of distrust towards centralized exchanges. In fact, the exchange does not store your cryptos on its own media. Everything is managed on the Ethereum blockchain (and now BNB Chain) which guarantees you a high level of security. The exchange offers a very large number of tokens which gives you the choice. Finally, if the platform is mainly aimed at crypto connoisseurs, its interface can quickly be used once you are more familiar with the field.
Uniswap
Uniswap
