Uniswap Review in India
If cryptocurrency is all about financial control, why do we trade on centralized crypto exchanges? Isn’t that counter-intuitive?
Well, centralized cryptocurrency exchanges like Binance and Coinbase have been the backbone of crypto market for years. But this might change soon as decentralized exchanges (DEX) enter the crypto space. These are exchanges where you can trade cryptocurrencies without a centralized body or intermediaries.
If you are looking to dip your toe in the world of ERC-20 tokens, Uniswap is the best place to start. In this Uniswap review, I’ll give you a complete overview of Uniswap exchange including, how Uniswap works, its features and how to trade cryptocurrencies in Uniswap.
By the end of this review, you’ll have all the information you need to start trading Ethereum-based tokens in Uniswap.
Pros / Cons
- Easy to use interface
- Access to all ERC-20 tokens
- Control over your funds
- Low trading fees
- No KYC
- Limited to Ethereum-based cryptocurrencies
- Prevalence of “fake” tokens
What is Uniswap
Uniswap is an Ethereum-based decentralized exchange for trading ERC-20 tokens. This means users can swap their ERC-20 tokens without the need for an intermediary institution to manage the ledger or control user funds.
Uniswap is a fully open-source project with no centrally-controlled servers, aka decentralized. It was launched in November 2018 by Hayden Adams on the Ethereum mainnet. The motivation behind this project was to create a DEX platform that addresses the user interface and liquidity issues of other DEXs like EtherDelta.
Despite their launch in 2018, it wasn’t until the Uniswap V2 upgrade in May 2020 when they started to get significant traction.
Currently, there are over 1300 coins listed on Uniswap. With over $1.77 billion in the total value of assets locked (TVL), Uniswap has a whopping 45% market share, making it the most sought-after crypto exchange.
To know more about Uniswap’s history and its emergence, read Hayden’s journey into creating his first website.
How Uniswap Works?
If there is no middleman to facilitate the trade, how are orders placed and settled in Uniswap?
To understand this, we have to take a deeper dive into Uniswap’s features and its protocol.
Uniswap Exchange Platform
Uniswap has the most simplistic UI for any exchange (this includes centralized exchanges). The UI is seamless across platforms and provides a stable experience for end-users.
The Uniswap interface offers two main features: swap and pool.
The swap feature lets users swap ERC-20 tokens. And the pool feature allows users to participate in liquidity pools and earn pool tokens. (More on this later.)
Uniswap Liquidity Pools
Uniswap uses smart contracts (math equation and logic) and pools of ETH and ERC-20 tokens to do the same job of order books. Rather than specifying the buy/sell price to the user, Uniswap quotes a market rate according to a predefined ruleset.
Uniswap achieves this by incorporating the pricing mechanism called Constant Product Market Maker, a variant of Automated Market Maker (AMM). This model involves liquidity pools that automatically sets and balances the token value depending on the demand.
You can think of liquidity pools as special crypto reserves. Each liquidity pool is made up of two ERC20 tokens. This can either be ETH and an ERC-20 token or two ERC-20 tokens.
So, when you want to buy ETH with your USDT, you will use the ETH/USDT liquidity pool. After you make the transaction, the USDT portion of the pool increases, whereas the ETH portion decreases. And this effectively causes the price of ETH to go up.
In simple terms, the pricing depends on how much a given trade shifts between the two tokens.
Uniswap Token (UNI)
UNI is an on-chain governance token that grants holders the right to make decisions about the Uniswap protocol.
Uniswap introduced UNI on September 17, 2020, as a response to SushiSwap’s “vampire attack.” Unlike most cryptocurrencies, Uniswap launched UNI without an ICO (Initial Coin Offering) or any other token sale. Further, they airdropped 400 UNI tokens to anyone who had used Uniswap before September 1, 2020.
The 1 billion UNI will be distributed to its community (60%), team members and future employees (21.266%), investors (18.044%) and advisors (0.69%) over the course of four years.
At the time of writing this, UNI ranks 27th in CoinMarketCap with the current UNI price standing at ₹267.82. You can buy UNI from crypto exchanges, including Binance and Coinbase, or swap ERC-20 tokens for UNI on Uniswap exchange.
I’ll discuss how UNI works in detail in a different article. For now, it’s important to know that UNI serves Uniswap’s purpose of community-led growth.
How to Use Uniswap
Uniswap is a one-stop-shop to buy any ERC-20 tokens, literally. Since it’s a decentralized exchange, you don’t have to worry about your keys or funds as you have complete control of them. And, there’s no KYC or ID verification.
To use Uniswap, all you need is a web 3.0 wallet like MetaMask.
Once you connect your wallet to Uniswap, it will use Uniswap’s smart contract to interact with the Ethereum network to validate transactions.
Yes, it’s that simple to buy ERC-20 tokens on Uniswap!
How to Swap Tokens in Uniswap
Now that we’ve looked at what makes Uniswap special, it’s time to see how the swap feature works.
Here’s a step-by-step guide to swap tokens on Uniswap:
Step 1: Navigate to the Swap tab on https://app.uniswap.org/.
Step 2: Make sure your wallet is connected.
Step 3: Choose the token you want to swap from by clicking the dropdown, and enter the amount you wish to exchange.
Step 4: Now select a token that you want to swap to from the dropdown list. You can either enter the token name or its address. If your token is not in the Uniswap list, you can copy-paste the token address from Etherscan.
Step 5: Uniswap will display the estimated amount of token you’ll receive along with price impact and LP fee.
The transaction settings (Slippage tolerance and Transaction deadline) are set to default values. But you can adjust this by clicking on the Settings icon on the top-right corner.
Step 6: Once you’ve set those values, click the Confirm Swap button.
Step 7: Your wallet will prompt you to confirm the transaction. Check the transaction details and gas fee. Click Confirm to complete the transaction.
And that’s it – you’ve exchanged ERC-20 tokens on Uniswap!
You can check your transaction details on the Ethereum blockchain explorer.
Most centralized charges have a plethora of fees, including membership fees, deposit fees, withdrawal fees and so on. And these fees vary depending on the buying limits and verification level.
The good thing is, you don’t have to worry about those in Uniswap.
Uniswap charges a flat 0.3% fee on all trades. And unlike other exchanges, this transaction fee is shared with the community. It serves as an incentive for pool operators to create and maintain liquidity.
All trades happen on the Ethereum blockchain – so the only ‘withdrawal fee’ is the gas fee required to move funds from Uniswap smart contract. You can adjust the maximum slippage under the “Settings” tab before placing the order. Also, keep in mind that the price impact depends on the size of the liquidity pool.
How to Earn Tokens in Uniswap Liquidity Pools
Uniswap democratizes market making by adopting the automated liquidity protocol.
To earn pool rewards on Uniswap, you have to be a liquidity provider (LP). Anyone can become a liquidity provider by depositing an equivalent value of the two tokens in the pool. And in return for this contribution, the LP earns a percentage of the pool fees.
Uniswap determines the token price using the equation: x * y = k. Here, the x and y variables represent the quantity of ETH and ERC20 tokens in a liquidity pool, and k is a constant value.
When someone trades the token pair in a liquidity pool, the 0.3% LP fee will be shared proportionally with all the liquidity providers in that pool.
Joining a Liquidity Pool
You can join a liquidity pool in two ways: add liquidity to an existing pool, or create a new liquidity pool.
Here’s how you can add liquidity to on the Uniswap exchange:
Step 1: Navigate to the Pool tab on https://app.uniswap.org/.
Step 2: Make sure your wallet is connected.
Step 3: Click on the Add liquidity button, and choose the token and enter the amount you wish to provide liquidity for. It is important to note that an equal value of ETH and ERC20 tokens will be added to the pool.
Step 4: Check the details and your share of the pool and click confirm.
Step 5: Once your transaction is verified on the Ethereum blockchain, you are part of that pool!
Every time someone swaps this token pair, you will earn 0.3% of the transaction proportional to your share of the pool.
Is Uniswap Safe?
Compared to other crypto exchanges, Uniswap is much more secure. Since only you hold the keys to your wallet, you retain the ownership of the assets. So, it is safer to trade your crypto from your wallet on Uniswap.
Although Uniswap has become the de facto exchange for DeFi tokens, it is not without criticism. Due to its decentralized nature, anyone can list a token on Uniswap. This makes it easier for scammers to create a ‘fake coin’ with a similar name to a DeFi token.
So, before you execute a trade, verify the legitimacy of the token name on Coingecko.
Is Uniswap Legal in India?
Since Uniswap is a decentralized exchange, you are required to account for the law in your country.
The crypto trading regulations in India are still underway, but there is no specific legislation against Uniswap.
Conclusion: Is Uniswap For You?
Decentralized exchanges are transforming the way we buy crypto, and Uniswap is pioneering this change. But is Uniswap the right exchange for you?
Uniswap is easy to use and a hassle-free way to trade ERC-20 tokens. Since all ERC-20 tokens are available on Uniswap, it’s a great platform for beginners to learn about Ethereum network and immerse themselves in the community.
Uniswap doesn’t require KYC – so you can explore the crypto space without worrying about your privacy.
Also, you save money as there are no membership fees or trading fees in Uniswap.
Uniswap lists all ERC-20 tokens in the market. This means you can immediately get in on the trading action without waiting for the new coins to be listed on centralized exchanges. And you can seamlessly exchange any ERC-20 tokens for another with your existing Ethereum-based wallet.
Liquidity pools are a great way to earn rewards in DEXs, and Uniswap has made this process so simple that you can join a pool with a single transaction.
More importantly, Uniswap is a great way to support the cutting edge crypto projects in the DeFi space.
Sooner or later, decentralized infrastructure will be the underlying framework for everything, from finance to supply chain to data storage. It’s the perfect time for you to ride this decentralization wave — starting with Uniswap.
|Headquarters||New York, United States|
|Accessible Platforms||Uniswap App|
|Customer Support Helpline||Uniswap Support|
|Social Media Community||Discord, Twitter, Reddit|