Uniswap Review for Canada 2023
Making Crypto Simple
Uniswap is an Ethereum-based decentralized exchange that became a significant player in the cryptocurrency market soon after its establishment in 2018.
Decentralized trading through this automated liquidity protocol and liquidity pool allows fintech developers and traders to participate in a macroeconomic market accessible to everybody.
To further understand the innovative concept of the Uniswap cryptocurrency exchange and its unique protocols, we’ve examined this platform in greater detail. Let’s first see how this crypto initiative came to life and what it is all about.
About the Uniswap Exchange
The Uniswap exchange is a creation of the Uniswap.org fintech company, responsible for developing the Uniswap decentralized finance (DeFi) protocol. An ex-Siemens mechanical engineer named Hayden Adams created this open-source, decentralized financial protocol to help automate cryptocurrency token transfers on the Ethereum blockchain using smart contracts.
Built on the Ethereum blockchain, the Uniswap exchange functions as a decentralized cryptocurrency exchange and a liquidity pool whose transactions and funds are automated and secured by smart contracts.
Moreover, Uniswap utilizes the groundbreaking Automated Market Maker (AMM) technology and the Uniswap protocol instead of using traditional order books to compute cryptocurrency values, conduct ERC-20 token transactions, and complete financial activities with the lowest slippage possible.
How Does the Uniswap Protocol Function?
In its most basic form, the Uniswap protocol represents a network of self-executing smart contracts that cannot be upgraded and cannot be reversed. These contracts merge to create an automated brokerage marketplace where traders can engage in safe peer-to-peer (P2P) trading of ERC20 tokens without needing an intermediary.
The Uni Token (UNI)
The Uniswap exchange has its native token, the UNI token. The UNI governance token was launched on September 16, 2020. The UNI was formed to discourage Uniswap users from switching to SushiSwap, which provided them SUSHI tokens in exchange for their platform migration.
Since Uniswap was designed to be a publicly-owned and self-sustaining ecosystem, UNI token holders can vote on the platform’s governance, participating in this type of corporate ownership. Users can thereby contribute to the development of this crypto initiative.
Because it was created on the Ethereum blockchain, Uniswap does not accept cryptocurrency projects that were developed on any other network save the one on which it was established. As a result, the exchange provides access to a catalogue of more than 1,800 cryptocurrencies and over 2,500 trading pairings.
In addition to Ether (ETH), Uniswap accepts many other digital assets based on the ETC-20 standard. Even though Bitcoin (BTC) can be exchanged through Uniswap, the cryptocurrency must first be wrapped as WBTC.
Traders on the Uniswap platform can only make crypto deposits because fiat currencies are not supported as a funding method. If you do not have any cryptos on your balance, you must first get them from a CEX that accepts fiat payments before you can begin trading on Uniswap.
The cryptocurrency trading pairs with the most significant volume on the Uniswap v3 platform are DAI/USDC and USDC/ETH.
Trading Fees and Limits
Uniswap’s transaction fees are only 0.3%, which is far lower than the fees charged by most CEXs. However, rather than going to Uniswap, these swap fees are given to the liquidity providers as an incentive for boosting the platform’s liquidity.
There is an additional charge for gas costs on Uniswap, which are the fees necessary to transfer the transaction on the Ethereum blockchain. Compared to the deposit or withdrawal fees associated with engaging with liquidity pools, exchanging crypto on Uniswap is cheaper.
Liquidity pools are Uniswap exchange’s foundation and a major appeal for crypto investors. You can contribute to a Uniswap liquidity pool by investing an equivalent dollar value of two ERC-20 tokens (USDT or ETH, for example) and earning a share of the fees collected by that pool.
To keep track of who is accountable for what portion of a particular liquidity pool, Uniswap issues liquidity tokens when users provide liquidity. For every dollar you put in, you’ll get back a percentage of that dollar’s value, so the more you invest in the liquidity pool – the more extensive your incentive will be.
When it comes to trading, Uniswap Exchange’s swap function is one of its most used tools by traders. The crypto widget is a beginner-friendly and straightforward tool, so if you’re new to the platform, have no fear that you’ll get entangled in some complex trading tool.
Simply select any two Ethereum assets (ERC-20) with a click of the mouse, and the job is done. In addition, you don’t need to sign up for a trading account or have your identity confirmed to trade assets on Uniswap, making the exchange a user-friendly platform overall.
Is Uniswap Safe to Use?
This DEX avoids the KYC (Know Your Customer) protocol, which requires users to provide private information as a protection against hackers and scams.
In contrast to the standard approach of using centralized exchanges, you are free to maintain possession of your private keys on Uniswap. In this way, Uniswap customers are solely responsible for their crypto assets, making this marketplace one of the most secure in the crypto world.
All in all, Uniswap is generally deemed one of the safest platforms since it’s built on the highly secured Ethereum blockchain network. However, even the platform’s unchangeable smart contracts can be compromised.
For illustration, Uniswap suffered a security breach in 2019, losing 340,000 USD worth of tokens, after which the exchange took all the precautionary measures to upgrade and protect the most vulnerable part of its platform – the reentrancy attack vector.
If you have any questions about Uniswap or how to use the platform, its creators invite you to get in touch with them through their email or some of the support routes on social media, like Twitter, Discord, Reddit, or Github.
You can also help yourself by searching for answers to your queries in the Help Center section of the Uniswap trading platform’s website.
Pros and Cons
To sum up, here’s a short walk through the Uniswap exchange:
- Uniswap is one of the safest DeFi platforms in the industry;
- This exchange boasts high trading volume and liquidity;
- Smart contracts protect the liquidity pools and users’ funds.
- Uniswap supports only ERC-20 tokens;
- There’s always a potential risk of an impermanent loss of assets when you contribute your assets to a liquidity pool;
- You can’t buy cryptos with fiat currencies as Uniswap is an unregulated exchange;
- Prepare to pay high gas fees;
- The platform experienced a security breach in 2019;
- Transactions can take longer to be verified.
The Bottom Line
Ever since its introduction to the crypto market, Uniswap has performed the function of providing a distributed blockchain and highly decentralized infrastructure for trading cryptocurrencies.
The Uniswap exchange team was motivated to start this crypto project thanks to Ethereum’s concept of permissionless accessibility, safety, and data integrity.
All of these are necessary aspects for a future in which people all around the world will be able to use financial products without worrying about taking unnecessary financial risks.
Also, the fact that this decentralized crypto trading rival has become a serious competitor of the centralized crypto giants demonstrates that there is a significant demand for trustless financial services among crypto investors.
Frequently Asked Questions
Uniswap is quite simple to use, much like the other automated market makers that are now available. Connecting your wallet to the exchange user interface is all that is required of you to begin trading or to pool your coins on the Ethereum blockchain network, as well as the Polygon, Optimism, or Arbitrum networks.
Once your wallet is connected, you are ready to start trading your favourite cryptocurrencies – no KYC user verification process, no lengthy registration procedures, nothing.
To build a new liquidity pool, supply liquidity to the platform, exchange tokens, or participate in the voting on the governance initiatives, simply link a Web3 wallet to the Uniswap interface. Keep in mind that a gas fee is associated with every transaction made on the Ethereum blockchain paid in Ether (ETH).
Bitcoin and Ethereum are the two most popular cryptos in the world, but they can’t interact as they are developed on two different blockchain structures. This is why “wrapping” is needed, to modify the cryptocurrency so it can function on another blockchain.
A wrapped Bitcoin, abbreviated as WBTC, is a version of Bitcoin that can be used on the Ethereum network. Wrapped Bitcoin’s price is the same as Bitcoin’s, but it can be used with Ethereum-based products like ERC-20 wallets, DeFi apps, and smart contracts.