What is Uniswap? A true story book

Uniswap is the business backbone of the crypto industry developed by Ethereum.

Most real estate markets are substituting for middlemen such as Coinbase and Binance. These platforms are restricted by an intermediary entity (a business entity) and users are required to deposit funds according to their needs and use existing orders to support their business.

Orders An order is a buy and sell order presented on paper with a similar price. The cost of buying and selling is not sufficient for an asset called "deep trading". In order to facilitate business success in this system, the purchase of the order should be based on the same sales and repeat. for

For example, if you want to sell BTC for $ 33,000 in a basic marketplace, you have to wait for the buyer to appear and the buyer to buy BTC for the same price or higher. .

The biggest problem with this process is fluidization, which refers to the depth and volume of the order in the backlog at all times. The low turnout means traders are unable to complete purchases and sell orders.

Think of liquids in contrast and imagine you have your own grocery store. If the market is not very busy and people are cheap and selling, it can be considered "liquid". The market can be considered a “tight market” when it is calm and there is little market.

What is Uniswap?

Uniswap is a completely different company. The whole ruling means that it is not owned and operated by a single source, but uses a new business model called Automated Liquidity Protocol.

The Uniswap platform was developed by the Ethereum blockchain in 2018, making it the second largest crypto asset project in the world in terms of market value, with full ERC-20 tokens and infrastructure (services). Wallets like MetaMask and MyEtherWallet, etc.) are similar.

Uniswap is also a completely open project. This means that anyone can create their own decentralized trading platform using trading rules. Users can also add new tokens for free. Usually, the exchange represents income and pays a high price for Shangxin tokens. So that's a significant difference. Because Uniswap is a digital trading system (DEX), instead of requiring investors to give up control of their private keys, consumers have always had control over their money, so order can go into the same as in the central enterprise. Internal data takes longer and is more expensive for the average business than running on a blockchain. By controlling your personal keys, you eliminate the risk of loss of wealth caused by hacker attacks on your business platform. According to data as of early February, Uniswap is the fourth-largest financial services (DeFi) platform with more than $ 3 billion in crypto assets stuck in contracts.

How Uniswap works

Uniswap works on two smart contracts: the “exchange” contract and the “factory” contract. An automated computer is designed to work specifically when something is done. In this case, the factory smart contract is used to add new tokens to the platform, and the swap contract facilitates the exchange of tokens or “trades”. Tokens based on ERC-20 can be exchanged for other tokens on the new Uniswap v.2 platform. for

Automated liquidity contracts

Uniswap uses robust processing capabilities to solve business problems at the heart of the enterprise. This is achieved by supporting entrepreneurs on the business platform, thus becoming Business Providers (LPs). Uniswap users share their money to create funds which will be used to create all the businesses that occur on the platform. Each token ledger has its own amount of resources that users can contribute, and the value of each token is computed by computer via a numeric method (starting below: How to Charge Token Decision).

With this system, buyers or sellers do not have to wait for their partners to appear to complete the transaction. Instead, if a pool is large enough to support this, all operations can be performed immediately at a known cost.

In exchange for the funds, all participants will receive tokens representing their contribution to the fund. For example, if you donate $ 10,000 to a pool with a total of $ 100,000, you will receive 10% of the pool water. These tokens can be exchanged as part of the exchange rate. Uniswap charges a fixed rate of 0.30% for each transaction made by the platform user and automatically submits it to the deposit account.

When a doctor decides to opt out, he receives a portion of the cost of storage in the portion of the product he holds in the pool. Get collected tokens and destroy their rights and interests.

Following the development of Uniswap v.2, a new value has been announced which can be opened or closed by community vote. By default, 0.05% of the total exchange rate of 0.30% is transferred to the Uniswap fund for future reference. Currently, this refund option has been closed, but once opened, participants will start paying 0.25% of the exchange rate into the pool.

How is the value of the token determined?

Another important principle of this system is the cost of each token. Unlike the decision where the highest buyer and lowest seller determine the value of each asset, Uniswap uses an automated marketing system. Another option is to adjust assets based on the long-term mathematical model of equipment and demand. The principle of operation is to increase or decrease the value of the token according to the percentage of the number of tokens in each pool.

Its very important. This means that every time a user adds a new ERC-20Token to Uniswap, that person must add another ERC-20Token at a cost equal to a certain value of the selected ERC-20Token option to start the pool.

The formula for calculating the value of each token is x * y = k, the value of TokenA is X, the value of TokenB is Y, and K is constant.

For example, Bob wants to trade Chainlink (LINK) tokens in the Uniswap LINK / ETH investment pool, and Bob invests a lot of LINK tokens in the pool to increase the LINK to ETH ratio in the capital. Since the value of K should remain unchanged, the value of ETH increases but the value of LINK tokens in the capital decreases. So the more LINK tokens he puts from Bob, the less other tokens he gets.

The size of the pool also determines how much the value of the token changes during trading. In a liquid pool, the more money you have, the easier it is to work big, and imprecision will lose value.

order

Arbitrage traders are an integral part of the Uniswap ecosystem. These traders are good at analyzing the different prices of different companies and using them to make money. For example, if your BTC exchange rate on Kraken is $ 35,500 and Binance is worth $ 34,500, you can easily make money by buying BTC on Binance and then reselling it on Kraken. Successful products can be profitable with minimal risk.

What the arbitrage traders at Uniswap do is find token trades above or below the average price. This is the result of a number of industries experiencing inconsistencies in the pool and lower or higher prices. And change accordingly.

How to use Uniswap

Using Uniswap is very simple, but you need to make sure that you have a wallet that supports ERC-20, such as MetaMask, WalletConnect, Coinbase Wallet, Portis or Fortmatic.

If you have such a wallet, you will need to add ETH and pay a GAS exchange rate (called the Ethereum exchange rate) to Uniswap. GAS rates vary depending on the number of networks you use. When paying on the Ethereum blockchain, most ERC-20 wallet services have three options: slow, medium, or fast. Slow is the cheapest option, Speed ​​is the most expensive option, and Average is the average. The exchange rate is determined by the speed at which the leader of the Ethereum network can transact.