The decentralized Ethereum exchange

UNISWAP: The decentralized Ethereum exchange Uniswap offers users the ability to trade any ERC20 asset instantly.

Uniswap Exchange

It works using the liquidity that users contribute to the system in exchange for rewards that can reach 5% of the commission that has been paid by other investors.

It is not an independent project in its own blockchain, it is a protocol conceived for the decentralized exchange of cryptocurrencies, through an Automated Market Maker (AMM) type design, Uniswap clone which is one of the pillars of the Ethereum DeFi ecosystem today. ).

It emerged in the year 2018 and at that time it was something very innovative, since the idea was that it would address the liquidity problem that conventional cryptocurrency exchanges have. Today it is one of the best known and most used decentralized exchange protocols (DEX) on the Ethereum blockchain.

What network is it on: Ethereum Network

In addition to the fact that each user manages their funds and does not depend on any centralized resource, by not requiring registration or identity verification for transactions, it offers a series of services in Ethereum without the need for central control.

How does Uniwap work?

Uniswap’s operation focuses on two points:

Provide a decentralized means of exchange (DEX) to its users

Provide a means to create an automated liquidity protocol (AMM).

Uniswap is an automated liquidity registry, that is, there are smart contract models that define a standard method to make liquidity pools and markets compatible with each other. Without intermediaries. When a protocol works with a decentralized mechanism, there is no order book for the traders.

What makes Uniswap different is that it uses a valuation mechanism called the "Permanent Commodity Market Making Model" that allows any ERC20 token to be added to the exchange, providing you with the equivalent ETH value and the ERC20 token being traded.Uniswap clone script That is, add fluidity through a Liquidity Provider (LP).

How Uniswap works

So when this is done, what is received is a part of the fees generated by the users who exchange the token.In an AMM-type DEX, any user can act as a liquidity provider, when they deposit their cryptocurrencies in pools that represent the different markets and thus earn commissions.

Uniswap balances the value of the tokens to exchange them according to the number of people who want to buy and sell.

Advantages of Uniswap

Self storage, there is no risk of losing funds if the exchange is hacked or goes bankrupt.Low fees, charges a flat fee of 0.3% per transaction. Access to the protocol can be done using any web3 wallet (MetaMask) and create custom applications there. Ability to create an exchange for any ERC-20 token.

UNI: the Uniswap token In 2020 they launched the platform’s native token: UNI. It was a strategy to attract more liquidity providers by allowing them a tool with which to improve their liquidity mining and yield farming operations. Currently the token is used as a governance token. That is why Uniswap has appreciated strongly since the launch of its token.

Advantages of decentralized exchanges

• Anonymity: it is not necessary to register or give any personal information to start trading with them. You just have to connect a compatible wallet.
• Security: the use of smart contracts improves the security of the platforms, since they are able to block and stop operations in a matter of seconds if they perceive that something is not working well.
• Low commissions.
• Server downtime issues do not occur, as the hosting of these exchanges is distributed across the nodes.
• They do not have intermediaries, something that improves the speed at which operations are carried out.
• They do not operate with a single server, so it is much more complicated that a system failure can leave users without service.
• They have a wide offer and variety of tokens.
• Most of these exchanges allow users to be involved in making decisions about the fate of the platform.
• There is no custody, the user maintains possession of their crypto assets at all times.

But of course, they have their good points, but also their bad points. Some of the disadvantages of DEXs are:

Disadvantages of decentralized exchanges

• No link to bank cards. They only work with cryptocurrency assets and not fiat money, which may seem logical since enabling crypto-to-fiat transactions would require the involvement of banks.
• Without customer service, there is no actor on the other side, only oneself is responsible for one’s own money.
• Complexity. Some DEXs like Uniswap are built on top of the Ethereum blockchain which means that all tokens traded there must also be on that blockchain. But the reality is that users must convert their ETH to "Wrapped Ether" (WETH), which is the same price as ETH in order to trade. Something that can be a bit complex.
• Smart contract codes are also vulnerable. To hacks and losses.

decentralized exchange script

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