Uniswap Review 2023
The best way to engage in crypto trading is through the use of crypto exchange platforms. There are hundreds of exchanges on the market, but honestly, only a handful are really worth your while because a lot of these platforms have either unreasonably high fees, a poor selection of available cryptocurrencies, or a lack of efficient security protocols. That’s why it’s best to stick with the most popular exchanges according to the ratings on Coinmarketcap.
While centralized exchange platforms (CEX) like Coinbase and Binance are usually the primary choice of crypto beginners, advanced traders often use decentralized exchanges (DEX) to find less popular tokens and participate in liquidity pools by staking assets.
Decentralized crypto exchanges work on an entirely different operating model compared to centralized platforms. There’s no single authority that manages a DEX and all of the trading operations are facilitated by smart contracts that ensure the automated market maker (AMM) function of these platforms.
One of the first and most popular DEX platforms on the crypto market is Uniswap.org, built specifically for the Ethereum (ETH) blockchain. Let’s take a closer look at the platform and find out all the details about the largest ETH-based decentralized exchange.
About the Uniswap Crypto Exchange
Uniswap (UNI) is a veteran DEX, launched back in 2018, but the idea for the platform was born earlier. In 2016, just a year after the launch of the Ethereum blockchain, its co-founder Vitalik Buterin came up with the idea for a decentralized exchange protocol with automated market maker functionalities that don’t depend on the market orders of individual traders.
Buterin proposed the implementation of Ethereum smart contracts into the platform to create a mechanism that automatically handles market orders and influences the price of platform assets based on staked assets in the platform’s liquidity pools. The pools needed users’ assets to keep providing liquidity, and that was the easiest part because anyone who stakes crypto in a liquidity pool would get awarded with high staking rewards that are actually a percentage of the platform trading fees. This way, the problem of high market spreads for assets that have low trading volumes could easily be solved.
The idea was so exciting that soon enough, programmer and crypto enthusiast Hayden Adams assembled a team of developers who started working on the Uniswap DeFi protocol. The team received multiple financial injections from different investors, including a 100,000 US dollars investment from the Ethereum Foundation, and in late 2018, the Uniswap DEX was launched.
Before the launch of Uniswap, DEX platforms didn’t have automated market maker features. Instead, they operated with classic market order books. A good example of this type of platform is EtherDelta, which requires users to place market orders at custom buy/sell prices to influence the market, which is the same concept that centralized exchanges use.
Uniswap solved the problem of low liquidity for low cap coins. Many platforms similar to Uniswap, like SushiSwap, have since been launched, but UNI remains the market leader on the Ethereum network.
Uniswap has a highly dedicated developer team that constantly works on platform updates to improve user experience. That’s why the platform went through three system updates so far called Uniswap V2 and Uniswap V3. You can still access the V2 version of the platforms because some liquidity pool features aren’t available in V3 yet, but generally, most of the traffic has shifted to the latest version of the platform.
The key feature of Uniswap is asset swapping. You just need to connect your wallet to the platform, select the Swap option and start exchanging assets by selecting which token you wish to exchange, along with the asset you wish to exchange it for. Uniswap supports MetaMask, Coinbase Wallet, Portis, Fortmatic, and WalletConnect. Once you specify the number of tokens you wish to exchange, you can initiate a transaction and make a swap in less than a minute.
If you click on the Pool tab on the main platform screen, you can start staking assets in a liquidity pool through the Open new position option where you can choose an asset pair that you wish to provide liquidity for, set your fee tier, price range, and amount of staked coins.
The Vote section of the platform displays all of the active and executed governance propositions. Uniswap works on a community governance basis, which is a trie DeFi governance mode, where users who hold UNI tokens get to vote and propose protocol changes.
The fourth column of the Uniswap interface is the Charts feature, which takes you to the detailed Uniswap chart interface, where you can see all of the market statistics for the various tokens available on the platform, the liquidity pools, as well as all of the recent market orders.
Unlike centralized crypto exchanges, which usually offer a selection of several tens of the largest cryptos, DEX platforms with automated market maker functionalities support hundreds of tokens because they literally act as blockchain gateways. This means that you can trade nearly any ERC-20 token on Uniswap, and certainly all of the most popular ones such as Tether (USDT), USD Coin (USDC), Wrapped Bitcoin (WBTC), Chainlink (LINK), and others.
You just need to find your desired token on Coinmarketcap and copy the Ethereum token address into the Swap section on Uniswap. Once you copy the token address, Uniswap will detect the token if it’s legit, and you’ll be able to swap assets for that token. Just remember that if the token you’re looking for has a very low trading volume on Uniswap, you might need to set the transaction slippage a bit higher, resulting in fewer tokens because they are more expensive to find.
Fees and Payment Methods
DEX platforms can only be funded with cryptocurrency, and Uniswap isn’t different. You need to connect your crypto wallet to the platform, and you need to have Ether or other ERC-20 tokens to facilitate a swap. Some ERC-20 tokens are harder to swap for other tokens because they have low liquidity, so the safest way to trade on Uniswap is with Ethereum or with the platform’s native UNI token.
As far as fees go, you’ll always need to pay a standard Ethereum blockchain fee, which can be quite high in times of high network traffic. It’s best to check the ETH gas fees on Ethgasstation.info before trading.
Additionally, the Uniswap platform fee depends on the liquidity of the traded assets. There are three fee tiers. The lowest fee tier is 0.05% for relatively stable trading pairs, 0.30% for most pairs and 1% for low liquidity exotic trading pairs.
The UNI Token
Uniswap has its own UNI token, which can be exchanged for any ERC-20 token on the platform. Through liquidity pools, users can stake and earn UNI tokens. It’s quite common for a cryptocurrency exchange to have its native crypto token, but what makes UNI stand out is the fact that it has a huge market cap and that it’s ranked among the top 30 cryptocurrencies on Coinmarketcap, which is the most reliable source for monitoring the token’s price.
Even though UNI is the native token of Uniswap, it’s available for purchase and exchange on most of the leading crypto exchange platforms, and it’s considered a very popular ERC-20 token because it’s used to provide platform liquidity on Uniswap. Additionally, UNI is the platform’s governance token, and its holders get to participate in making decisions by voting for various propositions.
Is It Safe to Use Uniswap?
The security measures of a crypto exchange platform are one of the most important factors when considering whether to use a platform. With centralized crypto exchanges, extensive security features such as KYC protocols and two-factor authentication are a must for decent protection from cyber attackers.
DEX platforms work on an entirely different principle, without central company servers that store user data, credentials and crypto assets, which means hackers can’t steal anything by breaching a central exchange server like in the case of centralized exchanges.
This is what makes DEX platforms like Uniswap extremely secure. The platform is built on the Ethereum blockchain, which means that it has the same security features and immutability of approved transactions. No one can simply change the destination address of an already approved transfer because it’s already added to the ETH blockchain and can’t be tampered with.
You don’t need to create a user account in order to use Uniswap. The only thing you need to do is connect your crypto wallet to the platform, which is why you should pay close attention that you’re using the right Uniswap link instead of some fake web address that’s asking permission to connect to your wallet. The swaps and liquidity pools are all managed by Ethereum smart contracts, which are also immutable, and once they’re executed, they can’t be reversed.
Uniswap is maintained by developers closely connected to the Ethereum Foundation. The team is always working on the user experience and security updates, which is one of the reasons why Uniswap has upgraded to the V3 version in 2021. The fact that Uniswap has had two thorough platform updates in just a couple of years illustrates the team’s dedication towards providing maximum safety for Uniswap users.
Uniswap is fairly simple to use, and there aren’t a lot of issues that can arise with the platform. The most common issue users face is when they can’t facilitate a swap because of the slippage tolerance error, but this is usually fixed by increasing the slippage for a transaction.
However, users can always contact Uniswap customer support through email or Twitter in case of persistent issues. The team is very responsive and ready to help solve any platform-related issues in a short period of time.
The platform also has a Help Center section with lots of helpful articles regarding different aspects of the platform, such as getting started on Uniswap, swapping crypto, staking in liquidity pools and other topics.
Pros & Cons
These are the main selling points and potential deal breakers of Uniswap.
- You can trade Ethereum (ETH) and hundreds of ERC-20 tokens in a matter of seconds;
- No account creation process; just connect your wallet and start swapping tokens.
- Smooth user experience and very user-friendly interface;
- The platform has a native UNI token, a highly liquid asset with huge trading volumes and market cap.
- Ethereum gas fees can be extremely high sometimes, which is a general problem of the Ethereum blockchain;
- Some transactions might require you to set higher slippage rates when conducting a swap, which results in less favourable exchange rates due to low trading volume;
- You can’t buy crypto with fiat money.
Why are Uniswap fees often very high?
The fees for exchanging assets on Uniswap are dominantly based on the Ethereum blockchain’s network traffic. These fees are often as high as several tens of USD because of high network congestion, and they aren’t a consequence of Uniswap exchange fees. In fact, Uniswap fees aren’t high. They are between 0.05% and 1%.
Why can’t I buy tokens on Uniswap with fiat currency?
Uniswap doesn’t have a user account system or cash deposit protocol, just like other DEX platforms. That’s why you can’t deposit fiat money or buy with currencies like US dollars. You need to connect your crypto wallet and swap Ethereum based crypto for other tokens.
Why does my Uniswap transaction take so long?
All Uniswap transactions are facilitated through the Ethereum blockchain. An average transaction takes between 15 seconds and a few minutes, but sometimes, a transaction can take much longer during high network traffic. Gas fees are extremely high during high network traffic, and the transactions with the highest fees get processed first. If your fee is lower than average, your transaction might take considerably longer to get verified.
A Few Ending Words…
Uniswap is a great choice for swapping Ethereum-based tokens. Sure, there are many competitors, like SushiSwap, which also provide top-quality services, but Uniswap’s automated liquidity protocol and highly efficient automated market maker functionalities keep the platform a few steps above the competition. The only potential dealbreaker is the often high ETH gas fees, but this is generally an issue for all ETH DEX platforms, and you’ll always need to pay the gas if you’re swapping ERC-20 tokens.
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Disclaimer: Digital currencies and cryptocurrencies are volatile and can involve a lot of risk. Their prices and performance is very unpredictable and past performance is no guarantee of future performance. Consult a financial advisor or obtain your own advice independent of this site before relying and acting on the information provided.