Uniswap (UNI) Definition

What is Uniswap (UNI)?

Uniswap is a decentralized exchange that enables peer-to-peer market making. Uniswap is also the cryptocurrency of the symbol UNI. The Uniswap platform allows users to trade cryptocurrencies without the involvement of a centralized third party.

The Uniswap blockchain is hosted on the Ethereum platform and managed by UNI holders. Uniswap describes the blockchain as a public good. Uniswap blockchain is open source. In other words, anyone can view and contribute to the blockchain code.

The Uniswap platform can support the exchange of digital tokens that comply with the Ethereum technical standard known as ERC-20. Uniswap acts as an automated market maker using smart contracts made possible by blockchain technology. Uniswap users can securely create liquidity pools, provide liquidity and exchange various digital assets.

As a decentralized exchange, Uniswap uses an unauthorized design. The Uniswap protocol can be used by anyone and the Uniswap platform cannot selectively restrict access. Anyone of choice can use Uniswap to trade digital assets, provide liquidity, or create new markets to exchange new pairs of digital assets.

The automation provided by smart contracts can make trading assets more efficient. Uniswap also uses smart contracts to avoid liquidity issues that traditionally affect centralized exchanges. You can also reduce transaction processing fees by eliminating rent-seeking third parties such as decentralized exchanges and financial institutions.

How Uniswap works

The Uniswap platform uses blockchain-based smart contracts to facilitate decentralized trading of many different digital assets. Pairs of digital assets are exchanged through the liquidity pool. The liquidity pool uses smart contracts to automatically rebalance with each transaction. The Uniswap blockchain, which acts like an electronic ledger, is continually updated to reflect the trading activity that occurs between Uniswap users. Uniswap is an automated market maker by acting as an exchange without the involvement of central authorities.

Uniswap works using the Ethereum platform, which currently uses the Proof of Work method of operation. (Ethereum is gradually shifting to using only the proof of stake method.) Proof of work requires vast amounts of computing and energy resources used to process transactions and generate new cryptocurrencies.

Uniswap users can join the decentralized exchange in several ways.

• Create a new market: Uniswap users can use smart contracts to create new markets for exchanging new pairs of digital assets.
• Exchange assets through existing markets. Uniswap can use the platform to exchange digital assets through a decentralized market that has already been created.
• Provide liquidity and earn rewards. Uniswap users can bet on digital assets (agree not to trade or sell) to provide liquidity. Anyone who bets digital currency on the Uniswap platform will be given a UNI.
• Participate in Uniswap Governance: UNI token holders are empowered to manage the Uniswap platform and voting rights are distributed in proportion to the user’s UNI balance.

To join the Uniswap network, you need to connect a compatible digital wallet. In addition, the Ethereum platform collects processing fees for Uniswap transactions, so Uniswap users need Ether (ETH) to pay the transaction fees incurred.

Advantages and disadvantages of Uniswap

Uniswap and pancake swap

Uniswap and Pancake Swap are both decentralized exchanges that facilitate the trading of digital assets. Both use tokens (UNI and CAKE, respectively) to incentivize users to provide liquidity.

Pancake Swap and Uniswap work on different blockchain platforms. Uniswap uses the Ethereum platform, while Pancake Swap uses Binance Smart Chain. Uniswap supports the exchange of Ethereum-compatible tokens that comply with the ERC-20 standard, and PancakeSwap enables the exchange of Binance-compatible tokens that comply with Binance’s BEP-20 technical standard.