What is Uniswap?

Uniswap Decentralised Exchange enables people to exchange their funds (ERC-20 tokens) without intermediaries. So, on a centralised cryptocurrency exchange, your crypto assets are under the control of the exchange, but on Uniswap only you have full control over your wallet.

How to buy Uniswap cryptocurrency?
How to buy Uniswap cryptocurrency?

Uniswap History

History is a universal tool that helps predict the future. If you want to be sure of your choice and invest in Uniswap, study the history of cryptocurrency. 

The idea of a decentralised exchange without intermediaries has been known in the cryptocurrency community for a long time. However, the reference implementation of this idea has not been developed, and DEX (decentralized exchanges) themselves have not gained much popularity and, as a consequence, had insufficient liquidity for trading.

The solution to the problem of creating a convenient, functional and decentralised exchange without intermediaries was the concept of an automated market maker (AMM, more about it below), first described in January 2017 by Ethereum developers.

In August 2018 alone, Hayden Adams, developer of the decentralised exchange Uniswap, built on the AMM concept, received $100,000 from the Ethereum Foundation to build his project. A full working version of the Uniswap 1.0 protocol was released on 2 November 2018.

The exchange only became more popular in early 2020, following the launch of version 2.0 of the protocol and the growing popularity of DeFi projects, which could be freely listed on the exchange.

Trading conditions for the purchase of Uniswap
Trading conditions for the purchase of Uniswap

History of the UNI token

The need for Uniswap's token emerged on September 10, 2020. One of the popular tokens, SushiSwap (ticker symbol SUSHI), migrated to its platform, a fork of Uniswap itself, with the only difference being its own token. At this point, Uniswap lost about 75% of its liquidity as many users, and liquidity providers also decided to migrate to SushiSwap.

Therefore, as early as September 16, 2020, the Uniswap development team announced the release of their token with the same name, known on the cryptocurrency exchanges under the ticker UNI. Immediately, an airdrop (free distribution) of 400 UNI tokens was conducted for users who have transacted on the platform at least once.

The primary purpose of the token is to fund the developers of Uniswap and motivate the community:

  • Every UNI holder has the right to vote for Uniswap development proposals (proposals can be viewed and supported in a special section of the website).
  • Holders with at least 1% of the current issue of UNI tokens may also submit their suggestions for the project's development.
  • Those with at least 4% can accept or reject them.

In this way, the platform's management is decentralised: power is fairly distributed throughout the Uniswap community according to the share of assets in the hands of each individual. Thus, it is not concentrated in a particular group of individuals.

Choosing a cryptocurrency
Choosing a cryptocurrency

How does Uniswap work?

The Uniswap protocol was inspired by Vitalik Buterin's automated market maker (AMM) concept. Uniswap primarily uses the Constant Product Market Maker Model mechanism, a variant of Automated Market Making (AMM), which contains liquidity pools for traders. 

Subsequently, in May 2020, Uniswap introduced an updated version, Uniswap V2, along with liquidity pools. Unlike its predecessor (V1), users can now swap ETH and ERC-20 tokens, while V2 uses wrapped ether (wETH) in the central contracts, where users can combine ERC-20 tokens directly with any other ERC-20 tokens. In addition, the prices have become more reliable and harder to manipulate.

The table shows how AMM works in comparison to CEX:

ORDER BOOK            AMM
A buyer and a seller generate orders by placing an optimal price.  In the liquidity pool, 2 tokens are priced/compared against each other.
When 1 coin is sold for the other, the relative value of each changes, a new market rate is established.
A transaction takes place between 2 individuals when the desired buy and sell prices match.  Buyers/sellers do not trade with each other, but with a liquidity pool.
The pool automatically tracks existing reserves and updates them when a trade takes place. That is, trades can be made all the time without waiting for a counterparty to show up.

Liquidity Pool in Uniswap

This is the important part if you are going to buy UNI. 

When you make an exchange on Uniswap, you are not trading with each individual buyer and seller, but with an overall liquidity pool of liquidity providers. Let's understand what this is.

If you have traded on centralised exchanges, you may be familiar with the concept of a market maker or order book. The main feature that distinguishes the Uniswap platform is the absence of a market maker.

Instead of the market maker, the automated market maker (AMM) is used. It replaces the standard market maker with a liquidity pool that combines two assets that are evaluated against each other. If a user buys or sells one asset relative to the other, the market rate of the two assets relative to each other changes.

For example, when you buy UNI on Uniswap in a UNI/ETH pair, you give away ETH and receive UNI. The supply of ETH in the liquidity pool increases because you have added ETH coins to the pool. And the supply of UNI decreases because you've withdrawn UNI tokens from the pool. Correspondingly, the lower the supply of UNI and the higher the supply of ETH, the greater the increase in the price of UNI versus ETH.

The ratio of the two assets in the pool is always constant, due to the fact that any imbalance is eliminated through a directly proportional increase or decrease in the price of one asset relative to the other. Thus, the liquidity of UNI/ETH or any other pair is always the same.

Information about cryptocurrency Uniswap
Information about cryptocurrency Uniswap

Advantages and disadvantages of Uniswap

  • Advantages:

Uniswap Labs' experienced development team, which is constantly working on improving the Uniswap protocol and the UNI token.

Limited issue of Uniswap token.

Listing on most major exchanges. Even if you do not want to understand how DEX exchanges work, centralised exchanges or exchanges also provide the opportunity to buy a UNI token.

Project dominance among DEX exchanges on the etherium (ETH) blockchain.

Open source code. Everyone can check the project code, make changes and create their own project based on it.

High level of decentralisation. The closest competitors on other blockchains (e.g., PancakeSwap on BSC) have similar platforms with low fees and high transaction speeds, but a high level of centralisation.

  • Disadvantages:

The UNI token is predominantly used in the Uniswap exchange ecosystem. If the use of the token does not expand beyond the exchange, it could lose its competitiveness.

The Uniswap exchange, like the UNI token, runs on the Ethereum (ETH) blockchain, so it does not have its own blockchain and is effectively dependent on the performance of ETH.

How to make money from the liquidity pool

It is crucial to know if you want to buy Uniswap. Because you are going to buy expecting benefits. If you have ER20 tokens (e.g. DAI and USDC or UNI), you can lend these assets to a liquidity pool and earn passive income from them.

You will receive a small commission from each exchange transaction that will be made through your pool. The amount of such income depends on the activity of the traders in the trading pair and on your share of the total pool of liquidity for that pair.

For example, you contribute two assets in equal proportions - DAI and USDC - to the pool of DAI/USDC liquidity. You select the price range in which you will provide liquidity in the trading pair, e.g. $1,001-1,1003. Accordingly, when users make transactions in this price range, they will pay a commission (for this pair - 0.05%) to the general liquidity pool. And you as a part of that pool will receive a share of that commission, proportional to your investment in the pool.

Popular cryptocurrency
Popular cryptocurrency

Where to buy Uniswap in Kenya?

You can trade on popular exchanges if you want to buy Uniswap in Kenya. The project's DEX platform is the most convenient. However, you can also trade on popular centralised exchanges with high capitalisation and a good reputation, such as Binance. 

To work with digital money, you have to buy it first. Let's remind you again what cryptocurrency is and where you can buy it. One of the most common ways to buy it is through an exchanger. There are many exchangers, and they differ from each other in terms of fees and ease of use.

Another important aspect is reputation. Scandals happen, and it is advisable not to fall into the same networks as hapless investors. There are exchange aggregators online that take on this part of the task, gathering reliable resources. But there are still risks, and you have to take that fact into account. As for the technology of exchanging fiat money for cryptocurrency resources, it is almost the same as offline. Choose a rate, enter your details and confirm the transaction.

An equally popular way to get cryptocurrency is to register on an exchange. There are two types of exchanges: some specialise solely in cryptocurrency transactions, while others handle both digital money and fiat currencies.

The selection criteria are the same as when looking for an exchange: reliability, reputation, speed of transaction and ease of use. To work with large amounts of money you will need to verify your account.

Another option is to search for a seller of cryptocurrencies through p2p (peer to peer) sites. This is a site with frequent listings where sellers and buyers meet. The seller must be verified before a transaction can be made. Such sites have a rating system similar to the one actively used by foreign online shops. But it should be understood that the risks involved in such transactions are higher than in dealing with exchanges and exchanges. 

How to start investing in Uniswap in Kenya?

If you do a timeline review of the Uniswap crypto coin, you will see that its price has risen by 6836%+ since its launch. This means that the first investors have already made impressive profits. If the market is favourable, the value of the token increases as it becomes more popular. Uniswap is, therefore, an attractive option for investment. 

Both external and internal factors influence the pricing of the token. For example, the price of a token can be affected by updates to the system. As a result, the cryptocurrency rate is highly volatile, so it attracts so much attention from many traders around the world. The best way to make money from cryptocurrency, for example, Ethereum classic is through CFDs. 

Register on the investment platform
Register on the investment platform

CFD trading is one of the trading methods for an individual entering into a contract with a CFD broker instead of directly purchasing the underlying asset in question. The CFD stands for Contract for Difference. 

CFDs have become the most popular way for online investors to trade commodities, indices, currencies, and stocks in recent years. Because CFDs do not involve the purchase of a physical asset and operate independently of the market, they propose increased flexibility over traditional trading, including access to overseas markets, leveraged trading, share splits and short selling.

Why to  trade CFDs?

1. Use of leverage.

To increase an invested sum without using own capital.

2. To choose between long and short positions.

Benefit from all market fluctuations.

3. It is an easy way to diversify your portfolio.

Trading a variety of assets in different markets.

If you plan to invest in Uniswap in Kenya, consider all your options and go for it. 

The investment potential of the UNI token depends on the development of the entire Uniswap platform. The capitalisation of the token is directly linked to the current position and expectations of the platform. In June 2021, the exchange holds the leading position among DEX platforms and is the leader in the entire segment of decentralised exchanges on the ETH blockchain. Therefore, if you were looking for a convenient earning option, Uniswap is definitely worth your attention! Have fun trading!

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