When it comes to exchanges, the first thing that comes to mind for newcomers in the cryptocurrency world is centralized exchanges (CEX), such as Binance (BNB) and OKX (OKB). Little do they know that there are decentralized exchanges (DEX), let alone what Uniswap (UNI) is? What does it do? Why has it become the leading overlord of DEX?

In fact, whether it is for investment and profit, or to prevent the collapse of centralized exchanges like FTX, everyone, especially novices, should have a deep understanding of Uniswap (UNI). Otherwise, not only may you not make money, but you may also lose everything due to the centralization defects of CEX.

What is Uniswap?

Uniswap is the world's largest decentralized exchange for cryptocurrencies. It was founded in 2018 by Hayden Adams. However, the success of Uniswap is inseparable from Vitalik Buterin, because the technical principle of Uniswap was proposed by Vitalik Buterin, and Uniswap is built on Ethereum (ETH).

Uniswap has many functions. However, they are not created all at once, but are continuously enriched with the iteration and update of versions.

What is UNI coin

UNI is the native token of the Uniswap protocol, and can also be understood as the platform currency of Uniswap. It is worth joking that Uniswap originally had no plan to launch the platform currency UNI, but was forced to launch it in September 2020, one month after its competitor Sushiswap snatched users by airdropping SUSHI.

In essence, UNI is a platform coin and governance coin. Therefore, there are many benefits for users to hold UNI, such as participating in liquidity mining (including creating and adding liquidity) to get rewards, participating in DAO governance through proposals and voting, and receiving airdrops from time to time, etc.

The total supply of UNI coins is unlimited, with an annual increase of 2% (starting in 2024). The initial supply of UNI is 1 billion, which has been distributed, with community users accounting for 60%.

How does Uniswap work and how is it different from Binance?

If Binance is the leader of centralized exchanges, then Uniswap is the leader of decentralized exchanges. They are ranked first in their respective fields. So, what is the difference between the two?

The biggest difference between Uniswap and Binance lies in its operating mechanism. Uniswap uses the Automated Market Maker Protocol (AMM) to facilitate transactions, without the need for an intermediary to match buyers and sellers, and rewards transaction fees to liquidity providers (LPs). This is equivalent to users opening their own exchanges and earning transaction fees by providing services to other customers. They may also receive platform subsidies.

In addition, there are many differences between Uniswap and ATM, as follows:

Differences between Uniswap and Binance

What are the advantages and disadvantages of UNI?

Through the above comparison with a certain security, it can be seen that Uniswap (UNI) has obvious advantages in terms of security, account control, identity verification, etc. Users do not need to undergo KYC verification, and privacy can be well protected. Users have absolute control over their accounts and do not have to worry about the platform running away, misappropriation of assets, and other issues.

Of course, Uniswap (UNI) also has some shortcomings, such as not supporting fiat currency deposits and withdrawals, listing coins without permission, which leads to the risk of counterfeit coins, higher transaction fees than centralized exchanges, and obvious slippage problems. These all need to be improved and optimized.

Is UNI coin worth investing in?

According to CoinMarketCap data, as of July 27, the market value of UNI coin was 3.4 billion US dollars, accounting for 0.28% of the total market value of virtual currencies, ranking 24th in the world and first in the DEX sector. In addition, according to data, UniSwap occupies three of the top ten DEXs in terms of trading volume, with market shares of 31.1%, 11%, and 4.9%, respectively, a total of 47%, which is close to half of the total DEX trading volume.

Top 10 DEXs by Trading Volume

Whether in terms of market value or trading volume, UNI ranks relatively high in DEX and even the entire cryptocurrency market, which also shows that its fundamentals are beyond doubt and it is a relatively high-quality investment target.

How to make money with Uniswap (UNI)?

As mentioned above, you can earn fees by creating or adding liquidity. It should be noted here that there is no restriction on the currency type, it can be UNI or other ERC-20 tokens, such as DYDX, MATIC, APE, etc. The specific operations are as follows.

Step 1: Go to the official website, click the button in the upper right corner to connect your wallet, and click “Liquidity” on the left.

Step 2: Click the "New Position" button and the parameter setting page will pop up.

Step 3: Fill in or select the currency pair, quantity, and fee level, and click the button indicated by the arrow. Note: If the data is incorrect, the button will be gray and cannot be clicked.

If you want to make money by trading UNI coins, you can choose to trade UNI spot or Heyue at an exchange or foreign exchange broker according to your trading preferences. The trading rules and operating procedures of UNI coins are the same as those of BTC transactions, so you can learn from them.

common problem

How to create a liquidity pool on Uniswap?

The creation and addition process of a liquidity pool is basically the same. "Creation" is the first person to create a pool. The creator can set the parameters by himself, and the adder operates on this basis. Some parameters, such as the exchange rate, cannot be changed and can only use the ones set by the creator.

After creating or adding a liquidity pool on Uniswap, can I withdraw the pool?

It supports withdrawing the pool, and you can choose to withdraw all or part of it. Of course, after withdrawing, you can add it again, which is quite flexible. However, you need to pay a certain K fee for each operation.

What is the fee reward for providing liquidity?

Usually 0.03% is charged to liquidity providers. This ratio is constant, but the income you receive also depends on the trading volume of the entire pool and your contribution value. The higher the trading volume, the higher the liquidity share contributed, and the higher the handling fee reward you personally receive.

UNI and SUSHI

One major difference between UNI tokens and SUSHI coins is the fees.

Uniswap v3 introduces multiple pools for each currency pair, each with a different swap fee. Liquidity providers can initially create pools with three different fee tiers - 0.05%, 0.3%, and 1%. Riskier assets - or those that are rarely traded - tend to tend to have higher fees.

In contrast, SushiSwap charges a common fee of 0.3% on all swaps – of which 0.25% goes to liquidity providers. The remaining 0.05% is distributed to SUSHI holders.

Everyone, please move your hands and pay attention~

Thank you for your support, see you next time!