Uniswap distributed 400 UNI tokens to any cryptocurrency wallet that had ever connected with their platform in September 2020. The airdrop was valued at roughly $800 at the time, and it generated a lot of noise in the cryptocurrency world. Those that held on to their free UNI tokens now have 400 UNI tokens valued at over $8,000. That’s a great stimulus check. In the article, we will discuss the Uniswap smart contract in action.
Through early 2021, Uniswap has developed alongside the Decentralized Finance (Defi) business. It’s the most popular Ethereum exchange, with over a billion dollars worth of cryptocurrencies traded on the site. Investors can stake their UNI tokens for liquidity to earn interest on their investment, and they can vote on protocol changes using them.
What exactly is Uniswap?
Uniswap is a decentralized cryptocurrency exchange that runs on the Ethereum blockchain. DEXs allow investors to trade cryptocurrencies without having to create an account with a centralized cryptocurrency exchange like Coinbase or Binance. Daily, the site transacts more than a billion dollars in cryptocurrency, making it the world’s most popular decentralized exchange.
The Uniswap currency is an ERC-20 token, which means that instead of having its own network, it uses Ethereum’s blockchain to perform transactions. The Ethereum blockchain is used by several cryptocurrencies, including most non-fungible tokens (NFTs). Ethereum’s primary advantage over Bitcoin is its smart contract technology. On Ethereum’s blockchain, smart contracts allow developers to create important protocols like Uniswap.
Smart Contracts from Uniswap
Let’s look at a Uniswap smart contract in action. To earn interest in their cryptocurrency holdings, investors contribute their funds to a Uniswap smart contract; these investors are known as liquidity providers. The smart contracts that hold their cryptocurrencies are known as liquidity pools. Liquidity providers are required for Uniswap to function since they provide liquidity for trading on the platform.
The smart contract estimates the price of each crypto asset instead of using order books. Because each crypto asset, such as Ethereum and DAI, has the same value in each liquidity pool, the code calculates the price of each asset using the constant product formula X*Y=K, where K is the total amount of funds in the pool and X and Y are the number of cryptocurrency tokens in the liquidity pool.
These liquidity pools will modify their token holdings regularly to maintain a 50-50 split between each asset in the pool.
Is Uniswap a secure platform?
The Uniswap exchange is widely considered one of the safest ways to trade bitcoins. Because Uniswap communicates directly with your Ethereum wallet, a hacker would have to gain access to your crypto wallet, as the exchange does not hold your assets. Because centralized exchanges keep your bitcoin, they’re far more appealing to cryptocurrency thieves. If a hacker can break into an exchange’s security, they’ll have access to a considerably greater pool of assets than if they broke into a single bitcoin wallet.
Like any other investment, there is a danger of losing money when it comes to the UNI token. Cryptocurrencies, particularly altcoins, carry a significant level of risk. Early investors in Uniswap, on the other hand, saw large returns on their money.
Some analysts believe Uniswap is still undervalued, citing the company’s small size (about 12 workers) and similar transaction volumes to Coinbase. The market capitalization of Uniswap is $16.7 billion, while Coinbase has a market capitalization of more than $60 billion. Of course, the valuation of these exchanges is influenced by factors other than transaction volume, but it’s still interesting data.
What are the Safest Ways to Invest in Uniswap?
Binance and Coinbase are the two most popular centralized exchanges that support the Uniswap currency. It’s simple to register an account with either of these exchangers; all you have to do is enter your email address and create a password. You’ll need to authenticate your identity after you’ve created an account. A photo of your driver’s license, your Social Security number, your home address, and your date of birth are usually required at exchanges.
Uniswap: Is It a Good Investment?
Uniswap could be an excellent addition to your portfolio if you believe in decentralized finance. Uniswap’s V3 upgrade makes bitcoin on the platform even more liquid, making it the most liquid decentralized exchange. While other DEXs can employ Uniswap’s previous upgrades, the V3 upgrade is locked in for two years, giving Uniswap a significant competitive advantage over other decentralized exchanges.
The likely resumption of liquidity mining is one of the elements that will influence investing in UNI in 2021. Uniswap founder Hayden Adams stated at Coindesk’s Consensus 2021 that the company should be launching a liquidity mining program again in the not-too-distant future.
Liquidity mining is a type of yield farming in which consumers of a decentralized finance (Defi) product receive an additional token in addition to the normally expected yield simply by depositing assets in a liquidity pool. According to the 2021 Global Crypto User Index, 97 percent of respondents showed faith in cryptocurrency. Crypto investing was viewed by 52 percent as a source of income rather than a hobby.
More specifically, 60 percent of participants stated that exchanges were the most common place to keep cryptocurrency. This indicates that millions of cryptocurrency users trust exchanges. The king of decentralized exchanges is Uniswap. More Defi users will pump large sums of money into the decentralized exchange through its unique currency, UNI, as liquidity mining is expected to return soon.