Uniswap: Leader of All Decentralized Exchange Platforms

Share On Facebook
share on Linkedin

Uniswap was recognized as the leading decentralised Cryptocurrency exchange platform last year. The Uniswap ecosystem has an affordable trading fee and a growing customer base. These features made them the leader in the Decentralized crypto Exchanging platform.


However, Uniswap may be losing its high-ranking status.

In the year 2021, Uniswap was recognized and awarded the biggest among the Defi exchanging platforms as it holds the largest trading volume of all such platforms put together. Their methods of operation are more advance than those of Coinbase and Binance platforms which rely on the order books of their clients to fix the exchange price of assets. Binance and Coinbase exchanging platforms are rather traditional in their operation. Their approach to exchange is rather a centralized one. Decentralized exchange platforms, such as Uniswap, use mathematical methods to fix prices for assets traded on the platform. This Automatic method eradicates the services of middlemen in fixing the price of assets.

Where some Centralized exchange platforms such as Coinbase and Binance, are slow to add new tokens (due to all the processes they had to go through before they accept them) Uniswap is quick to add new tokens as long as they are compatible with the Ethereum network. This automated approach to their operation enables Uniswap to expand quickly. For instance, the first version of Uniswap, which was launched on the Ethereum network in November 2018, allowed customers to transact business between Ethereum and ERC-20. The second version which was released in 2020 added new features such as ‘flash swap’ and ‘ERC-20 pools’. The third version which was released this year was made to improve the efficiency and security of assets.

Uniswap Also Has Its Native Token
This token is also called Uniswap (UNI). It is like a currency for operation on the platform. In other words, we can say this is a kind of investing in the company’s stock. When Uniswap token was released in 2020, existing investors on the platform were given 400 UNI airdrops. This was to promote the token. it is an innovative promotional move from the Uniswap platform. And ever since, some other network follows this example.

Revenue in Uniswap
Uniswap offers the opportunity for generating revenue for two main groups on the network: the protocol team and the Liquidity providers.

The protocol team is directly under the Uniswap organisation. Another way this team generate money, apart from the gain they get from the capital, is the income they get from the fee they charge for every transaction carried out on the network. In addition to this, Uniswap also generates income via the network’s native token which is known as UNI. Though a large amount of the token was given out freely to investors and workers behind projects on the Uniswap network when it was launched, about 20% of the token is fixed or reserved.

Liquidity providers could be anyone on the network with a crypto asset. Such people are an important aspect of a Decentralized Exchange platform such as Uniswap. And this is why the network creates a more encouraging atmosphere to suit more crypto asset holders. Through the system called Automated Market Makers (AMM) assets are pooled together from the Liquidity Providers, using automatic computer processes. The assets they provide to the network are what made them an important part of the network. The pool is made up of investors’ assets on the network. And these pools are based on the pairs of a particular token for example ETC/BTC, or APE/SOL. When an Investor is interested in a particular pool, he will have to deposit an equal amount for the two paired assets in the proportion of 1:1 (1 to 1 ratio). As the Automated Market Maker calculates the pricing of the tokens and transactions made on the network, the liquidity providers are rewarded greatly. This is justifiable because Liquidity providers are a very important part of The Automated Market Makers. Apart from this, they get most of the trading fees that are charged on the Uniswap network

Business man using computer hand close up futuristic cyber space and decentralized finance coding background, business data analytics programming online network metaverse digital world technology

Other Decentralized Exchange Platforms
Being the first Decentralized Exchange on the Ethereum network, it remains the leading network, as several other DEXs have emerged as its competitors. Some of the Other Decentralized Exchanged networks are as follows: SushiSwap, PancakeSwap, Compound, Curve Finance and DYDX. SushiSwap and PancakeSwap are copies of Uniswap. Their features are very similar to Uniswap. Also, the fee they offer can effectively compete with that of Uniswap.

Why Uniswap Remains the Leader
The network is the first Decentralized Exchange network that successfully based its operation on the Automated Market Maker system. As a result of this, they maintain high and stable revenue. And since this is decentralized finance, there is no centralized system to regulate and restrict the amount of revenue to be generated. Blockchain is all about the decentralisation of financial transactions. And at, the same time it is transparent. However, traditional crypto exchange platforms still use centralized design. Unlike the Decentralized Exchange networks that seem to allow investors to handle their money themselves, centralized networks are like managing their deposits for them.

The Challenges Faced by Uniswap
Despite all these, the future looks bleak for Uniswap as competitors are emerging. Although the network still possesses the highest user base, due to increasing competition, many Liquidity providers are pulling out to join other DEX networks. This, as a result, is affecting the market share for Uniswap Liquidity providers.

Another problem is the creation of ‘Knockoff’ an alternative to the Automated Market maker. this innovation has seriously affected the network. Uniswap needs to continue to be innovative so that it can maintain its kingly status. If it continues to improve its network and operation, it will continue to be relevant even in the future crypto market

Learn from the market wizards: Books that will take your trading to the next level

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20221130 04:44:07