How to Use UniSwap: A Step-by-Step Beginner’s Guide

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Uniswap Decentralized Exchange (DEX) is the most popular DEX built on the Ethereum blockchain. For users wondering “What is Uniswap?”, this article outlines what it is and how it works, as well as several ways users can get started with the Uniswap DEX.

With Uniswap, users can exchange crypto tokens without relying on intermediaries. Not having to rely on third parties results in almost no economic rent being collected. Instead, Uniswap relies on smart contracts to execute transactions. Smart contracts are algorithms that execute automatically Once certain preset conditions are met.

How does Uniswap work?

Since Uniswap is an open source protocol, many DEXs with the suffix “swap” are already listed. These protocols are essentially copies of the original Uniswap source code. They differ in the graphical user interface (GUI) and product differentiation and positioning.

The most famous and controversial of these imitators is Sushiswap.After copying Uniswap’s source code, it continues emission Vampire attack.Vampire attacks are where DeFi protocols are Various incentives for liquidity providers. Vampire attacks are designed to suck liquidity from the target protocol.

How did Sushiswap succeed in vampire attack? The platform launched an aggressive marketing campaign. They also make it easier for Uniswap liquidity providers to switch. Finally, they offer extremely generous rewards to make it worth it.

Another less controversial example is Pancakeswap.This DEX lives in Binance Smart Chain. Pancakeswap Offers Non-Fungible Tokens (NFTs) And provide yield farming opportunities that Uniswap does not have.

However, Uniswap is the first Relying on the Automated Market Maker (AMM) model, rejecting the traditional unwinding mode. Due to factors such as liquidity issues, the open ledger model is not friendly to DEXs. In contrast, the AMM model uses a liquidity pool with a constant product market maker model and therefore relies on the constant product formula:

Notably, in version 1 or 1 of Uniswap, liquidity pool providers face the risk of permanent loss. In other words, v1 is best thought of as a minimum viable product released for beta (or even alpha) testing.

In each iteration, Uniswap has brought considerable improvements to users. For example, v2 introduced oracles and airdropped UNI tokens. UNI token is the official governance token of Uniswap DEX. If Uniswap users use the platform before September 2020, they will receive these airdrop tokens.

For v3, the most notable improvement coming In the form of centralized liquidity. This novel form of liquidity allows liquidity providers to set the conditions under which fees are charged.

Additionally, Uniswap v3 has been released on the Optimistic Ethereum network. Optimism is a second layer scaling solution that is vastly superior to Ethereum’s first layer. Its key benefits include reduced slippage and high gas fees and near-instant transaction speeds.

So how to buy tokens on Uniswap? Before diving into how to use Uniswap, it’s important to answer this question: Is it safe to use Uniswap?smart contracts, blockchain technology and Decentralized Finance (DeFi) Security? These are the technologies that Uniswap is based on.

The Ethereum blockchain is very secure unless there are exploitable vulnerabilities. For example, Uniswap has suffered exploits for reentrancy attacks in the past, but this vulnerability has been resolved (thus making Uniswap stronger in the long run). Since then, liquidity and trading volumes have only increased, and by a considerable amount.

Now let’s see how people use the platform.

How to use Uniswap?

Users who want to learn how to trade on Uniswap have many options. This section describes how to use Uniswap with mobile devices and Trust Wallet and Coinbase Wallet.

But first, we discussed the steps on how to use the Uniswap protocol with Metamask. After that, this section presents the steps of two mobile friendly methods.

Remember, Metamask is just as easy to use on mobile devices. However, the web wallet as a browser extension has an impeccable usability experience on the desktop with few competitors. That’s why, for Metamask, this article focuses on the desktop experience.

How to use Uniswap with Metamask?

The following diagram lists the steps to use Uniswap and Metamask:

How to use Uniswap with Coinbase?

For U.S. citizens already familiar with the platform, the Coinbase approach may be less intimidating. First-time users should start the following steps after successfully opening a Coinbase account. Those who already have an account can start with the first step.

How to use Uniswap with Trust Wallet?

Trust Wallet is one of the most popular mobile wallets for a reason. Trust Wallet is easy to use, friendly, and provides users with a range of tools. Here are the steps to use Uniswap and Trust Wallet.

A key deterrent for new Uniswap users is the high Uniswap fees. Since Uniswap lives on the Ethereum blockchain, it relies on ETH to pay for gas. Due to the design of Ethereum, greater congestion leads to higher gas fees as it triggers a bidding war between users who race to insert their transactions into the next block first.

To circumvent failed trades, consider going into Uniswap’s settings. (Users can do this by clicking the gear icon.) Before executing a trade, users should adjust the slippage tolerance to about 12%.

Slippage tolerance is simply the price difference between the confirmation of the transfer and the price the seller is willing to accept. Adjusting the slippage tolerance ensures that user transactions proceed ahead of schedule. Front-running increases the chances of a transaction being included in the next block.

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