All you need to know about the Uniswap Protocol and its strategy to compete Coinbase and Binance
Thanks to their cutting-edge technology, distinctive features, and attractive offers, Binance, Coinbase, and Uniswap are some of the most well-known platforms for cryptocurrency exchange.
On the one hand, with hundreds of cryptocurrencies listed and high liquidity, Binance and Coinbase are the exchanges that traders and investors prefer. On the other hand, Uniswap Protocol is a major decentralized crypto exchange running on the Ethereum blockchain, and now it is the top decentralized Ethereum-based exchange (DEX) in terms of trading volume and number of users.
The trade volume on Uniswap over the previous 24 hours has reached approximately $820 million on the Ethereum mainnet.
According to coingecko, Uniswap Protocol presently controls close to 60% of the market for all volumes across all DEX platforms. But when compared to its mainframe equivalents, things seem different, with Binance and Coinbase during the previous 24 hours hosting $19 billion and $1.5 billion, respectively.
Mary-Catherine Lader, COO of Uniswap Labs, said in an interview with Decrypt at the Messari Mainnet conference in New York that the team behind the protocol wants to keep growing the exchange’s market share. “We have several new products in mind to increase Uniswap market share,” she said. Consequently, the biggest decentralized exchange in the DeFi industry has started a significant expansion.
But, before going deep into the interview details, let’s first know what Uniswap Protocol is. How does it work? And does Uniswap have a future?
Introduction
Users from anywhere in the world can trade cryptocurrencies on the Ethereum blockchain using Uniswap Protocol, the biggest and most popular Decentralized Exchange (DEX).
Despite the launch of numerous other decentralized exchanges at the time, Uniswap was one of the first decentralized finance (DeFi) applications to acquire considerable popularity on Ethereum. It is currently the most well-liked DEX in the world.
What Is Uniswap Protocol (UNI)?
The owners of UNI are in control of the Uniswap platform, established in 2018 on top of the Ethereum blockchain. “UNI is the crypto token for Uniswap.”
The UNI governance token on the Uniswap blockchain, which enables users to vote on significant protocol modifications, is sometimes referred to as a public good.
Users may trade cryptocurrencies on Uniswap, a decentralized exchange that supports peer-to-peer market making and eliminates the need to work with a centralized entity like a financial institution or central exchange. So, canceling a third party can lower transaction processing costs.
The decentralized exchange Uniswap is not owned and run by a single organization, making it entirely distinct from other types of DEX. Smart contracts are used by Uniswap to prevent the liquidity problems that plague traditional centralized exchanges.
Additionally, Uniswap is entirely open source, making it possible for anybody to clone the code and build their own decentralized exchanges. Users may even freely add tokens to the exchange. Anyone who desires to utilize Uniswap can exchange new pairs of digital assets, offer liquidity, or establish a new market.
How does Uniswap Protocol work?
Due to the lack of an order book, Uniswap employs blockchain-based smart contracts to enable the decentralized trading of multiple digital assets. Uniswap uses a system known as Constant Product Market Maker. The trading activity that goes on among Uniswap users is continuously updated on the Uniswap chain. Uniswap is a computerized market maker as a result.
Liquidity pools are smart contracts used by automated market makers to manage liquidity reserves. Since anybody is able to supply liquidity, these reserves are financed by liquidity providers. He makes a deposit into the pool with the equal value of two tokens; in exchange, the traders pay a charge to the pool.
By investing the equivalent of two tokens, liquidity providers establish a market. In exchange, they are given tokens, which represent their portion of the total liquidity pool.
Uniswap V3
The market cap is one of the most significant modifications brought about by Uniswap v3 efficiency since it has substantially more liquidity than Coinbase and Binance. This is due to the fact that AMM can offer better liquidity than centralized exchanges since its decentralized nature lowers technical obstacles to market making and throws open the door to a lot of previously underutilized wealth.
As a result of Uniswap v3’s ability to create an on-chain order book on Ethereum, liquidity providers may now specify certain price ranges to which they want to supply liquidity, and anybody can do the same with their own funds. And that is where AMM’s beauty resides.
When we compare the liquidity of Uniswap v3 with that of centralized exchanges across a variety of highly capitalized digital asset pairs, we discover that Uniswap v3 consistently has better liquidity than the biggest centralized exchanges, as determined by the depth of market.
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| Uniswap v3dominance Source: uniswap.org |
Within a year of its release, Uniswap V3 had a sizable market share, albeit only for Ethereum and its many pairings. However, Uniswap is expected to witness similar domination of other assets as more passive and diversified money becomes available.
How to use Uniswap Protocol?
Uniswap is simple to use. All you have to do is make sure you already have an ERC-20-compatible wallet, such as one from MetaMask, WalletConnect, or Trust Wallet. To trade on Uniswap and pay the “Ethereum transaction fee,” add Eth to it.
- Visit https://uniswap.org.
- Press the “Launch App” button in the top right corner.
- Select the wallet you wish to use by clicking “Connect wallet” in the top right corner.
- Connect to Uniswap after logging into your wallet.
- Select the token you want to swap from and the token you want to exchange to on the interface, Then, input the amount and click “Swap.”
In your ERC-20 wallet, a confirmation box for transactions will display.
By copying and pasting the Transaction ID at https://etherscan.io, you may confirm that the procedure has been successfully completed.
When paying for “gas fees” on the Ethereum blockchain, the majority of ERC-20-compliant wallet services provide you the choice of three payment speeds: slow (the least costly), medium, or quick (the most expensive option).
The Uniswap token (UNI)
The Uniswap protocol’s original token, UNI, grants its owner governance rights. As such, only holders of UNI can vote on new developments and changes to the protocol, including decisions regarding the distribution of tokens to the community and developers as well as any adjustments to the fee structure.
Compared to May’s peak, the UNI “$7” is down 84%. This does not appear to deter new investors or holders, either, as they are taking advantage of the chance by acquiring additional UNI. Since they also want to profit, if this is the lowest level for UNI, then these buyers will shortly turn a profit.
Does Uniswap have a future?
Future prospects for Uniswap Protocol are bright, and one of the key elements affecting the platform’s trajectory is the development of its UNI token. So, the question is: Will the price of Uniswap increase?
Analysts predict that UNI token will likely make it into the top 10 currencies list, so the crypto community might consider it a beneficial investment choice.
We can see from the Uniswap cryptocurrency chart that it is worthwhile to invest in the Uniswap token, and both financial analysts and crypto specialists believe that the Uniswap (UNI) token is poised to rise.
Is Uniswap safe?
Uniswap is safe since it is a decentralized exchange that makes use of blockchain technology. Additionally, Uniswap’s smart contracts are created to be unchangeable. However, there is the potential for clever contract hacking in general.
Since you may trade on the platform using Ethereum safely and comfortably using your own wallet, you are completely responsible for the security of your wallet and digital assets when using Uniswap. You are less likely to misplace your cryptocurrency assets or become a target of cyberattacks if you use secure wallets like MetaMask and Trustwallet on your PC.
Self-guarding one’s digital assets does not, in general, carry no risks, but it does eliminate the chance of exchange hacks.
Centralized exchange (CEX) vs decentralized exchange (DEX)
Most centralized exchanges (CEXs), including Coinbase and Binance, are controlled which means the business running the exchange needs customers to deposit funds into their possession and uses a conventional order book mechanism to allow trading. With the entire amount invested in each order, the buy and sell orders are listed.
However, because Uniswap is a decentralized exchange (DEX), customers always keep control over their money as opposed to centralized exchanges that demand traders to hand over control of their private keys.
So, keeping hold of the private keys completely removes the possibility of losing money in the event that the exchange is compromised.
Who Is Better Uniswap Protocol or PancakeSwap?
The trade of digital assets is facilitated via decentralized exchanges Uniswap and PancakeSwap, both of which employ tokens. Many users are curious as to which is superior.
The Automated Market Maker (AMM) concept was established by Uniswap, a decentralized exchange (DEX), where users trade their assets from the liquidity pool using automated market maker technology. Market makers are rewarded with crypto assets as they help cryptocurrency traders by providing liquidity. In that it uses AMM technology and lets users trade from MetaMask and Trust Wallet, PancakeSwap is similar to Uniswap.
On the one hand, some traders may believe that PancakeSwap’s transaction charge is better compared to Uniswap’s. On the other hand, The BSC chain has just 21 validators, compared to over 400,000 on the ETH chain, according to some, who contend that utilizing it increases the danger of network censorship or service problems.
This results in the BSC blockchain seeming to be more centralized than decentralized.
Therefore, it is up to the traders to decide if they want to trade with the risk associated with the central exchange, PancakeSwap, or whether they can afford the higher transaction costs on Uniswap.
Which One Is Better? Binance or Uniswap
Due to their distinctive offers, cryptocurrency exchanges Binance and Uniswap are both highly favored possibilities. However, it is difficult to identify one exchange as the best platform because the decision relies on the investors and their goals; each exchange has its own benefits and drawbacks.
With its distinctive features, affordable trading costs, support for more than 200 digital assets, Binance futures contracts, and round-the-clock customer care, Binance draws in a sizable user base. While Uniswap users are not required to transmit funds, engage in transactions, or contribute to liquidity pools, anybody with access to the internet and an Ethereum wallet is free to take part.
Uniswap and Binance are fundamentally unlike, one employs the AMM paradigm and is decentralized, while the other is centralized and runs in a completely different manner. However, they take into account the various demands of traders.
Uniswap Protocol is the best option for users who value privacy or for those who reside in nations where trading on some centralized platforms is prohibited. Overall, it is better for traders to utilize both Uniswap and Binance to locate more trading chances and earn a profit.
How Uniswap plans to increase market share in order to compete with Coinbase and Binance
In terms of trading volume, Uniswap Protocol is currently unable to compete with Coinbase and Binance.
Uniswap is the largest decentralized exchange with a trading volume of $820 million on the Ethereum mainnet, accounting for nearly 60% of the market. However, the situation is different when we look at the central market, where Binance alone recorded a trading volume of $19 billion over the last 24 hours.
NFTs, according to Uniswap Labs COO Mary-Catherine Lader in an interview with Decrypt at the Messari Mainnet conference in New York, is an approach (strategy) to close this gap. NFT is viewed by the Uniswap team as a means of advancing into the core competition.
Uniswap Labs purchased the NFT Genie complex in June.“We were really excited about NFTs as a growth sector to get more people into cryptocurrency, and to get more people to exchange tokens,” he said.
Of course, centralized exchanges like Binance, Coinbase, FTX, and Kraken are all entering the NFT market, giving Uniswap competition from firms in the center. But it is still a useful step toward closing the deficit. “It made sense for us, from a market structure perspective, to help Uniswap create an experience where you can buy and sell any digital asset you might have,” he said.
In addition to purchasing Genie and developing the Uniswap Diamond with experienced traders and liquidity providers in mind, Uniswap is prepared to take on the industry’s heavyweights.
