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What is Uniswap ? How does it work?

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zaara hary
What is Uniswap ? How does it work?

Uniswap, the well-known leader in the decentralized exchange space is quite becoming popular among the DeFi enthusiasts and also many crypto holders, traders, and lovers.

In short, Uniswap is currently the most popular decentralized exchange in Decentralized Finance which records a daily trading volume of $263M, which accounts for about 95% of all DEX trading.

This clearly shows that Uniswap plays a significant role in the decentralized exchange globe.

Uniswap, Ethereum's most popular DEX Protocol which has 38,000 daily active users allows users to swap various Ethereum tokens. This Uniswap protocol comes up with two versions, namely V1, V2, and Uniswap V2 is just the second iteration of Uniswap which includes some new improvements and trading features in the exchanges. The operations of Uniswap V1 will be continued as the Ethereum exists.

Origin of Uniswap

On November 2, 2018, Uniswap was created by Hayden Adams, an Ethereum Developer along with the help of Noah Zinsmeister and Dan Robinson.

Uniswap is a result of Adam's inspiration over an equation which is known as the market maker equation, X * Y = K. This is how the DeFi Protocol Uniswap started its first waves in the crypto market.

Difference between Uniswap and Traditional DEX Platform
DEX platform relies on an order book mechanism and in Uniswap there is no order book.
In DEX, each new token must be manually listed, whereas Uniswap is available for all ERC 20 tokens.
Traditional DEX does not have pool features and but Uniswap allows users to participate in pools and gain rewards.
Uniswap does not require any deposit, gateways, or custody for your money whereas DEX requires custody.
What Makes Uniswap a Popular DEX Platform Among Crypto Traders?
Initially, the cryptocurrency exchanges are carried out in a traditional way called centralized cryptocurrency exchanges, where exchanges of cryptos happen with the presence of central authority. As days passes, and the decentralized ledger technology blockchain started to sound high and there arose decentralized exchanges to short out the problems of centralized exchanges such as mismanagement, hacking and arbitrary fees.

Since, decentralized exchanges possess their own problem known as liquidity, which refers to a lack of money flow in an exchange that makes trading faster and efficient.

Here comes a DEX platform that tries to solve the liquidity problem of decentralized exchanges, Uniswap. The Uniswap protocol creates liquidity by allowing the exchange to swap Ethereum tokens without relying on buyers and sellers. This nature of eradicating liquidity issues makes Uniswap more popular among crypto people.

The other main distinct feature of Uniswap is its pricing mechanism known as the " Constant Product Market Maker Model", which allows users to add any token to Uniswap by funding it with an equivalent value of ERC 20 token or Ethereum.

Here is an easy way that helps you to launch your own DeFi based DEX platform like Uniswap. Get Uniswap Clone Script from Bitdeal Now !

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