Uniswap Changed The Face Of Cryptocurrency Trading
In 2016, Vitalik Buterin of Ethereum suggested that Decentralized Exchange (DEX) is the way to go if the Crypto industry can have features like on-chain automated market-making with distinct qualities. The proposition lucidly stemmed out of the insufficiency of Centralized Exchanges (CEX).
Cryptocurrency Exchanges operated by intermediary administrators relinquishing the control of funds by users and utilizing conventional order book methods to facilitate trading. Hence, to ensure a trade, all buy orders have to be filled by a sell order on the reverse section of the order book for the corresponding sum and value of the digital asset and the other way round.
Although some Decentralized Exchanges evolved to solve the abrasive impediment of third-party involvement, it wasn’t a sufficient solution. They were slow in execution and lacked the liquidity to ensure a seamless trading experience.
It wasn’t until later when Hayden Adams utilized the concept Buterin suggested into an operative output — Uniswap. The move laid the foundation for a new movement in the Cryptosphere that is gradually altering many inadequacies in the exchange sector with the infusion of some innovative concepts.
Uniswap’s Solution
Built on the Ethereum Blockchain, Uniswap isn’t controlled and administered by a sole outfit. It employs a comparatively novel kind of trading standard known as the Automated Liquidity Protocol.
Liquidity Pools: Utilizing Liquidity Protocols to execute trades instantaneously, order book matching becomes obsolete. The methodology renders incentives to individuals to make liquidity available for trading and swapping through Automated Market Making (AMM).
In return, these Liquidity Providers (LP) receive a proportional percentage of their contribution from the transaction fees. Instead of token hodlers hanging on to their assets, they can employ them in a pool to make more money.
Non- Custodial Wallets: For the first time in the history of Cryptocurrency trading, users have custody of their funds when transacting. It paved the way for the letters and spirits of the Blockchain, which forbids giving access to your private keys, especially to a central authority.
All traders have to do is to link their ERC20 compatible wallets like MetaMask, WalletConnect, Portis, Fortmatic, and even Coinbase Wallets to Uniswap, and they can start to provide liquidity, swap, and trade tokens. These non-custodial wallets safeguard users’ funds in case of a security breach on the platform.
Governance: Before the inception of Uniswap, governance was only a feature of community-led Cryptocurrency projects like Dash, Decred, Smartcash, PIVX, and a few others. Users of exchanges had no say in the decision process.
However, this was about to change when Uniswap entered the market with a governance system that allows users of the platform as part of the decision-making process. Hodlers of the native token UNI can vote on all the decisions concerning the ecosystem.
Open-Source: Uniswap amplifies the Blockchain once more as an open-source protocol in nature. Accordingly, anyone can fork their codes to build a similar exchange or project.
The project is groundbreaking creativity driving a staggering paradigm shift in the Cryptocurrency market. While Centralized Exchanges require hefty fees for listing coins and tokens, you can do the same for free on Uniswap.
Inspiration
This breakthrough is a crucial entirety in advancing the peer-to-peer intent of the underlying technology of Blockchain. Uniswap accurately defeated the challenges of a Decentralized System operating on a centralized infrastructure, ushering in a new era of further financial freedom.
The pioneering role provided by Uniswap injected new energy into the ecosystem, stimulating a plethora of services that are transforming the industry like never before. These are the mechanisms defining the new frontiers of modern-day financial products for the technologically inclined.
Automated Market Making for, instance, is now the new norm in the Exchange Market today. Even more projects and chains are sprouting out in the market today, offering the same features built outside the Ethereum domain with their unique innovations.
It is the same impulse that GDeFi is engaging in forking Uniswap to build our NOVELTY GlobalSwap DEX. Though essentially premised on Uniswap, GlobalSwap development is in line with the GDeFi protocol, robust, and foolproof. GlobalSwap is the remedy to the numerous harmful difficulties tormenting the DeFi industry and notably DeFi exchanges since conception.
Challenges
The most pernicious hurdle facing Uniswap, and for that matter, other DEXes in the ecosystem, is the high gas fees on the Ethereum Blockchain. These days transaction fees for moving ERC-20 assets can go as high as $50, if not $100 and above.
Ethereum 2.0 touted as the relief to this debilitating factor, an antithesis of the Blockchain is not yet in sight. No one knows the release date as the DeFi sector continues to burgeon at an incredible pace.
This bottleneck brings us to another crossroad! It impedes the adoption and scaling of decentralized finance in the mainstream markets.
However, at Global DeFi (GDeFi), we solve the exorbitant gas fees impediment with another Blockchain remedy. We are implementing a layer 2 solution on the Matic network to provide cheaper transaction fees, next to nothing.
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