How Does Uniswap Work?
Uniswap is a decentralized finance protocol on Ethereum for swapping ERC-20 tokens. Founded by Hayden Adams in 2018, Uniswap is intended to operate as a public tool that lets its users trade tokens without middlemen. Uniswap is an open-source protocol that allows everyone-developers, liquidity providers, and traders-to take part in a financial marketplace that is accessible to all.
Uniswap has its native token called UNI. The UNI is a governance token that gives investors a chance to convert ERC-20 tokens or Ethereum into other projects on the Ethereum network
Connecting Your Uniswap Account To ZenLedger
- To import your transactions, log in to Uniswap and copy your receiving address.
- Paste the receiving address you copied from Uniswap into the wallet address field in ZenLedger.
- Select the proper coin from the dropdown list.
- Select if the wallet is based in the USA or not.
- Then hit add a coin.
How To Generate Uniswap Crypto Tax Forms?
After you’ve connected your Uniswap account, completed your import, and confirmed that your transaction information and tax liabilities are correct, simply click to download your forms!
How To Buy Uniswap Crypto?
Let’s get started with how to buy Uniswap (UNI) with three simple steps:
1. Create An Account
In case of the absence of ERC-20 token for swapping Uniswap (UNI), you can use centralized exchanges directly for the direct buying and selling of UNI. Once you place your order, your crypto exchange or crypto broker will carry out the order on the basis of pre-set instructions in lieu of commission or fee.
2. Connect Your Wallet
Next, you have to store your tokens away from the prying eyes of hackers in a crypto wallet. There are many such wallets available in the market that aim to keep your tokens protected. It is recommended to use a hardware crypto wallet, instead of a software wallet as the former offers higher security. But if you're looking for something accessible, a software wallet will do the job.
3. Start Purchasing
Now that your account is set up and your wallet is connected, it's time to purchase on your exchange. Here's how to place the order:
Step 1: Determine how much you'll purchase
Keeping the volatility of the crypto market in mind, it is important to observe the current scenario of the market before deciding how many UNI you would need to purchase.
Step 2: Place your order
Now you must place your order on the broker's platform. Here you must specify the type of order that you want to place.
Step 3: Order filling by broker
Once your order is submitted, your task is done. Your broker will now fill the order based on the specifications set by you. In case the order can't be filled, your broker might withdraw it during or towards the end of the trading day or can leave it indefinitely open. Under any circumstance of filing an order or cancellation of the order, you will be notified by email.
How Does Uniswap Work?
Uniswap's most unique feature is its pricing mechanism, the "Constant Product Market Maker Model". In this process instead of letting buyers and sellers determine the price of the token, a common equation is used. The equation is:
x * y = k, where x and y denote the quantity of ETH and ERC-20 tokens available in a liquidity pool and k is a constant value.
The significance of this process is that Uniswap balances the ETH and ERC-20 tokens and also the demand and supply of altcoins and then decides the price of a token. This means that the price of tokens changes only if trades occur.
The Bottom Line: Is Uniswap A Good Investment?
There are various features that set Uniswap apart that make it a good investment option. Let's look at some of those features:
- Uniswap uses a pricing mechanism called the “Constant Product Market Maker Model”
- Allows listing of any ERC-20 token - no permission required
- Smart contracts and liquidity pools can be created if they don't exist for a token
- Latest updates in Uniswap V2 and Uniswap V3
Uniswap V2 was released in May 2020. It offered many new features and technical improvements.
Recently, Uniswap V3 was launched in May 2021 with more advanced features like concentrated liquidity, the ability to change risk levels when volatile assets are being traded, more tier fees, and also inexpensive and accessible oracles. Uniswap V3 also generates non-fungible tokens (NFTs) depending on the liquidity provider's position.