What is Uniswap?
Uniswap is a decentralized finance (defi) application that lets users swap cryptocurrencies and earn rewards for staking assets into liquidity pools.
Launched in 2018, Uniswap was actually used at an industry conference (Devcon 3) to demonstrate the significance of crypto-economics and open-source financial apps on the Ethereum blockchain. Uniswap developers, traders, and liquidity providers work together to create a decentralized financial marketplace that is open and accessible to all. Uniswap eliminates the middlemen while facilitating the safe, accessible, and efficient exchange of crypto assets.
The platform also lets developers use its open-source Uniswap Protocol to build liquidity and trading capabilities into any application.
The Uniswap Protocol and the Uniswap Interface were developed by Hayden Adams for Uniswap Labs. Prior to developing Uniswap, Adams previously worked as a mechanical engineer for Siemens.
Uniswap was originally built on the Ethereum network and was later upgraded to work with the Mainnet, Optimism, and Arbitrum blockchains. Recently, the Uniswap community voted to also deploy on Polygon to give users faster transactions, lower gas fees, and access to more applications. Uniswap foresees the potential for cross-chain applications to play a leading role in the evolution of the user experience.
The first version of the Uniswap Protocol (V1) was a proof-of-concept for AMMs (automated market makers). Version 2 was launched in May 2020, and Version 3 was launched in May 2021, and introduced new options, such as the ability to allocate liquidity within a certain price range.
The Basics of Uniswap
Rather than serving as a traditional market maker, Uniswap is what’s known as an automated market maker.
- The protocol is made possible by a suite of immutable, censorship-resistant smart contracts that facilitate the creation of liquidity pools.
- Stakeholders provide liquidity to the exchange so that assets may be bought and sold by other users creating more efficient markets.
- In return, liquidity providers are awarded a percentage of the trading fees. Each successful trade using a given investor’s liquidity pays out between a 0.05% – 1%
- Users can anonymously participate in Uniswap by simply connecting a crypto wallet. There is no signup process nor KYC requirements.
- Unlike traditional exchanges, traders do not need to match with individual counterparties to complete a trade.
Uniswap allows crypto traders to swap more than 30,000 different crypto assets.
Key Concepts of Uniswap
Liquidity pools
Liquidy pools are reserves that contain various crypto assets that can be traded with each other.
- A separate liquidity pool must be created for each trading pair.
- The pools keep track of aggregate liquidity reserves and the pre-defined pricing strategies set by liquidity providers.
- Reserves and prices are updated automatically for every trade.
- There is no central order book, no third-party custody, and no private order matching engine.
Uniswap governance
Uniswap isn’t governed by a corporation, rather it is governed by a decentralized global community of over 4,000 delegates. In order to become a delegate one needs only to hold the platform’s native cryptocurrency, UNI. Votes are weighted by the number of UNI held by each delegate.
Delegates can collaborate on the ongoing evolution of Uniswap by proposing and voting on upgrades.
The Uniswap Grants Program
The Uniswap Grants Program provides funding for promising projects seeking to build upon the Uniswap protocol. So far, more than 300 defi applications have been built using the Uniswap Protocol.
Uniswap token UNI
Uniswap’s native token is UNI. According to Crypto.com, the market capitalization for the UNI token is over $500 million as of October 2020. As of Jan. 25, 2022, the UNI token has a market cap of over $6.6 billion making it the 24th largest.
Is Uniswap Safe?
Of course, the question on every UNI investor’s mind is, “Is Uniswap safe?” Because if the Uniswap Protocol were to be vulnerable to hacks, it could potentially send Uniswap price to zero. As with other protocols, security measures have been put in place but it’s important to note that investors go in at their own risk as there are no absolutes with any type of investing. According to CryptoVantage, Uniswap is extremely safe. Essentially, Uniswap has the same security as the blockchain on which it runs.
Because Uniswap is decentralized and its utility is the result of automated smart contracts, there is no central server to hack. Funds provided to liquidity pools cannot be removed by any account other than that of the stakeholder’s. This means a hacker would need to gain control of the stakeholder’s wallet rather than the application itself.
Moreover, the code that runs the platform and the smart contracts has been thoroughly audited and tested.
So, is Uniswap safe? While there’s no clear cut answer to this question, what we can say is that there are a number of preventative measure put in place to protect Uniswap from hacks. These measures include decentralization, immutable contracts, and multi-chain functionality.
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Uniswap vs. Sushiswap
Uniswap is often compared to SushiSwap, which some see as its popular rival. Launched in 2020, Sushiswap core code is actually a slightly modified copy of Uniswap’s open-source code. Both of these decentralized exchanges act as automated market makers (AMM) and both rely on liquidity pools and trading pairs.
However, whereas Uniswap no longer offers a liquidity mining program, SushiSwap does. SushiSwap users can stake tokens and earn SUSHI governance tokens. Furthermore, Uniswap does not offer lending and margin trading.
Uniswap swap exchange fees range from 0.05% to 1%, whereas SushiSwap charges a flat 0.3% on all trades. This makes Uniswap seem to be a favorable choice for trading large volumes of crypto assets. Large volume traders are generally less likely to be concerned with earning governance tokens.
Also, Uniswap allows users to concentrate their liquidity into their desired price range, while SushiSwap does not. Again, this could be a big concern for those with large stakes. Given this and better trading fees, Uniswap has reached a high of $10.4 billion TVL in December of 2021, whereas SushiSwap reached a high of $6.9 billion TVL in November of 2021.
How to Buy Uniswap?
Bitcoin IRA simplifies the process for you to invest in UNI and potentially grow your retirement savings. If you’re looking to get started with opening a crypto IRA to start investing in UNI, just follow these simple steps:.
- Create an account on our platform. This entire process typically only takes a few minutes.
- Fund your account by transferring funds from your personal bank account or another retirement account.
Start trading. Once your account is funded, you’ll be able to access your dashboard and digital wallet to trade around the clock in real-time.
Uniswap Crypto IRA and Taxes
Gains on cryptocurrency investments are taxed the same as any capital asset. First, you pay taxes on your income. Then, you pay capital gains taxes on profits from the sale of crypto.
However, by investing in UNI via a Roth IRA with Bitcoin IRA, investors can potentially achieve substantial tax savings. While a Roth IRA doesn’t allow investors to deduct contributions as does a regular IRA, a Roth IRA may save investors from paying 20% or more in capital gains taxes when funds are withdrawn (after a minimum retirement age of 59-and-a-half).
Uniswap Crypto IRA and Taxes
The fact that Uniswap’s market cap has seen record surges of over $22 billion shows that many investors have high confidence in Uniswap’s continued growth. In fact, by market cap, Uniswap is by far the largest decentralized exchange (DEX) in the world surpassing the market caps of Aave, Maker Dao, Fantom, Pancake Swap, and Compound over the past 12 months.
Because decentralized exchanges, such as Uniswap, are essentially blockchain-based applications that utilize automated algorithms to handle transactions, they can’t be regulated by any central or government authority. This adds to the confidence that Uniswap may potentially be around for a long time to come.
Moreover, Uniswap allows stakeholders to earn commissions on their crypto without having to create an account and provide personal information. In today’s world where privacy is of high importance, one’s anonymity is becoming more and more appealing to crypto investors.
See below for a table of future Uniswap price predictions.
How to Create a Bitcoin IRA with Uniswap
Now that you’ve learned what Uniswap is, you may have a good idea of the opportunities presented by this fast-growing crypto trading protocol, and perhaps you may be ready to start investing in UNI. By opening a retirement account with Bitcoin IRA you’ll have access to the most secure1 cryptocurrency IRA platform available.
Uniswap Price Predictions
According to CoinPriceForecast.com, as of 01/25/2022 Uniswap price was $10.60 with a long-term Uniswap price forecast of $25 by the end of 2025.
Source: CoinPriceForecast.com
By the end of 2022, Uniswap price is predicted to be above $16, still down 12% over the year. However, in five years’ time, Uniswap price could potentially approach $30, an increase of about +180%.
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1Security may vary based on asset chosen and custody solution available.
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