Recently, we’ve released a big article on the history and technology of Uniswap DEX, ahead of the new Uniswap protocol v3 release.
Since then, you all shared interesting questions on our Telegram community. So to clarify some technical basics, here is a quick practical guide to Uniswap.
This is not financial advice. Remember to always do your own research and follow the best practices for safe crypto management.
Is Uniswap easy for beginners?
Uniswap for trading assets and providing liquidity is fairly easy. To exchange on Uniswap, it’s enough to go to the Uniswap browser interface (aka website) at Uniswap.org and click ‘Use Uniswap’ in the right top corner.
What coins can I exchange on Uniswap?
Uniswap app is built on Ethereum blockchain and allows the exchange of ERC20 assets. Currently, Uniswap supports 61 coins and tokens: Here’s a full list.
What do I need to use Uniswap?
You need an Ethereum wallet that’s compatible with Uniswap, for example, Metamask. You’ll find the list of compatible wallets on the website of Uniswap. Uniswap.org.
If you type Uniswap.com instead of Uniswap.org you’ll be redirected to the Sushi Swap website. Sushi Swap is a Uniswap competitor that was created from the fork of the Uni-V2 protocol. Sushi creators and fans are known for their aggressive marketing tactics on socials and a near exit scam of their founder who later gave the money back.
Am I using Uniswap V2 or V3?
Currently, the browser interface of Uniswap connects to the V3 protocol by default. The Swap interface connects to both v3 and v2. If the token swap is advantageous on v2, it will notify the user and perform the swap on v2.
The liquidity providing (the Pool section) is set to v3; however, you can still opt for v2, by pressing the “Looking for your v2 liquidity” link at the bottom of the page.
How to Swap tokens on Uniswap?
Go to the Uniswap.org domain. Press Use Uniswap in the right top corner of the page. Or scroll down in the phone browser to find the Use Uniswap button. Uniswap will then lead you through the next steps:
- Connect your Ethereum wallet to Uniswap (or learn more about Wallets if you don’t have any)
- Select token you want to swap from
- Select token you want to swap to
- Click “SWAP”
- Preview transaction
- Confirm transaction in your wallet
What are the fees for DeFi Swaps and Providing Liquidity
The Uniswap collects a 0.3% fee on all trades, which are added to each token pool. You also have to pay a GAS fee for processing transactions on the Ethereum blockchain.
Currently, due to high levels of transactions on the Ethereum blockchain, the GAS prices on transactions on DEXs and NFTs markets are quite high, circa $50 (as of May 2021) and rising.
The Uniswap v3 will soon also be released on side chain Optimism. Side chains are layer 2 scaling solutions that could help solve the congestion and high fees and offer an alternative to Ethereum mainnet.
Uniswap v3 was launched on the 5th of May and received a trading volume of $150m in the first 24h.
🎂 It’s been ~24hrs since the launch of @Uniswap v3
v3 24hr vol: $150m
v3 tvl: $300m
vol/tvl (efficiency) = 50%
v2 24hr vol: $1.1b
v2 tvl: $8.1b
vol/tvl = 13%
🤯 In it’s first day, v3 has already seen more than twice the volume that v2 saw in its first month
— Hayden Adams 🦄 (@haydenzadams) May 6, 2021
V3 promises higher transaction volumes at the lower Total Value Locked capital, increasing the capital efficiency for liquidity providers.
On May, 9th the capital efficiency of v3 surpassed 120% creating a $630m volume on $522m TVL in @Uniswap v3.
In the past 24 hours Uniswap V3 has done more volume than every other DEX on Ethereum.
All this with only $500mm in TVL – less than SushiSwap, Curve, Bancor, and Balancer.
Capital efficiency isn’t a meme. pic.twitter.com/aUGqxi2NEY
— Ryan Watkins (@RyanWatkins_) May 8, 2021
How to Provide Liquidity on v3 protocol
New Uniswap v3 offers a multi-tier choice of fees (0.05,% 0.3%, 1%) that reflect the provider’s risk depending on the level of price fluctuation of the token pair. Uniswap tutorial suggests the lowest fee for stable assets like stable coins, mid-tier fees for standard assets, and the highest fee for exotic assets with higher price volatility and lack of price correlation between assets.
Currently, LPs (Liquidity Providers) need to manually set the market price brackets in which they want to provide liquidity. They will then earn fees only on trades that happen within the brackets.
Uniswap warning that selecting a starting price significantly different from the global market price will expose LPs to an immediate arbitrage opportunity! So make sure to do your research and read the Uniswap guide before providing any liquidity.
How to Remove Liquidity from Uniswap?
You always provide and remove token pairs and not singular tokens.
To close your position on Uniswap, go to the Uniswap.org interface. Connect your wallet.
- In the Pool dashboard, change Add Liquidity to Remove Liquidity from the dropdown menu.
- Choose the token you want to remove.
- Set the amount of token to remove and Uniwap will match it to an appropriate amount of Eth. If you don’t have enough Eth to withdraw Uniswap will inform you and you’ll be able to change the token ratio.
- Check if withdrawal prices are satisfactory.
- Adjust GAS price in your wallet dashboard if needed and press confirm.
- Confirm and wait for transaction processing on the Ethereum blockchain.
Author: Natalia Nowakowska