How do I use Uniswap exchange? Earnings and investments in 2022
Uniswap is a decentralized brokerage protocol (DEX) founded by Hayden Adams in 2018. Its DEX allows for the trading of ERC-20 standard tokens in a non-custodial manner via a software or hardware wallet.
Uniswap exchange allows you to earn with minimal investment. This is relevant in the year 2022.
Uniswap launched UNI, its governance token, via a distribution ("airdrop") on September 16, 2020.
UNI currently has a market capitalization of $5.2 billion, and is ranked 13th on the Brave New Coin (BNC) chart, where $1.5 billion has traded in the last 24 hours.
Volumes traded in DEXs have increased dramatically in recent months. Uniswap led this volume, with over $25 billion in January alone.
Despite increasing competition, volume at Uniswap has continued to grow on a monthly basis. Sushi Swap also experienced a rapid increase in volume, trading over $12 billion in January.
Trading on Uniswap works through an automatic market maker (AMM), which uses a formula x * y = k, where x represents the quantity of a token in a liquidity pool, y is the quantity of another asset, and k is a fixed constant.
The value of both assets in Uniswap's AMMs is 50:50. When one token in the AMM pair appreciates or depreciates, the other token will be bought or sold to make up the difference.
Liquidity providers (LPs) supply their capital to a specific pool of liquidity. LPs replace the traditional order books of centralized brokerage houses. Thus, LPs receive 0.3% of the fees traded and generated by trades in the pool.
Other incentives, such as "yield farming" - lending funds to other users in exchange for an interest rate - and "liquidity mining" - rewarding a pool of market makers for encouraging liquidity for a specific token - also encourage LPs to provide liquidity.
AMMs also feature impermanent loss (IL), which happens when the price of an asset deposited in a liquidity pool changes, compared to when one asset was deposited, related to the other asset in the pair.
The greater the change, the greater the possibility of an impermanent loss.
This type of mechanism is called "impermanent" because as the relative prices of the tokens in the AMM return to the price when they were deposited, the loss disappears and the trading fees serve as a reward.
For example, two assets in a pair, which are highly correlated, such as wBTC and renBTC, will have little impermanent loss for a long period of time compared to when they were initially deposited.
Pairs such as ETH/USDC or UNI/ETH are highly uncorrelated and will have an impermanent loss for a long period of time compared to when they were initially deposited.
All in all, because of the impermanent loss, participation in AMMs presents the risk of underperformance in a basic buy-and-hold strategy.
In September 2020, a total of 150 million UNI were issued and distributed.
The nearly 50,000 liquidity providers received 49 million UNI and any address that interacted with a standalone Uniswap contract also received 400 UNI (a total of 251,534 addresses) and the community received 100 million UNI.
The governance treasury retained 43% of the total UNI supply to distribute it over time. After four years, a perpetual, annual inflation of 2% to UNI will take place.
Currently, UNI has a supply of 287 million tokens in circulation, with a maximum supply of 1 billion.
Over $3.12 billion is locked up in the Uniswap protocol in a mix of assets, including bitcoin (BTC), ether (ETH) and dai (DAI). The total blocked value (TVL) in contracts on Uniswap ranks it fourth, behind the MakerDAO, Aave, and Compound protocols.
Statistics on the blockchain for the UNI token show a significant increase in both the number of transactions per day and the average transaction size in recent weeks.
Transactions per day reached a record high of 294,000 during the initial token distribution in September 2020.
Since December, the number of transactions per day has increased fourfold to over 12,000. Average transaction values have also increased sharply since December, along with the token price.
The Kalichkin network's weekly value of the estimated proportion of daily transactions (NVT) on the blockchain (red line in the chart below) has ranged between 20 and 285 in recent months.
A clear downtrend in NVT suggests that the coin is undervalued based on its utility and economic activity, which can be considered a positive price indicator.
Daily active addresses reached almost 180,000 during the initial token distribution in September 2020. Currently, there are more than 8,000 active daily addresses, a number that has continued to rise in recent months.
Regarding development activity, Uniswap's GitHub account has 35 repositories and has seven active developers.
A large part of the coins use the GitHub developer community. Files are saved in folders called "repos" or "repos".
Changes to these files are logged with "contributions" (or "commits"), which save a record of what changes were made, when and by whom.
While contributions represent quantity and not necessarily quality, a large number of contributions can indicate increased interest and activity by developers.
The distribution of UNI tokens in 2020 was so successful that it inspired several other DEXs to do the same. The volume, total blocked value, and token blockchain statistics suggest a continued large increase in the use of Uniswap's DEX and UNI token in recent months.
Technical aspects for the UNI/USD and UNI/BTC pairs show an uptrend, as the with prices are above the 33-day MME and the four-hour Cloud.
Strong resistance is between $22.50 and $27 and between 64,000 sats and 110,000 sats for the UNI/USD and UNI/BTC pairs, respectively. Both pairs should show the strong support, based on the daily Cloud at $13.50 and 43,000 sats, respectively.
Uniswap exchange today is one of the largest crypto exchanges.