Ȗniswap 𝑬xchange

Uniswap was founded to give liquidity — and hence trade, and the benefits that exchanging brings — to the DeFi community. The protocol uses a formula for automatic exchange

Uniswap is a type of decentralized exchange known as an automated market maker (AMM). A decentralized exchange is one that doesn't have a central authority managing orders. AMMs accomplish this by using smart contracts (programs written on the blockchain) to set prices and execute trades. In doing so, they're able to offer decentralized financial services, or DeFi for short.

LEARN MORE: Defining DeFi (Decentralized Finance)

AMMs like Uniswap can provide crypto trading because of their liquidity pools. A liquidity pool is a pool of crypto funds, contributed by users, locked in a smart contract. Funds from the liquidity pool are used when people want to trade crypto.

Uniswap takes a small fee from every transaction and distributes it among a pool's liquidity providers (the people who have deposited their crypto into the pool). It's a mutually beneficial relationship. Uniswap is able to offer crypto trading because of its liquidity providers. The liquidity providers earn crypto because they receive a cut of the exchange's transaction fees.

How to use Uniswap

To use Uniswap, you connect your crypto wallet. After you do that, here's what you can do on the exchange:

  • Trade crypto: Choose the "Swap" option, then select the crypto you want to trade and the crypto you want to receive.

  • Liquidity mining: Choose the "Pool" option. You can open a new position and deposit any two cryptos that have a Uniswap pool already. You can also check out the top pools to see which pairs are popular.

There are plenty of crypto wallets available. Options include hardware wallets that keep your crypto offline in cold storage and free digital wallets available as an app or browser extension. Once you have a wallet, you can transfer your crypto there and start using Uniswap.

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