- Uniswap is an on-chain protocol that intends to make decentralized exchanges more accessible and reliable.
- As the name implies, a liquidity pool is a huge pool of tokens that are held to facilitate a trade to be performed in decentralized exchanges.
- A smart contract is a self-executing program designed to be triggered upon certain conditions being met.
Ever since the introduction of Bitcoin in 2009, not only cryptocurrency but blockchain technology and all its offshoots have been continuously evolving. Cryptocurrency exchanges are viewed as the finest point of confluence between the non-technical world and the complex technology behind crypto. However, most popular cryptocurrency exchanges were centralized, defeating the entire purpose of cryptocurrency and blockchain.
The centralized cryptocurrency exchanges were conceptualized and quite some of them have found considerable success. To govern these exchanges, there needs to be an exchange protocol. Uniswap is one such exchange protocol created by Hayden Adams facilitating the swapping of ERC20 tokens with ETH tokens.
More about Uniswap
Uniswap is an on-chain protocol that intends to make decentralized exchanges more accessible and reliable. It has been built to address one of the most prominent concerns with decentralized cryptocurrency exchanges – liquidity. Unlike most other decentralized finance platforms, Uniswap utilizes a liquidity pool instead of audiobooks.
This would mean that a decentralized cryptocurrency exchange can now create its own liquidy by using the Uniswap protocol than completely relying on the needs of the buyer and seller.
Uniswap has evolved today – Uniswap version 2 is available. The second version of Uniswap has a lot of advantages like offering flash swaps, resistance to manipulation, direct pooling of ERC 20 tokens, enhanced compatibility with ERC777 standards, and a significant improvement in terms of the interface.
The way Uniswap protocol works is simple and straightforward. As long as the liquidity pool holds the tokens, it can be exchanged for equal value. Once the exchange is completed, the tokens are automatically destroyed.
What is a liquidity pool?
Since Uniswap deals with liquidity pools, it is important to understand what it actually means. As the name implies, a liquidity pool is a huge pool of tokens that are held to facilitate a trade to be performed in decentralized exchanges. Keeping in mind the security, these liquidity pools and the tokens are secured with smart contracts that make it impenetrable by fraudsters and people with malicious intentions.
Even in the centralized exchanges, there might be instances of a few market makers intending to push only a certain type of asset, making it difficult for users who process anything other than what these market makers wish to promote. To address this discrepancy, a liquidity pool is introduced. These liquidity pools avoid constant changing of order book price value, keeping the entire exchange ecosystem less susceptible to malicious market influences. It also facilitates easy exchanging of tokens if both the tokens are present in the liquidity pool.
The relevance of smart contracts
A smart contract is a self-executing program designed to be triggered upon certain conditions being met. The smart contract can be considered the epicenter of blockchain technology. It is these smart contracts that facilitate the automatic execution of a task without the intervention of third parties. When it comes to Uniswap, smart contracts are written in this exclusive language call Solidity.
The salient features of Uniswap
Needless to say, the Uniswap protocol does not involve any central authority or order books that are prevalent in most mainstream exchanges. The liquidity is made possible automatically through the open-source Uniswap protocol.
It is this automation of liquidity that enables trading without mandating an order book. The liquidity pools are created by the liquidity providers. Once this is done, it is offered to the Uniswap protocol.
The decentralization offered by the Uniswap protocol has two distinct advantages. The first one is, needless to say, the rendering of the idea of intermediaries obsolete. Tokens can quickly be exchanged by the participants of the platform. The pricing is also handled automatically as they’re set previously.
Liquidity in the Uniswap protocol does not belong to anyone in particular. Therefore, the price of the tokens depends exclusively on the market value and cannot be set by the buyers and sellers. This mechanism makes the entire ecosystem democratic. Another aspect that adds to the democratic nature of Uniswap is that anyone can create a token and offer it to the liquidity pool without any need for authorization.
The relevance of the Uniswap clone
Uniswap has been a game-changer for decentralized cryptocurrency exchanges and ecosystems in terms of liquidity. A lot of cryptocurrency and blockchain companies have been intent on creating their own version of Uniswap.
This makes quite a lot of business sense as a white label clone has the capacity to save a lot on both time and money. A white label clone also minimizes the possibility of bugs that might interfere with basic functions. In all of this, it should not be forgotten that your white label solution should be packed with features that make it easy and interesting for the users.
Your Uniswap clone should include two-factor authentication. This will ensure that the instances of unauthorized access are considerably reduced. It also facilitates safer trading which is of paramount importance in a decentralized platform.
The clone should make it easy and quick when it comes to buying and selling crypto assets. Uniswap is known for swiftness in transactions and your Uniswap clone should have at least the same level of swiftness if not better.
Anything to do with the blockchain and cryptocurrency is envisioned at a global scale. Therefore, your Uniswap clone script should have support for multiple languages. It is to be remembered that a person is more likely to use a platform if they can avail of native language support.
All these advancements under the hood should be garnished with a simple, interactive, and intuitive interface. This will ensure that all users are comfortable with using the platform/product.
Now that the awesomeness of Uniswap and the possibility of replicating its success with a Uniswap clone script have been established, all that is left for an aspiring crypto entrepreneur to do is to get in touch with a company that specializes in the creation and customization of Uniswap clones. They will take care to understand your requirement, craft the platform, and deliver it to you, so you can kickstart your decentralized crypto exchange platform business in a short period of time.