Create your own DEX with like Uniswap our Uniswap clone script. Get decentralized exchange development from BlockchainX experts.

1. What is Uniswap and how
does it work

2. One of the best-known Decentralized exchange in the blockchain world is Uniswap, and it
is not for less, because this protocol has become one of the largest DEXs in the crypto
ecosystem, with a locked value that amounts to 5 billion dollars. With this, Uniswap
becomes one of the main contenders for centralized solutions, and leaves behind the
belief that this type of technology could not become truly viable.Uniswap clone
But how has Uniswap achieved this? What technology is behind its design? You will learn
this and much more below.

3. 3
What is Uniswap?
Uniswap is a DEX (Decentralized EXchange or Decentralized Exchange), which allows
you to exchange your cryptocurrencies for others, using smart contracts on the
Ethereum network. This fact already tells us one thing: Uniswap works with ERC-20
Ethereum tokens . Let us remember that an ERC-20 token is a type of standard token
within Ethereum and there is a great variety of these types of tokens. In fact, there are
currently more than 420 thousand different ERC-20 tokens on Ethereum, which gives
us an idea of the huge ecosystem that exists. It is precisely this point that led Uniswap
to its immense success: there is a huge community that needs this exchange
functionality and, if you can make money with it, so much the better.
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4. However, as Uniswap only works with ERC-20 tokens, it is very limited in functionality. For
example, direct trades cannot be made using other cryptos, such as Bitcoin or Bitcoin Cash.
To overcome this limitation, other projects have dedicated themselves to creating ERC-20
tokens that represent these other cryptocurrencies. This is done by creating ERC-20 tokens
pegged 1:1 with that specific crypto, or using other means. A good example of this is RenBTC,
where RenBTC is an ERC-20 token pegged 1:1 to the value of Bitcoin, and guarded by a
decentralized network of nodes. Thus, each RenBTC token can be exchanged 1:1 with BTC
(except for a small commission) and, you can be sure that it will always be so.
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5. Who created Uniswap?
The idea that shaped Uniswap began in the mind of Vitalik Buterin in a paper posted
on the Ethereum Research forum. Under the name "Improving front running resistance
of x*y=k market makers", Buterin showed how Ethereum and its smart contracts
could be used to build advanced financial systems for market makers. This thread
created a huge discussion about the possibilities, among which one answer stands
out, that of Hayden Adams. Adams was a young developer in the Ethereum
community, who was working on a market maker implementation like the one shown
by Buterin. decentralized exchange script

6. How does Uniwap work?
Uniswap is now much more than just a DEX. First of all, we have that Uniswap was
created as an AMM (Automated Market Maker) protocol. This means that Uniswap is
able to enable its users to create markets from which third parties can benefit. The
creation of these markets is self-sustaining, allowing the protocol to generate
income that serves to encourage the injection of liquidity in exchange for a small
interest to its investors. They are the well-known pools, where investors inject
tokens to increase its liquidity, and as it is used by third parties, these transactions
generate commissions that are used to maintain the protocol and give rewards to
investors in said pool.It is, in a few words, the germ of the well-known liquidity
mining.

7. Liquidity control in the pool
Now, at this point we can say that liquidity pools are the heart of Uniswap. The creation and
management of them is what allows Uniswap to provide all the services for which it was
designed. But also, it is the "hook", that which attracts investors to invest in Uniswap with
the promise of making a return on their investment. Let us remember that each token in a
liquidity pool is an opportunity for investors to obtain rewards.This is possible because your
tokens are used to carry out trades and other operations that generate commissions within
Uniswap. From these commissions, the profits come both for the development of the
protocol and those that go to the investors in each pool. Thus, as a pool has a lot of use, the
greater the profits it generates in relation to its liquidity.

8. Oracles and commissions
Oracles also have an important role within Uniswap, as the platform needs information about the
price of tokens that are on its platform. On Uniswap, this feature is controlled by Time Weighted
Average Price (TWAP) oracles. This type of oracle is capable of offering information about the
different tokens within Unsiwap, and feeding the system to recognize and configure the prices
within the protocol. This function of the oracles is fundamental because the system of commissions
and rewards of the Uniswap protocol depends on it.
In the current V3 of Uniswap, the system is maintained and has become much finer and more
configurable. For example, TWAP oracles have been made more efficient in order to avoid
unnecessary Gas expenses. At the same time, the commissions in V3 have been adjusted to allow
for so-called flexible commissions. In this way, LPs have three different types of commissions per
pair: 0.05%, 0.30% and 1.00%. In this way, LPs can better adapt to the volatility of the pairs they
trade with.

9. What is the UNI token or Uniswap Coin?
The arrival of competitors like SushiSwap (a clone of Uniswap), with its application of yield
farming thanks to its SUSHI token, made the SushiSwap community respond, and the best
response was to launch its own token: the UNI token or Uniswap Coin. Thus, on September
16, 2020, Uniswap announces the launch of this new token thought of three fundamental
points:
1. Offer a new reward mechanism for participating in Uniswap pools and services.
2. Reward those who believed in the project from the beginning.
3. Allow for a more decentralized on-chain governance system.

10. THANK YOU