Written by Nezwan Helmy
The cryptocurrency Uniswap ($UNI) has quickly risen to be a major DeFi (Decentralised Finance) protocol and one of the fifteen largest crypto coins in the world (as of yet), despite the fact that it has only been in operation for exactly 12 months on the Ethereum blockchain.
So, does Uniswap offer a safe way of increasing the strength of your crypto portfolio?
What precisely is Uniswap, and how does it work?
A Decentralised exchange, Uniswap allows investors to trade in a simple and straightforward manner. As a result of a unique mix of financial regulations in the United States, Uniswap DEX has forged an easier access to Altcoin trading on Fiat-Crypto gateway exchanges, which allow investors to buy and sell cryptocurrencies for fiat money.
For this reason, Uniswap became very popular. Uniswap is able to bypass the majority of regulatory restrictions, since users retain ownership of their assets in their wallets and developers only need to provide the software that allows Uniswap to function.
Furthermore, Uniswap’s UNI tokens generated a return on investment of more than 5,000 percent for investors. As a result of this, the company’s market value has increased to about $15 billion.
A popular platform among crypto investors.
Since last year, Uniswap has processed more than $350 billion through up to 60 million transactions.
As a result of its foundation on the Ethereum blockchain, users of the exchange will also need ETH in order to use it and to pay for transaction fees.
Aside from that, the underlying value of the tokens has begun to catch up with market expectations. It is believed that $UNI coin holders now have more than $6 billion in total value locked.
However, it is its liquidity pools, rather than other aspects of the exchange, that are probably the most intriguing. Users must first connect their wallets to the Uniswap platform before they can begin using the service. Then, in order to provide liquidity for odd asset-trading pairs, they must place their cryptocurrencies into smart contracts and lock them up for future use.
Uniswap is not one of a kind – we also have PancakeSwap.
However enticing Uniswap may seem, it is essential to note that there are a number of alternative Decentralised exchanges, with capabilities that are comparable to, if not superior to, those of Uniswap.
PancakeSwap ($CAKE) has thousands of currencies and trading pairs accessible on its platform, which include Bitcoin and Ethereum.
As an added bonus, users who stake their CAKE may be eligible to earn incentives from developers of other blockchain platforms, in exchange for marketing or launching their respective tokens on PancakeSwap, with compounding returns of up to 85 percent each year.
Challenges ahead for $UNI and $CAKE.
When it comes to regulatory compliance, Uniswap surpasses its competitor PancakeSwap, which is built on the Binance Smart Chain (BSC) rather than Ethereum’s ERC-20 and as a consequence, is tied to the problems affecting its parent exchange, Binance.
But, it does not mean that Uniswap is unproblematic. This is due to Uniswap’s inability to control its ultra-leveraged, Margin trading products, which makes banks and governments across the globe hesitant to accept it. And since $CAKE runs on BSC, PancakeSwap may also be subject to scrutiny.