Welcome to our first Deep Dive into DeFi with our study on Uniswap.
- Uniswap is a special type of decentralized exchange (DEX) called “Token Swapper” which provides an user friendly and low latency interface for direct ETH to ERC20 token swapping
- A mechanism called “Constant Product Market Maker” is used for determining the exchange rate and price slippage, eliminating the need for an order book
- There are 3 actors in Uniswap: Casual users, Liquidity providers, and Arbitrageur; each contribute to the system in their own way
- Liquidity providers are incentivized to provide capital to earn transaction fees generated by casual users, and arbitrageurs are incentivized to provide external price information by earning spreads between Uniswap and other markets
- The protocol gives regular users a passive way to earn transaction fees as liquidity providers
- Uniswap is an important part of the developing DeFi landscape, and has already been used as a price oracle and source of liquidity for other players in the industry
Read the full PDF version of the Uniswap Report here.