This week, I analyze and summarize the features of the Uniswap protocol.
In short, Uniswap is a protocol specifically designed for automated market making. The protocol allows users to redeem tokens but also earn rewards by becoming a liquidity provider and build new liquidity pools on the decentralized crypto trading protocol.
you can:
-Use Uniswap as a traditional AAM, i.e. as an exchanger, liquidity provider or builder;
- Providing liquidity on Uniswap V3, which has a very innovative liquidity management model (at least when V3 is released).
Note: @UniswapV3 is more suitable for experienced LPs who have a good understanding of how this new liquidity distribution system works. Providing liquidity on Uniswap requires more experience than CurveFinance.
1) As with any AMM, DeFi users can interact with Uniswap liquidity pools, and the fees paid on Uniswap vary from pool to pool.
2) The liquidity pool is configured by Uniswap to automatically manage the liquidity of assets in the pool based on parameters.
3) Liquidity providers build liquidity pools in Uniswap by managing the distribution of liquidity itself. This is the Uniswap model: giving liquidity providers more freedom.
4) Uniswap is the leader in DeFi protocols because of its value and long history:
- Durable, non-upgradeable smart contracts to create an automated market maker;
- Designed to prioritize censorship resistance, security, self-regulation and distrust.
5) Uniswap V1 only allows exchange for ETH/ERC-20 trading pairs, with a fee of 0.3%, which increases transaction costs and slippage.
6) UniswapV2 allows swapping between all assets with a fee of 0.05%. Due to the liquidity distribution model of xy=k, this model is constant from 0 to ∞, but is not efficient because a lot of liquidity is not used. For example USDC/USDT pool.
7) Uniswap V3 proposes a more efficient liquidity distribution model, allowing liquidity providers to provide liquidity through instant quotes.
8) UniswapV3 maximizes the liquidity of the useful part of the market and significantly increases the fees charged by liquidity providers. On the other hand, if the price exceeds the range, LP will not provide more liquidity and therefore will not charge More fees.
9) The Uniswap V3 liquidity distribution model is not linear and can be adjusted according to liquidity, which is divided according to the market.
10) Example: On the ETH/DAI trading pair, the liquidity between 1800 DAI/ETH and 1900 DAI/ETH may be much greater than the liquidity between 500 DAI/ETH and 600 DAI/ETH, so depending on the market There are liquidity differences in demand, there are some different slippages and price impacts.
11) Different fund pools have different transaction fees:
-Stablecoin pool fee: 0.05
-Standard non-correlated pool fee: 0.3
-Uncorrelated pool: 1.00%
12) The protocol fee defaults to zero, but can be activated between 10% - 25% of the LP fee
13) UNI holders must delegate to an address to obtain voting rights, even if it is your own address & proposal voting is done on Snapshot.
