How to Swap Tokens in Uniswap

Sep 24, 2021 07:54 PM ET
How to Swap Tokens in Uniswap

Usually, when we want to buy or sell cryptocurrencies, we go to centralized exchanges. These exchanges ask us for information such as email, phone number, identity card, full name, among other things. The disadvantage of using these exchanges is that you will not find all the cryptocurrencies available nowadays. 

Since being a private company, they have the luxury of selecting which coin will be listed on the platform.

Decentralized sites were born to face the disadvantage mentioned above. Thus, we can find Uniswap, Pancakeswap, Sushiswap, among others. On these sites, we can find many coins to buy without the need for us to give our data.

The rationale behind cryptocurrencies is that they are accessible to everyone, and there are no intermediaries in the transactions. Undoubtedly, it is more reliable for many people to make exchanges through decentralized applications rather than centralized ones since they could act like traditional banks.

In this guide, we will see how to exchange coins in one of the best-known platforms in the world of decentralized finance called Uniswap. 

What is Uniswap?

Uniswap is a Defi project born in November 2018 and developed thanks to a $100,000 funding granted to the developers by the Ethereum Foundation. It has established itself as one of the most potent protocols in the Defi world in a short time. 

The goal of UniSwap is to allow users to execute "swaps" between tokens generated on the Ethereum network (mainly ERC-20 tokens). For example, you can exchange the ETH token for the UNI token.

Swap offers another solution, making immediate changes at the atomic level without going through any centralized entity, all through a protocol. The most revolutionary thing about UniSwap is not the swap itself; it is how they have built into the protocol to make this possible.

Why Uniswap?

Thanks to the fact that the developers have been working on new versions for the last few years, this application has become the most popular and user-friendly for people.

One of the advantages is that it works entirely differently from traditional market models, which is fascinating in its protocol. First, the idea that if you want to buy an asset and somebody has to sell you no longer exists; instead, a pool is created that will provide liquidity so that swaps can be made at any time.

Another advantage is that it cannot be censored because it runs directly on the Blockchain. On the other hand, governments can ban an exchange and can also be hacked, causing losses to those who store their cryptocurrencies in them.

Last but not least are the low commissions when making exchanges within the application. However, it should be noted that as the crypto market is volatile, commissions are sometimes high, and this will depend on the state of the Ethereum network. For more information about commissions, visit this website ethgasstation.info.

Uniswap Analytics

In a crypto market, during the bull run in April 2021, Uniswap recorded $9.5 billion in liquidity, one of the largest cash injections in the Defi ecosystem.

How to swap tokens in Uniswap 

Step 1:

Go to the website. You must use the official Uniswap interface. 

Home of uniswap website

Step 2:

Once you are on the official website, launch the application in the top right corner.

Launch Application Uniswap

Step 3:

Connect your wallet.

Different wallets to connect to Uniswap

Step 4:

Start trading with the Swap (Uniswap Exchange), selecting the tokens you want to swap.

Token selection

In this example, we are going to exchange 0.1 ETH. It automatically shows you the estimated UNI you will receive; as you can see, it’s 6.84649 UNI.

Token Swap example

In addition to this data, we have to take into account several issues:

  • Minimum received: At the bottom, it indicates that you will receive a minimum of 6.339 UNI.
  • Price impact: 1.98% is indicated. It is the difference between the market price and the price I will be charged on the exchange.
  • Liquidity provider fee: 0.0005991 ETH which is the 0.3 % that liquidity providers get in that Uniswap UNI/ETH liquidity pool.
  • Route: At the bottom, it indicates the route it will use to give you the best price. In this case, the route is from ETH to COMP to UNI.

Step 5:

Once we agree on the exchange, press swap. You must take into account that now your Metamask will be connected, and the Ethereum network will charge you an amount of GAS in ETH depending on the number of Gwei at which the GAS is at that moment.

Final step to confirm the swap

If you have enough ETH to pay the GAS of the transaction, everything will work. Finally, press “confirm,” and tokens will appear in your wallet. 

Conclusion

Having seen how UniSwap works and all the possibilities it offers, let's take a moment to reflect on what this innovation represents in the field of finance and why it is revolutionary.

The first point is clear: it is an unprecedented way of forming markets. For the first time, price is not regulated by purchase orders. Now, it is no longer necessary to have buy orders to maintain the cost of an asset. Goodbye to the fortunes spent on market makers to keep the price of an asset.

There is no doubt that we are in a time of change and innovation. The doors that the Defi world opens to us are limitless. 

In the coming years, we will see how blockchain technology will connect the world economically, in the same way, that the internet connects us socially. As a result, anyone in the world can participate and access financial services that were previously only accessible to a minority.

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