HOW TO LIST A DEFI TOKEN ON UNISWAP?

  1. How does Uniswap work?
  2. How to list a DeFi token on Uniswap?
  3. How to remove liquidity from Uniswap?
  4. What are the advantages of Uniswap?

What is Uniswap?

Created by Hayden Adams, Uniswap is a decentralized exchange protocol that is built on Ethereum to swap ERC20 tokens. It functions as an automated liquidity protocol, which implies that it does not follow the traditional “order book” model. It allows its users to swap tokens and trade without any intermediaries, thus ensuring a high degree of decentralization.

  • add liquidity/ provide liquidity
  • remove liquidity from pools

Uniswap Token — UNI

The native token of the Uniswap protocol is UNI, which allows governance rights to its owners. All UNI holders can vote for changes to the protocol. Out of the UNI genesis supply, 60% of the tokens are allocated to the Uniswap community members. The remaining 40% are supposed to be made available to team members, investors, and advisors over the time period of four years.

  • ETH/USDC
  • ETH/DAI
  • ETH/WBTC

How does Uniswap work?

Contrary to the traditional architecture of the “order book” model which many crypto exchange platforms use, Uniswap works with the help of the following two components:

  • Constant Product Market Maker Protocol

Liquidity Pools

Simply defined, liquidity pools refer to token pools locked in smart contracts. They provide liquidity to facilitate trading. Several decentralized exchange platforms use liquidity pools.

Constant Product Market Maker Protocol

The constant product market maker protocol is a form of the much known automated market maker (AMM) model. Basically, automated market makers are smart contracts that hold liquidity pools. These pools are funded by liquidity providers so that the traders can trade against these pools. Traders pay a fee to the pool in return, which is proportionally divided among the liquidity providers, according to their shares. The constant product market maker protocol works similarly, along with the advantage that any token can be added to Uniswap if it is funded with an equal value of ETH or ERC20 token being traded.

  • can be redeemed for the share they represent.

x x y = k

So, if you buy 1 ETH for 300 USDT via the ETH/USDT liquidity pool, you increase the USDT portion and reduce the ETH portion of the pool. This implies that the price of ETH will rise because k must remain constant, so the price of ETH is based on how much shift the given transaction/trade causes between x and y. This is the mechanism that determines the pricing. Hence, it is conceivable that with large liquidity pools, it is easier to process large trades as the shift between x and y is lower as compared to smaller liquidity pools.

Impermanent Losses

Liquidity providers earn a fee in exchange for providing liquidity for traders to swap tokens. But often, liquidity providers don’t take every aspect into account while providing liquidity to the pools. One such aspect is impermanent losses, which you’ll understand better with the help of an example.

Price of 1 ETH = 100 USDT

This implies that you have a 10% share of the pool. The total liquidity here will be 10,000. If a few trades take place and cause a shift in the ratio of USDT and ETH to 2,000 and 5 respectively, the price of 1 ETH will rise to 400 USDT. Why? The reason behind this is precisely what we discussed earlier, i.e., the total liquidity must be constant. So, the arbitrage traders will remove ETH and add USDT to the pool until the ratio stabilizes.

  • by earning LP fees over time.

How to list a DeFi token on Uniswap?

In order to list your DeFi token on Uniswap, there are a few prerequisites which you must take care of:

  • Deploy your ERC20 token contract to Ethereum mainnet
  • Deploy your ERC20 token contract to Ethereum mainnet
  • Send your ERC20 tokens to your MetaMask wallet

Create an Exchange

The first thing you need to do is create an exchange so that Uniswap knows about your token. You may take the following steps to create an exchange:

Add Liquidity

Now that you have created an exchange for your tokens, it is time to add liquidity. You will have to deposit both ETH and your own token. The price will be set according to how many tokens you deposit. Why? Because, as we discussed earlier, the tokens are supposed to be deposited in pairs and should be of equal value, as the total liquidity of the pool must remain constant. Hence, if you deposit 1 ETH with 1 of your token, then it would imply that your token price will be equal to 1 ETH.

How to Remove Liquidity from Uniswap?

Suppose you sell your tokens to investors and wish to remove your liquidity/deposits from the platform. You may follow the following steps to do so:

What are the advantages of Uniswap?

Uniswap offers many advantages, which make it the preferable choice as compared to the traditional crypto exchanges, such as:

  • Security
  • Trustlessness
  • New Tokens
  • Low Fees

Anonymity

Uniswap provides high-rank security. As the protocol is non-custodial, it does not hold any funds. Also, its smart contracts have been audited by several teams, which makes it more reliable

Security

Uniswap provides high-rank security. As the protocol is non-custodial, it does not hold any funds. Also, its smart contracts have been audited by several teams, which makes it more reliable.

Trustlessness

As we discussed earlier, Uniswap is a non-custodial protocol. It does not hold any funds, and there are no intermediaries involved. Hence, all trades take place directly from your wallets. You are the custodian, with the responsibility of your:

  • private keys

New Tokens

Uniswap provides its users with instant trading access to new tokens. Users can create an ERC20 token and then pair it with ETH to produce liquidity for new pools.

Low Fees

Uniswap is not designed to charge fees. It does not charge its users with any platform fees or listing fees. The only cost it incurs is a 0.3% fee per trade, which is very low as compared to other protocols or centralized exchanges.

Conclusion

Uniswap is a very innovative protocol built on Ethereum, and with the advantages it offers, it has managed to gain a lot of traction from the right investors. It is an intriguing step forward towards a trustless and decentralized financial system.

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