Development Of DeFi Platform Like Uniswap
Ever since Decentralized services entered the crypto sphere, several DeFi applications and protocols have been developed, offering financial services in a completely trustless way with no reliance on third-parties. One such platform that attempts to DeFi tokens is Uniswap. Offering a feasible alternative to centralized exchanges, DeFi Platforms like Uniswap allow users to swap tokens and contribute to liquidity pools for which they gain interests.
We, at Blockchain App Factory, are pioneers in providing solutions in the Decentralized Finance and cryptocurrency sector. Having designed, developed, and launched protocols and dApps in the likes of DeFi token development, DeFi Smart Contract Development, DeFi blockchain architecture development, our services are sure to scale your Uniswap like protocol to great heights.
Significance Of DeFi Platforms
A few years ago the majority of cryptocurrency exchanges were centralized. But there were a lot of risks involved in exchanging crypto assets on such platforms like vulnerability to hacks, breaches in security, mismanagement of information, funds, and private keys. But thanks to the advent of blockchain technology and smart contracts, all financial transactions and processes became decentralized, as in central authorities governing such actions were made obsolete. Instead, peer-to-peer marketplaces were created on the Ethereum blockchain, giving users full custody of their funds and assets.
Decentralized Finance (DeFi) Protocols functioned on smart contracts built on the Ethereum Blockchain network and were able to provide liquidity for trading to take place swiftly. Bringing a solution for the liquidity issue that was predominantly faced in Centralized platforms, a DeFi protocol - Uniswap, was produced.
The Uniswap Protocol- How It Works
Uniswap is one of the most popular DeFi platforms that function on the Ethereum network. Predominantly, the platform is used by traders to swap ERC-20 tokens. The swapping of tokens is done in a completely decentralized manner, without the need for any intermediaries. Also addressed as Automated Liquidity Protocol, the token prices are determined using token pools.
So how exactly do exchanges take place without order books? Here’s where Automated Market Makers (AMM) come in. These are simply smart contracts or rather liquidity pools that hold reserves that traders can trade, solving the issue of liquidity in exchanges. Anyone can lend their crypto assets to these DeFi liquidity pools for benefits and these assets can also be pulled out when necessary.
The smart contracts employed in a Decentralized finance(DeFi) platform like Uniswap are of two broad types- The exchange contract and the factory contract.
Uniswap Exchange also has a native token - UNI which is issued to the Uniswap community members, investors, developers, and advisors. Holding a Uniswap token will give the holder DeFi voting rights. These members can vote for changes in the protocol. Four liquidity mining pools hold the UNI token - ETH/USDT, ETH/USDC, ETH/DAI, and ETH/WBTC.
‘Swap’ - The main objective of the Uniswap like platform
Uniswap is an open-source platform and users using it will need an Ethereum address and a MetaMask wallet to trade or rather swap tokens on it. Swapping can be initiated between ERC-20 and ETH tokens, ETH to ERC-20, and ERC-20 to ERC-20. The swapping begins with users picking the token they want to Swap, followed by the amount they’d like to trade, and the protocol calculates the output token the user will receive. After the swap happens, the interface shows a pop-up that will display the minimum value received, price impact, and liquidity provider fee. The Swap users will be charged a small listing/platform fee.
How do Liquidity pools fit into the framework of Uniswap?
- Anyone with crypto assets can contribute to the DeFi Uniswap liquidity pools but on one requirement. If a liquidity pool provider is depositing two ERC-20 tokens, they will need to hold an equivalent value. The same logic applies for an ETH and ERC-20 pair. By contributing to the liquidity pool, providers will earn benefits and liquidity tokens. And rightly so, since more liquidity ensures faster transactions and fewer slippages. To further understand how liquidity pools function, and how tokens get their price or value, there is a simple formula that has been generated - x*y=k
- Consider this illustration. Assume the ERC-20 portion of the liquidity pool is ‘x’ and the USDT portion of the pool is ‘y’. The premise behind the working of a liquidity pool is that the total liquidity in the pool must be constant ‘k’.
- A user wants to trade 2 ETH tokens for 500 USDT in the ETH/USDT liquidity pool. The trade is done and now the value of the USDT portion of the pool will fall, increasing the value of ETH. Therefore the price of ETH will depend on the intensity of the shift between ‘x’ and ‘y’.
- When a liquidity provider deposits assets to the Uniswap Liquidity Pool, a ‘pool token’ is issued to them. These pool tokens (which are ERC-20 tokens) can be collected and exchanged and used in other decentralized applications. Apart from that, they also receive a liquidity provider fee. DeFi Liquidity pools can be added and removed on the smart contract as the provider wishes.
User Benefits And Advantages Of A Decentralized Finance (DeFi) platform Like Uniswap
Apart from providing traders a decentralized platform for swapping tokens, the Uniswap like DeFi protocol comes with a deluge of benefits for its users. Some of them are listed below.
- The users will have full control and custody over their funds since the Ethereum wallet will be supporting their assets.
- The Uniswap like DeFi platform supports a variety of new and trending tokens available in the crypt space.
- KYC and ID verification have been made dispensable for both traders and liquidity providers.
- An interesting feature called Flash Swap can also be done to avoid long steps involved in transactions.
- Very low gas fees - 0.3% is what traders will have to shell out to initiate swapping.
- All crypto assets and data stored on the Uniswap platform are kept highly secured.
- In some of the latest updates, any Ethereum based token can be traded on the platform but without any listing feeds. They only need to be paired with the equivalent ERC-20 tokens.
Business Benefits Of DeFi Platform like Uniswap
While investing in a DeFi Platform like Uniswap in the current crypto market scenario, there are a slew of benefits for your business that will warrant scaling and an increase in user engagement. Some of these benefits include
- Your business can witness high returns by several trading activities and functions like Yield farming, staking, trading, liquidity pools, etc.
- Since the Uniswap-like protocol runs on the Ethereum blockchain, the necessity for manual power has been made inordinate.
- DeFi Platforms like Uniswap dominate over 90% of the global exchange space so this will lead to an increase in trading volume and users.
- Your business can increase user engagement and visibility in the crypto space since Decentralized finance (DeFi) platforms like Uniswap are in vogue in the DeFi exchange sector. Investing and launching your own Uniswap DeFi platform in this lucrative climate will deem profitable.
- The risks associated with developing an DeFi Platform like Uniswap and the investment required is pretty low.
- At Blockchain App Factory, to widen your user base, a DeFi Platform like Uniswap can be developed on the Binance Smart Chain, an up and coming network that supports high performance Dapps.
- A DeFi platform like Uniswap can also be developed on TRON - A decentralized blockchain ecosystem that is one of the most secure at the moment.
Blockchain App Factory is the preferred DeFi platform developer in the industry!
Having been the leading developer of DeFi Platform Development Services and applications in the market, our solutions at Blockchain App Factory are sure to give the boost your business in the DeFi sector needs. We have a team of adept developers who are soaked in knowledge and skills when it comes to designing and developing, and our team of business analysts and marketers will ensure your Decentralized Exchange Platform Like Uniswap gets the greatest support that guarantees success.Apart from providing DEX protocols like Uniswap, we are skilled in developing DeFi platforms like Justswap - another Decentralized trading platform built on the Tron network, an open financial network open to all.
Adding to the list, we also excel in developing other Decentralized Exchange Protocols like Kyber, Curve, SushiSwap,dYdX, Airswap, Balancer, and IDEX built on either the Ethereum blockchain or other public blockchains like Binance Smart Chain, Tron, and EOS.Reach out to our experts today to learn more about how you can partner with us and successfully Create DeFi platform Like Uniswap.