There are always new things to talking about cryptocurrency, this article is about Is Uniswap a good investment in 2021?
Looking at Uniswap on the cryptocurrency rating site Coinmarketcap, Uniswap with the UNI token was ranked thirteenth, at press time. The current price is $ 22.56 with a market capitalization of over 7 billion dollars. With a maximum supply of 1,000,000,000 UNIs, currently, 311,692,215 UNIs have been circulating, meaning that around 31% of all tokens are the limit of supply.
What are the possibilities in the future, is it worth the UNI token to have as a digital asset for the future? Well, this information may give you new insights about Uniswap in the future. However, this is not investment advice as it is trading in risk-prone financial markets.
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Uniswap explained
Let start with Uniswap’s explanation first before going deep to the main point.
Uniswap is an open-source decentralized protocol that allows buyers and sellers to exchange their ERC-20 tokens without having to use another intermediary. It is a collection of computer programs that run on the Ethereum blockchain. Hayden Adams is the man that developed the Uniswap Protocol.
Uniswap operates without charging platform fees or intermediary fees for those who wish to use the Uniswap protocol apart from charging gas fees for token transfer on the Ethereum network.
Basically, Uniswap provides a liquidity solution so that anyone can lend their ERC-20 tokens to a special reserve called a liquidity pool. As investors in Liquidity Providers who provide tokens to this pool, they will get earnings from a percentage of the trading fee from swap transactions made by Uniswap users.
For payment instruments, Uniswap uses UNI Tokens. Uniswap is here to provide solutions to liquidity problems that exist in other ordinary exchange exchanges. The platform provides automatic liquidity provision.
Why Uniswap unique?
Uniswap has its own uniqueness compared to other exchanges in general. This is due to the unique pricing mechanism through the “Constant Product Market Maker Model”.
With this kind of mechanism, any ERC20 token can be added to the Uniswap protocol. Of course, this value will be equivalent to ETH and ERC20 tokens that will be traded later.
Uniswap is also a solution to liquidity problems that exist in other ordinary exchange exchanges. The Uniswap platform provides automatic liquidity provision. Thus, they no longer depend on the buyer’s and seller’s mechanisms that normally have to be in place to create liquidity itself.
What are Uniswap tokens used for?
At the time of the release of the UNI token, on 17 September 2020, Uniswap distributed UNI tokens to users who had used its services. And the result caused UNI tokens to jump into the top 3 Defi tokens by Defi market cap. According to Defi Pulse, Uniswap’s ranking as the Defi protocol was the first to have a total value locked of 1.40 billion USD, an increase of 81.10% in a day.
Apart from airdrops, users can also earn from staking tokens in certain liquidity called liquidity mining. The release of the airdrop is meant for governance, where UNI token holders have an influence on Uniswap’s future policies.
UNI token holders can also fund grants, partnerships, liquidity mining pools, and other proposals. Thus token holders have a primary role to play in making governance decisions, and the team is no longer directly involved. They only act as supervisors who provide support for problems that may occur.
How does Uniswap liquidity work?
Uniswap is unique in that it is compared to other exchanges in general. This is due to unique pricing through the “Constant Product Market Maker Model”.
In this way, any ERC20 tokens can be added to the Uniswap protocol.
The platform does not provide automatic liquidity provision. So, it is no longer dependent on buyers and sellers who usually have to be there to create liquidity itself.
Uniswap pool works are when a pool contract is created, the balance of each token is zero, Uniswap liquidity functions as a trading market for a pair of ERC20 tokens.
In order to start trading, one makes an initial deposit of each token, of which the first liquidity provider is entitled to set the initial pool price.
How its works
For example, you have Ethereum and want to exchange it for other altcoins such as AB Token, you will release a new Uniswap smart contract for the AB Token and create a liquidity pool from the AB token worth $ 10 and ETH worth $ 10.
This method of working uses the equation X * Y = K.
These X and Y represent the number of ETH and ERC20 available tokens. Meanwhile, K is a constant that can be set by the exchange contract maker at Uniswap. This value of K is the most important value because the value of X multiplied by Y must equal K.
This equation uses the balance between ETH and ERC20 tokens in determining the price of a particular token. For example, every time someone buys AB Token with ETH, the supply of AB tokens will decrease while the supply of ETH prices increases. That way the AB token price will increase.
This means that the price of tokens on Uniswap can change when trading transactions occur. The basic essence of Uniswap is to balance the value of the tokens and exchange them based on how many people want to buy or sell the tokens.
How Uniswap Tokens are created
Each time a new ETH / ERC20 token is entered or contributed to Uniswap’s liquidity pool. It will create a kind of “Token Pool”, which is also an ERC20 token.
Each token has its own smart contract and liquidity pools. If the token has both, then anyone can trade the token or contribute to the pool of liquidity. Because Uniswap is less permission.
If all is ready then a token pool will be created every time the funds are deposited into the liquidity pool in the protocol. So that the ERC20 tokens in the token pool can be freely exchanged, transferred, and used in other DApps.
If there is a withdrawal of funds, this token pool will be destroyed so that there is no longer a collection of tokens on the network. Each pool of tokens represents the user’s share of the total asset pools and a 0.3% share of the trading fee in those pools.
How long do Uniswap transactions take
From the experience of users who share on the Reddit forum, Uniswap transactions take 20-40 seconds, and it depends on the cost of the gas fee. Therefore, to speed up transactions, it is necessary to set up the gas.
From the experience of other users, after transacting for more than 45 minutes waiting, but the ETH that he bought has not been received. Perhaps it was a longer process than usual, so he asked the community for answers.
From several sources, the Gas regulation has an effect on the transaction speed at Uniswap, for information on gas here.
When was Uniswap launched?
Uniswap was discovered by Hayden Adams, and the first time he tweeted was on November 2, 2018, and that’s when Uniswap exchange was born.
1/🦄 Excited to announce the launch of @UniswapExchange ! It’s a protocol for automated exchange of ERC20 tokens on Ethereum. https://t.co/czTqyRit7u
— Hayden Adams 🦄 (@haydenzadams) November 2, 2018
Before launching Uniswap, Hayden was laid off from his job at Siemens as a Mechanical Engineering. Desperate, he called his friend Karl Floersch. And this best friend was the one who encouraged Hayden to create a project on Ethereum Defi. With the motivation of his friend, he then built the Uniswap exchange which eventually made this unique exchange grow rapidly.
On the way to completing Uniswap, it requires a long testing time and a winding experience. And in the end, when all the problems were resolved at the end of January 2018, the Uniswap exchange was not automatically launched.
Hayden still had to do demos and learn to code more deeply, until finally, he met Vitalik in April 2018 when he laid off for 10 months and his finances were running low. But his persistent struggle and meeting with crypto experts, finally at this time Uniswap exchange has changed Hayden’s life. Read on Uniswap Blog for a complete history.
Difference between Uniswap v1 and v2
When talking about the Uniswap exchange, we will know that there is Uniswap V1 and Uniswap V2, but what is the difference between the two? These are the most frequently asked questions that users need to be aware of.
Uniswap V1
The most basic difference in Uniswap V1 is that it always carries out two transactions. Where the first transaction is to exchange ERC20 tokens with ETH and the second is to exchange ETH back to the desired ERC3 tokens.
Due to that the end buyer had to pay twice. See the illustration:
Because it has several shortcomings in Uniswap V1 including higher costs, also Uniswap is closely related to the use of ETH, and ERC20 tokens cannot be exchanged directly with other ERC20 tokens.
That’s why the development team made improvements and came up with Uniswap V2.
Uniswap V2
Uniswap V2 offers end users 3 different options to exchange their tokens. Using “Router Contracts”. Which is to know all exchange contracts that implement the Uniswap V2 protocol. Here are three possible swaps:
- One of them is a direct exchange between two ERC20 tokens. For example, two Stablecoins such as DAI/USDC can be very useful for traders.
- Traditional swap via ETH, for which you have to pay double fees.
- Swap Custom paths where you can build more complex lines like DAI/ETH, ETH/BAT, BAT/USDT, and USDT/USDC to convert your DAI to USDC. Usually, this provides traders with arbitrage opportunities.
Difference between Uniswap and Sushiswap
Both are exchanges using a smart contract on the Defi system. Previous descriptions of Uniswap have been discussed above. And at a glance, Sushiswap is a hard fork from Uniswap, or you could say a byproduct of the Uniswap project.
Sushiswap is very similar to Uniswap, which also allows investors who provide liquidity to the pool to get rewards on their platform.
The difference between the two platforms is that Sushiswap promises its liquidity provider SUSHI tokens, which is also similar to lending projects like Aave’s LEND and Compound (COMP) in the Defi space.
Liquidity Uniswap vs Sushiswap
According to Defipulse, at the time of the press, Uniswap’s total liquidity reached 3.75 billion locked liquidity, while Sushiswap was below it at 3.16 billion locked liquidity.
Comparing in terms of locked liquidity, Uniswap was superior to Sushiswap, at least until the time of press.
Pair available Uniswap vs Sushiswap
Comparing in terms of availability, the Uniswap pair is also superior to Sushiswap, where Uniswap supports 1621 coins and 2156 pairs. Meanwhile, Sushiswap only available 168 coins with 182 pairs. Besides it, Uniswap’s daily volume is also greater than Sushiswap’s.
Fee trading Uniswap vs Sushiswap
For fees, according to Liquidityfolio, Sushiswap took 0.43% while Uniswap took 0.63% for the next 30 days fee. Although Sushiswap’s fee is lower, the difference is only 0.2% and it is a small difference.
Difference between Uniswap and Binance
Binance is a crypto exchange that is well known around the world. It is one of the largest exchanges. However, Uniswap offers its own uniqueness compared to Binance, because it is one of the Defi projects running on the Ethereum blockchain platform with smart contracts.
Uniswap is open source, anyone can easily contribute to the liquidity pool, meanwhile, Binance needs a role of the team.
Whereas Binance is a centralized exchange, the availability of pairs is very much supported, while Uniswap only supports ERC20 tokens.
Is Uniswap a good investment in 2021?
Even though it is not the first place in the Defi project, Uniswap is a Dex exchange which is one of the top projects. After launching the UNI token at the end of last year. Crypto fans were very enthusiastic and makes Uniswap to have a rapidly increasing value.
Even today, Uniswap is the second Defi project after Chainlink as the top-rated project with a market capitalization of more than 8 billion US dollars.
This proves that Uniswap is still a good investment in 2021. However, other competitors may always change positions in a short time if something extraordinary happens.
Analysts still believe that the value of the UNI token is still possible to increase, along with the increase in Uniswap users.
Uniswap price prediction 2021,2022,2023,2024
February 2021 is a golden month for UNI tokens reaching a high of $ 30 on 21 February 2021. Prices have fluctuated again afterward and currently at press time the price of UNI tokens is $ 26.82 with a 12% increase in just one day.
Coinmarketcap
Long forecast UNI prediction
From the current price of $ 26, Long forecast UNI price prediction that by the end of 2021 Uniswap will reach $ 40. While the prediction in 2022 the UNI price is probably to reach $ 42 until mid-2023. Furthermore, the price expects to move flat with a range from $ 40 to $ 42 in 2025.
Cryptonews prediction
Cryptonews Uniswap price prediction that the price of UNI tokens will increase to $ 80 in 2021. Meanwhile, in 2022 there will be a correction and it will reach $ 60. Then from 2023 to 2025, the price will fluctuate at $ 70- $ 80.
Tradingbeast UNI price prediction
UNI tokens by Tradingbeast prediction to gradually increase in 2021 to reach $ 27 by the end of the year. The prediction for 2022 is still gradually increasing until it reaches $ 36 as the average price. Furthermore, in 2023 there is still an increase to reach $ 39 at the end of the year. However, 2024 Tradingbeast predicts the price will fluctuate between $ 39 and $ 36 during this time.
Final thought
From the average analyst prediction, the value of Uniswap increases from year to year. But all of these are just predictions and it is very difficult to predict with one hundred percent certainty.
However, from the supporting data, Uniswap is still possible a good investment for this year. Even in a day has experienced a change of more than 12%. This means that the increased volume causes the value of the UNI token to increase.
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