With an array of official and unoffical resources for developers to build on the protocol, we should expect to see many more integrations between Uniswap’s unique token swapping system and new decentralized finance ( DeFi) products in the coming years. The interface even offers simple one-click solutions for purchasing pool tokens in combination with bZx token strategies. Interfaces such as Zapper.fi allow users to add funds to Uniswap pools using just ETH instead of ETH and another token. For example, InstaDApp allows you to add funds into Uniswap pools without needing to access the official Uniswap user interface. Since Uniswap is an open protocol of smart contracts, a number of different front-end user interfaces have already been created for it. Once you've completed your first trade on Uniswap, there are plenty of options for more advanced users. Once it’s done, your tokens will appear in your ERC20 wallet. When you’re ready, confirm the transaction and it will then be processed. Through Uniswap, you’re able to purchase ether (ETH) and any of the thousands of ERC20 tokens supported by the platform. Each pool token represents a user’s share of the pool’s total assets and share of the pool’s 0.3% trading fee. When funds are reclaimed, the pool tokens are burned or destroyed. Pool tokens are created whenever funds are deposited into the pool and as an ERC20 token, pool tokens can be freely exchanged, moved, and used in other dapps.

Whenever new ETH/ERC20 tokens are contributed to a Uniswap liquidity pool, the contributor receives a “pool token”, which is also an ERC20 token. To contribute to a liquidity pool, you need an equal value of ETH and ERC20 tokens.

Once a token has its own exchange smart contract and liquidity pool, anyone can trade the token or contribute to the liquidity pool while earning a liquidity provider fee of 0.3%. Each token has its own smart contract and liquidity pool–if one doesn’t exist, it can be created easily. What else is different about Uniswap?Ībsolutely any ERC20 token can be listed on Uniswap–no permission required. Essentially what Uniswap is doing is balancing out the value of tokens, and the swapping of them based on how much people want to buy and sell them. Whenever someone buys Durian Token with ETH, the supply of Durian Token decreases while the supply of ETH increases–the price of Durian Token goes up.Īs a result, the price of tokens on Uniswap can only change if trades occur. This equation uses the balance between the ETH and ERC20 tokens–and supply and demand–to determine the price of a particular token. In the equation, x and y represent the quantity of ETH and ERC20 tokens available in a liquidity pool and k is a constant value.

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