Uniswap is a cryptocurrency, named after the company that created the Uniswap protocol, which distributes digital crypto tokens via a decentralized network. The protocol uses smart contracts to enable automated exchanges between various assets on the Ethereum blockchain.

Because investing in the UNI token entails investing in the efficient decentralized finance (DeFi) ecosystem, people prefer Uniswap. This article examines why Uniswap is having such a significant impact on the cryptocurrency market and explores whether it is a wise choice for investors.

What is Uniswap?

The Ethereum blockchain-based decentralized exchange (DEX) Uniswap enables investors to trade cryptocurrencies without having an account with a centralized exchange like Coinbase. Currently, the platform conducts daily crypto transactions worth $1 billion. Additionally, it is the world’s one of the most popular decentralized exchanges. Instead of maintaining its own network, Uniswap uses various elements from Ethereum’s blockchain to transact the ERC-20 tokens.

Altcoins, in particular, are high-risk investments in cryptocurrencies. In spite of this, early Uniswap investors saw fantastic returns on their capital.

Advantages of investing in Uniswap

Using Uniswap instead of more traditional cryptocurrency exchanges has many inherent benefits.

#1. Decentralized ecosystem

Uniswap users can exchange their cryptocurrencies right from their Ethereum wallets, offsetting the need for centralized exchanges to hold onto their money in any way. This approach significantly reduces the possibility of hacking and adds an extra layer of security that centralized exchanges cannot provide by default. Additionally, investors can trade cryptocurrencies anonymously with Uniswap because they don’t need to create an account.

#2. Smart contracts

Uniswap is essentially little more than a collection of interconnected smart contracts that function as a decentralized exchange. Smart contracts are pieces of code that get recorded to the blockchain, and because they are decentralized, immutable, and global, they function as a highly refined transactional medium. These features of Uniswap smart contracts enable incredibly effective financial services by having the ability to transfer funds automatically based on the parameters in the software.

#3. Benefits of providing liquidity

To earn interest on their investment, investors get the option of staking their Ethereum tokens on Uniswap or using them to vote on protocol upgrades. Ethereum tokens include Ether, the platform’s native token, as well as ERC-20 tokens, like ChainLink, Aave, DAI, and Wrapped Bitcoin. For registration into the liquidity pool, investors on Uniswap V2 must contribute equal numbers of Ether tokens and ERC-20 tokens. However, users can deposit different amounts of 2 crypto assets due to the condensed liquidity in Uniswap V3. By providing intensive liquidity, Uniswap anticipates that investors will be able to earn much more interest.

#4. Security and digital safety

One of the safest ways to transfer cryptocurrencies is through Uniswap’s exchange. Your funds don’t remain on the exchange. Instead, Uniswap directly interacts with your Ethereum wallet, making it more difficult for a hacker to access your funds. Centralized exchanges are much easier and more accessible targets for cryptocurrency hackers because, in this case, the exchanges have custody of your cryptocurrency instead of you yourself. A hacker would have access to a much larger pool of money if they could compromise an exchange’s security than if they were able to compromise a single cryptocurrency wallet. Similar to any investment, there is a chance of losing money when using the UNI token. 

Recent developments that show Uniswap is a good investment

Every cryptocurrency wallet that ever interacted with Uniswap’s platform will receive 400 UNI tokens in September 2020. Those 400 free UNI tokens are already worth more than $8,000 for those who retained them. In 2021, Uniswap and the Decentralized Finance (DeFi) sector, both experienced rapid growth. With more than $7 billion in total value locked (TVL) on the Ethereum network as of 2022, Uniswap is among the top seven networks. Given that Uniswap only employs about 12 people, some analysts contend that the company is still undervalued, despite its impressive market capitalization of $16.7 billion.

Final verdict

Uniswap could be an excellent asset to your portfolio if you promote the decentralized finance sector. In addition to being the most liquid decentralized exchange, Uniswap’s V3 upgrade increases the liquidity of cryptocurrency on the platform. The V3 upgrade is secured for 2 years, giving Uniswap a significant competitive edge over other decentralized exchanges, whereas its different upgrades are great resources for other DEXs.