Uniswap is a DeFi protocol based on the Ethereum network, focusing on DEX applications of automatic currency exchange (Swap).
In 2018, the Uniswap protocol was founded by Hayden Adams, and the technical principles it applies were first proposed by Vitalik Buterin, co-founder of Ethereum.
The main function of Uniswap is to support the exchange between ETH and other tokens, or ERC20 tokens; in addition, Uniswap can also provide liquidity to earn income.
The model adopted by Uniswap will involve the establishment of liquidity providers and liquidity pools, and provide a decentralized pricing system, which is a variant of AMM automatic market maker, called constant product market maker (Constant Product Market Maker).
To put it simply, transactions in Uniswap are not like traditional finance, which is a transaction that combines orders from buyers and sellers, but is exchanged in the capital pool.
So how did the capital pool (market maker) come from?
The principle involves the liquidity mining we mentioned before. The liquidity provider will provide funds to the “liquidity fund pool”. When someone makes a transaction in the fund pool, the liquidity provider can obtain a certain percentage of Transaction fees in return.
So what does constant product mean?
For example, in the ETH-USDT fund pool, we call the quantity of ETH X, the quantity of USDT as Y, and the product of XY in a fund pool is a constant value, which we call K.
Assuming there are 10 ETH and 40000 USDT in the ETH-USDT pool, the constant value is 10 ╳ 40000 = 400000
Total liquidity of the fund pool = ETH quantity ╳ USDT quantity
K = XY
When a transaction occurs, this K value is constant, so X and Y are in an inverse relationship.
Therefore, when someone buys ETH in the fund pool with USDT, the amount of USDT will increase, and the amount of ETH will decrease, resulting in the widening of the price difference between USDT and ETH, so that later users have to buy ETH at a higher price.
When the number of tokens in the capital pool is small, that is, the smaller the total capital K, the more the price difference will occur. of.
In order to avoid slippage, liquidity mining occurs. Its principle is actually to increase the K value. According to mathematical calculations, when the total amount of funds in the capital pool is larger, the slippage will be smaller.
The current daily trading volume of Uniswap is about 6 billion US dollars before the deadline, and there are 1,725 trading pairs supported, and its capital depth is very sufficient.
How to use Uniwap
1)Click [Browser], enter [Uniswap] in the search box, and select the v3 or v2 version. Here, the v3 version is used as an example;
2）Uniswap V3 currently supports 3 main chains. Generally, you can choose the [MATIC] chain to save handling fees. Click [Confirm] to enter the homepage;
3）Select the currency trading pair, enter the exchange amount, and then exchange; if you want to experience the function of adding liquidity to obtain income, click [Pool] below.
Sushiswap started out as a community fork of the decentralized exchange Uniswap, which uses a constant sum automated market maker (AMM) instead of a traditional order book system.
Similar to platforms like UniSwap, SushiSwap uses a set of liquidity pools. Users first lock assets into smart contracts, then traders buy and sell cryptocurrencies from these pools, exchanging one token for another. One of the most popular DeFi platforms, SushiSwap allows users to trade cryptocurrencies without the need for a central operator administrator. Decisions related to the SushiSwap software are made by the holders of its native cryptocurrency, SUSHI. DEX supports over 12 different blockchains.
SushiSwap is an automated market maker protocol that uses smart contracts to complete transactions. Tokens are provided by other users through liquidity pools. Liquidity pools are managed by smart contracts without the need for a central governance party. Other SushiSwap users lock up their funds in these pools in token pairs, providing the funds needed to complete the swap. These users are then rewarded with a fraction of the fees generated by the transaction, a process known as yield farming.
SushiSwap also provides other Defi features, such as staking SUSHI coins in the network and getting rewards, lending services, purchasing newly offered tokens, etc.
How users can benefit from SushiSwap
Compared to UniSwap, SushiSwap pays 0.25% to all participating suppliers, and the remaining 0.05% is converted into SUSHI and distributed to token holders through SushiSwap. Meanwhile, UniSwap pays liquidity providers or investors 0.3% of all transaction fees. Individuals holding SUSHI tokens can also benefit from farming.
SushiSwap also helps users continuously collect protocol fees, which are denominated in SUSHI. If the liquidity provider wants to withdraw from the service, he/she can still earn profits from the rewards of the SushiSwap protocol.
The tutorial on using SushiSwap is basically similar to the UniSwap tutorial above, so I won’t repeat it here.
Bancor is a decentralized exchange protocol based on exchange pools. Similar to Uniswap, on the Bancor platform users can add liquidity to the exchange pool and trade within the exchange pool. But the difference is that Bancor issued BNT as a connection token for each exchange pool, while Uniswap V1 chose ETH. Through the connection of BNT, all tokens in the exchange pool can be directly traded.
Bancor’s governance also revolves around the BNT token, and BNT holders can participate in protocol governance in Bancor DAO through Staking.
Bancor is the earliest project to create an automatic market-making exchange pool, and its ideas have influenced many subsequent projects. The overall function is not much different from the rising star Uniswap. Some tokens can only be traded in Bancor. There are also some Bancor exchange pools whose depth is better than that of Uniswap. It is recommended that you use it as a supplement to Uniswap.
Curve Finance is an Ethereum-native decentralized exchange (DEX) currently deployed on Ethereum, Arbitrum, Avalanche, Fantom, Harmony, Polygon and xDAI.
Similar to Uniswap, users can provide liquidity to Curve (LP) or trade on Curve (Trader). However, Curve is mainly between stablecoins (USDT, USDC, DAI), or transactions between currencies with similar values, such as stETH and ETH, renBTC and WBTC, etc.
In Uniswap, the price of a coin is determined by the ratio of the two tokens in the pool, so the price of a coin will keep changing as users trade. In addition, when there is a lack of liquidity in the pool or the ratio of the two currencies is out of balance, a single transaction has a greater impact on the price fluctuation of the token, that is, the slippage is greater. Therefore, for stable coins, Curve has improved the traditional AMM mechanism. Because unlike other currencies, the price of stablecoins usually fluctuates within a certain price range. For example, the price of USD-backed coins always fluctuates around $1.
Stablecoin transactions on Curve can reduce users’ slippage losses. In addition, Curve’s transaction fee is lower (0.04%) compared to Uniswap’s transaction fee (0.3%).
PancakeSwap is a decentralized exchange based on Binance Smart Chain (BSC). Like every decentralized exchange, you can exchange tokens without the need for a unified agent, while maintaining the authority of the tokens on PancakeSwap.
Released in September 2020, PancakeSwap uses an Automated Market Maker (AMM) model to match another person any time you need to swap computerized resources on stage without a request letter; all things being equal, It exchanges with liquidity pools through smart contracts.
Using this element, you can exchange as much as you want and keep your coins in the pool while being compensated. This stage has a native token called CAKE which is a bsc token generator. The liquidity pool is called the SYRUP pool.
What is the difference between PancakeSwap and other DEXs on Ethereum?
Most decentralized exchanges, such as Uniswap and Sushiswap, rely on the Ethereum blockchain, where a lot of decentralized finance (DeFi) activity occurs. Unlike PancakeSwap, which was sent off in September 2020, Sushiswap was sent a month earlier, while Uniswap was sent off in November 2018.
PancakeSwap relies on Binance Smart Chain and uses the bep20 token generator, while the other two rely on the Ethereum blockchain and use the well-known ERC-20 token. Due to Ethereum’s high exchange fees, people turned to PancakeSwap on the grounds that it offered a lot of lower exchange fees.
Before PancakeSwap, Ethereum-based DEXs had a large number of clients, engineers, and equipment to develop basic decentralized applications. Still, the way BSC is newer and has yet to land doesn’t stop it from moving forward. By now, DEXs have been known by other DEXs.
In numerous events, it has overwhelmed the top DEXs for a long time, and Uniswap has become the most famous DEX in terms of trading volume, although it has not firmly established itself.
Balancer is a decentralized exchange (DEX) deployed on Ethereum. Similar to the Uniswap we introduced before, it uses the automatic market maker (AMM) to achieve decentralized transactions, allowing users to provide liquidity to create For liquidity pools of different trading pairs, users who want to trade can choose the trading pair to trade and pay the transaction fee, while the liquidity provider can get the fee sharing. Compared with Uniswap, Balancer has some functional differences.
Compared with other decentralized exchanges, Balancer has the following features:
Multi-asset liquidity pool
Unlike Uniswap and Sushiswap, Balancer can set up to 8 kinds of assets to trade with each other in the liquidity pool. The asset ratio will be preset and handed over to the smart contract to dynamically maintain the ratio.
Public Shared Pool ( Shared ), Private Pool ( Private ) Public Shared Pool ( Shared ): Once the proportion of tokens and transaction fees in the public shared pool is set, it cannot be changed. All users can use the public shared pool. Including providing liquidity or conducting trading functions.
Private pool ( Private ):
The private pool is privately owned by the creator of the pool, and no one except the holder allows users to use the private pool, and the token ratio and transaction fee of the private pool can be adjusted at any time, which is different from the public pool.
Balancer has introduced the position of liquidity pool administrator. In addition to setting the asset ratio mentioned above and whether to disclose the liquidity pool, another key point is that the liquidity pool administrator can set the transaction fee of the liquidity pool, and other Unlike decentralized exchanges, Balancer allows users to set transaction fees by themselves, which can be set between 0.0001% and 10%.
Balancer’s development team will also launch the Balancer V2 version in 2021, which has the following features compared to V1:
- Introduce Asset Manager (Asset Manager) to increase the asset efficiency of Balancer liquidity pool
- Increase the efficiency of gas usage, and lower handling fees under the same transaction
- Let all pools have their own set of AMM logic
DODO is a decentralized trading platform powered by an active market maker (PMM) algorithm. It features a liquidity pool with high capital efficiency, supports the liquidity provision of unilateral tokens, reduces impermanent losses, and minimizes slippage during transactions. DODO also offers SmartTrade – a decentralized liquidity aggregator service that finds and intelligently routes to various liquidity sources to quote the best price between any two tokens. In addition, DODO also eliminates various restrictions on the establishment of new asset liquidity pools, and can freely define and adjust the asset ratio, liquidity depth, fee rate, etc. in real time. Minimize the threshold for new asset issuance. Based on this, DODO has developed a crowdfunding pool (a liquidity distribution mechanism without permission and equal opportunities) and a customizable and flexible technical solution for professional on-chain market makers.
DODO is essentially a DEX for user-to-pool transactions (peer-to-pool transactions). It was officially launched in August 2020 and was initially deployed on the Ethereum network. The Binance Smart Chain public beta version will be launched in February 2021.
The main feature of DODO is its own PMM (active market maker) algorithm, which has 3 core points:
1）A reference price is introduced, which can gather most of the liquidity around the reference price, thereby improving capital utilization and effectively reducing slippage. This reference price can be a fixed value, or it can be quoted from an oracle machine;
2）The slope k of the fund pool can be set flexibly. The smaller the value of k, the smaller the slippage of the same transaction;
3）The parameter k and the introduced reference price i can be flexibly set and combined to create a fund pool suitable for different scenarios and different tokens, including Bonding Curve token issuance pool, equivalent token issuance crowdfunding pool, ordinary AMM pool, similar Stable currency exchange pool in Curve DEX, etc.
1inch was founded by Sergej Kunz and Anton Bukov at the ETHNewYork hackathon event in 2019, and its main function is a DEX aggregation protocol.
With the goal of providing the best price to users while taking into account the cost of transaction fees, the project aggregator solution connects to four different platforms, including Ethereum, Binance Smart Chain, and Polygon and Optimism ETH scalability solutions. Solutions, combining a total of more than 120 liquidity sources (such as DEXs, lending protocols, and AMMs).
In addition to optimizing prices, 1inch’s aggregator protocol also minimizes slippage (difference between expected price and actual strike price) by bringing together liquidity from disparate sources connected to the platform.
At the same time, aggregators leverage smart contracts to perform operational verification of transaction execution to ensure users’ funds are safe, even when interacting with insecure liquidity sources. In addition, the protocol minimizes the risk of front-office transactions, a common practice in which malicious parties use information on pending transactions to inflict financial losses on traders.
In addition to the aggregator protocol, 1inch’s rapidly growing ecosystem features the following DeFi solutions and platform elements:
- 1inch Liquidity Protocol: Formerly known as Mooniswap, 1inch’s liquidity protocol provides AMM functions for projects, and users can use it to exchange tokens (natively on the platform) and generate passive income through yield farming.
- 1inch Limit Order Protocol: Simply put, the Limit Order Protocol solution introduces an upgraded trading experience similar to those offered by centralized cryptocurrency exchanges, but in a decentralized manner. In addition to market orders, users can utilize the protocol to place limit, stop and trailing stop orders between Ethereum, Binance Smart Chain and Polygon with zero transaction fees.
- 1inch DAO: A decentralized autonomous organization with a user-friendly interface that allows users to participate in community governance and vote on matters regarding the future of the project using their native 1INCH coins.
- 1inch Foundation: A non-profit organization that promotes the development of the project ecosystem and promotes incentivized activities and contributions through different methods, such as distributing governance rewards and developer grants, and launching a staking token interest program.
- 1inch Wallet: A user-friendly, non-custodial DeFi wallet that users can leverage to store tokens, connect to decentralized financial applications, and 1inch’s protocol.
At present, there are more than 80 public chains, and almost every chain has a head DEX and other small DEXs. The mechanism and operation principle are roughly similar to the 7 above. They can all be accessed and used through the BitKeep wallet. Everyone is playing When transferring to the DeFi ecosystem on different public chains, you can first choose the DEX on the public chain for experience.