DeFi Tools—UNISWAP Usage Tutorial

What is Uniswap?
Uniswap is a decentralized exchange protocol released on the Ethereum mainnet in November 2018. Its creator is Hayden Adams. Currently, Uniswap ranks 11th on DeFi Pluses, which is lower than before.
Unlike other decentralized exchanges that place orders, Uniswap uses a new AMM automatic market maker algorithm to execute transactions. Compared with other exchanges, the smart contract design of Uniswap Exchange can significantly reduce the amount of gas used.
How to understand Uniswap’s automated market-making mechanism?
Traditional exchanges generally provide an order placement platform, which matches buyers and sellers through programs (matching engines) to reach a transaction. It is a free market where people who are willing to buy and sell place "buy orders" and "sell orders" on their own, and the orders of both parties are completed through the "intermediary" of the exchange. Traditional exchanges have the following characteristics:
There must be users placing orders in the market, and there must be a certain amount of orders (market depth). Orders must overlap for a trade to be completed, meaning the bid price is higher than or equal to the ask price. Assets need to be stored on the exchange.
The model of Uniswap is completely different. Simply put, Uniswap's matching mechanism is based on a most basic formula: K=X*Y. Among them, X represents an asset, Y represents another asset of equal value to X, and K is a function of the multiplication of the two. When the value of K remains unchanged, the values ​​of X and Y are inversely proportional, that is, as X increases, Y decreases (and vice versa). Because the small amount of asset Y will lead to a premium relative to the market, it will attract users to carry out arbitrage, thereby smoothing out the price difference and restoring the system to balance. Let's take ETH and MakerDAO's algorithmic stablecoin DAI as an example to explain this model to everyone (excluding handling fees).
Assume that the current ETH price is 150 USD, and the DAI price is pegged to USD, which is equal to 1 USD. Now inject 100 ETH and 15,000 DAI into the system, then K=100*15,000=1,500,000.
When the user converts 2 ETH into DAI, the total amount of ETH is reduced to 98, and the total amount of DAI at this time = 1,500,000/98 = 15,306. The additional 306 DAI is equal to the price of 2 ETH, that is, 1ETH = 153USD. At this time, ETH will have a premium relative to the market, which will attract users to carry out arbitrage. Users sell their ETH to the system to replenish the ETH in the fund pool, so that the system returns to its original stable state.
What are the shortcomings of Uniswap?
Under the order placing mechanism, if the price does not reach the price set by the order placer, the system will not trade. However, under the Uniswap model, users should pay attention to the liquidity of the current fund pool to avoid too much slippage and asset loss.

Here is a simple calculation for everyone. From the table, we can see that as the amount of ETH in the system increases, the cost of users purchasing a single DAI relative to ETH will increase. When the amount is 10ETH, the spread can reach 9.89%. The fact that UMA was listed on Uniswap some time ago and the price rose from 0.26 to 1.2 US dollars also confirms this point.
Balancer has made further modifications to this. But overall, this type of AMM mechanism DEXes will inevitably experience slippage due to liquidity issues. However, for start-ups, this type of DEXes is a boon for them to price and sell tokens, and Uniswap saves them a lot of money to pay exchanges and market makers.
How to use Uniswap in Bitpie?
The first step is to open Bitpie and find Uniswap

For the Android version, you can find Uniswap in the recommended/popular DApps on the discovery page.
For iOS version, please update to bitpie PRO version and enter in the search box on the discovery page:
https://uniswap.bitpie.com/

* Because Uniswap uses a Singapore domain name, it often encounters slow loading or access errors. Bitpie has optimized this, and the current experience of using Bitpie to access Uniswap is very smooth.
Step 2: Enter the DApp main page and select the function you want to use

The picture shows the revised Uniswap page. I personally feel that it is simpler than before.
Step 3: Select Exchange, enter the exchange amount and currency, and select floating point to exchange.

Here we take ETH to DAI as an example, and choose to accept a maximum increase of 0.5% deviation. After setting, click "Exchange". After the order is confirmed, you will receive DAI in your wallet address.
From the main page, we can see that in addition to exchange, there are also "Send" and "Fund Pool" functions. Both of these functions belong to the V2 version, because the system will automatically switch to V2 when used.
The sending and redemption functions are similar, except that a receiving address is added, so that you can send the coins to your own/other people's designated addresses or ENS domain names after the redemption is completed. The fund pool function allows users to earn profits by injecting ETH into the system to increase system liquidity. The figure below shows how to use the fund pool function to inject liquidity into the system.

The above is the introduction and experience of using Uniswap. The DeFi market has recently become popular again because of Compound's lending and mining, which has attracted widespread attention from the market, which is a good thing for the DeFi market. At the same time, DeFi products are gradually gaining favor in the market due to their own characteristics such as decentralization, anti-censorship, and openness and transparency. Bitpie will also continue to pay attention to the DeFi ecosystem and bring you more DeFi product introductions and experiences. (Network)