What is Uniswap and how does it work?
One of the most well-known decentralized exchange (DEX) protocols in the blockchain world is Uniswap, and it is no wonder, because this protocol has become one of the largest DEXs in the crypto ecosystem, with a blocked value that amounts to 5 billion dollars. With this, Uniswap becomes one of the main opponents of centralized solutions, and leaves behind the belief that this type of technology could not become truly viable.
But how has Uniswap achieved this? What technology is behind your design? This and much more you will know below.
What is Uniswap?
Uniswap is a DEX (Decentralized EXchange or Decentralized Exchange), which allows you to exchange your cryptocurrencies for others, using smart contracts on the Ethereum network. This fact already tells us one thing: Uniswap works with Ethereum ERC-20 tokens . Let us remember that an ERC-20 token is a type of standard token within Ethereum and of these types of tokens there is a great variety. In fact, there are currently more than 420,000 different ERC-20 tokens on Ethereum, which gives us an idea of the huge ecosystem that exists. It is precisely this point, which led Uniswap to its immense success: there is an immense community that needs this exchange functionality and, if you can make money with it, all the better.
However, as Uniswap only works with ERC-20 tokens, it is severely limited in functionality. For example, you cannot make direct exchanges using other cryptos, such as Bitcoin or Bitcoin Cash. To overcome this limitation, other projects have dedicated themselves to creating ERC-20 tokens that represent these other cryptocurrencies. To do this, 1: 1 anchored ERC-20 tokens are created with that specific crypto, or using other means. A good example of this is RenBTC, where RenBTC is an ERC-20 token anchored 1: 1 with the value of Bitcoin, and guarded by a decentralized network of nodes. Thus, each RenBTC token can be exchanged 1: 1 with BTC (except for a small commission) and, you are sure that it will always be like that.