Since the July 2020 DeFi explosion, everyone’s been talking about DeFi and Uniswap this summer!
Are you looking to add some tokens from Aave, Compound, or MakerDAO to your cryptocurrency investment portfolio but unsure how to do it?
You could go with a left-field pick, but why do that when there’s Uniswap? Should you use it, how do you use it, and why is it useful? We’ll get to that.
Are you ready to watch your portfolio appreciate epically? Please continue reading to find out how to make it happen so you don’t miss out on the next wave of momentum.
Should I Use Uniswap?
If you’re wondering if you should use Uniswap as your cryptocurrency trading platform, there are a few things to keep in mind.
If you buy $UNI tokens (Uniswap’s native token), it isn’t like owning shares in a company listed on the stock exchange. These are not traditional investments, and the jury is still out on if these cryptocurrency and governance tokens are deemed securities.
About half argue they are, and the other half argue they aren’t. Some others are even something so new shouldn’t be classified as securities just yet. If these tokens are considered money, but we can’t spend them anywhere (for the most part) en masse at a retail-level, we should treat them as investment instruments only.
This is due to many reasons but boils down to governmental regulation — the SEC not least of the regulatory bodies concerned.
Central Exchanges on the Ethereum Network
In DeFi trading, there is always the option of using centralized exchanges (CEX). These types of exchanges are closer to what you might be used to if you’ve used platforms like Ameritrade or E*TRADE with tools that carry out basic functions.
A CEX acts as broker and exchange – combined, holding your funds in a custodial wallet so that they can trade off-chain on their native trading platform — internally.
This is the only way they can use the order book-model with cryptocurrency and still make money. Well, that and the fees (a lot of fees).
You also have to identify yourself for regulatory bodies such as the IRS and SEC. This is something called KYC or Know-Your-Customer compliance laws, and a practice all banks and traditional markets must comply with.
Decentralized Exchanges on the Ethereum Network
Uniswap is leading the pack emphatically when it comes to DeFi and decentralized exchanges (DEX) of ETH. For months, it matched or exceeded most of the total CEX (centralized exchange) trading volume.
At its highest ratio of value locked to DeFi as a whole to date, on October 26, 2020, Uniswap’s liquidity pools accounted for about 20%, according to DeFiPulse.com.
SushiSwap, another DEX, has “merged” with Yearn.Finance, but started as a hard-fork Vampire Mining attack against Uniswap. SushiSwap intended to take most of the TVL (Total Value Locked) with it onto its own protocol but ended up failing catastrophically.
One of the creators, called ChefNomi, tried a rug-pull – but to their credit, returned the $14 million in funds to the development fund.
Still, more DEXs like Curve and CREAM have modified versions of token trading and the AMM (Automated Market Making) methods of Uniswap.
However, Uniswap rises above them all regarding reputation, reliability, and ease of use. In addition to its X*Y=K automated market maker algorithm, there’s no one to dethrone it any time soon.
What makes Uniswap even more remarkable is the integral core that makes up the passionate and thriving community.
How to Invest With Uniswap
To invest in Uniswap, you need to remember that there’s no:
- Order book, because it’s not an order book-model trading platform
- Intermediaries, since you’re dealing directly from your personal wallet to the liquidity pool and back
- KYC, for IRS and other tax-regulation purposes
All of these facts have their shortcomings and advantages. For example, because anyone can make a trading pair and add liquidity to a pool, a token should be verified before you trade for it.
There are countless scam tokens on the market that can make it seem like you can get a high return from a pool with a lot of trades and stability. Sadly, it turns out you just dumped $10k of ETH into a pool for worthless tokens. Now someone will pump a bunch more worthless tokens into the pool and take your ETH for free.
Because it’s decentralized, there is, by design, no regulatory body. You are responsible for yourself because it is a “trustless” system. Investing time at Etherscan.io or CoinGecko for verified tokens is a good way to safeguard yourself from poor decisions and regretful investments.
Gas Fees: Full or Half a Tank?
One of the great things about the Ethereum network is that you can set your own fees for transactions. That doesn’t necessarily mean it will go through though. In the meantime, you’re left paying the price — literally.
You can get around this by using trusted sources like ETH Gas Station to check the latest average gas prices or dig even deeper, for more data.
Failed Txs (transactions) still cost the gas (ETH) you spent to try to put the transaction through. Unless a miner has snatched it up and sent your Tx into a block, it will expire. When a miner chooses to put your transaction into a block and mines it, they have accepted the fee you’ve offered.
A miner should act in a fair and neutral manner because the higher the gas fee, the fewer transactions they can put on any given block. If you pay too high an amount in GWEI (the common unit of ETH for gas) in gas fees, a miner will take it and you’ll be refunded for the overage. Higher GWEI amounts mean a larger transaction in data, and the miners lose out on potential transactions added to the block and more fees.
As more miners catch on and optimize their block-filling with enhanced algorithms (algos) for better fee collection methods, the highest and lowest fees will get ignored more often, necessitating a keen on-average gas fee for your transaction type.
Finding the Best Portfolio in DeFi
As far as tokens go, what’s the best to invest in? That’s an ever-changing question. But, with tools that sit on top of Uniswap like Swapfolio, you can see the big picture, in real-time.
Swapfolio allows you to view your portfolio at a glance and see top-performing pairs and even filter your results even further – all from a central source. Observe interesting pairs and even receive news and updates from community members.
You’ll never find a consistently “best pair”, but there are a handful of steady gainers. It’s best to customize your portfolio based on your experience and goals.
Want to be rewarded with a steady stream of APR from a stable, high transaction rate-pool, or make a risky play and kill it as a top LP (Liquidity Pool) provider in a smaller pool? You can do it all on Uniswap — if you’re well-informed enough and quick enough.
Swapfolio helps to give you the tools and education needed to make it a reality.
How to Manage Your Crypto Portfolio With Uniswap
Managing your portfolio with the “vanilla” tools on Uniswap can be a bit laborious. It might require you to have several windows open at once to track your tokens. You also don’t have access to many professional-level tools, though the interface is quite simple to understand and use.
To manage your portfolio professionally in this DeFi-centered landscape with precision and speed, you’ll need some new tools. Swapfolio has you covered with:
- Increased security with verified Tokens
- Estimates Gas in-terminal, saving you from failed TXs & wasted ETH
- Same anonymity as Uniswap, just link your Metamask wallet and go
- Have your entire portfolio, best-performing pairs, and tx histories on one screen
- Access to professional-level tools, in an easy-to-use portal
We screen the tokens listed via the Swapfolio App, but we STRONGLY recommend that users think of our screening feature as a back-up and not as their primary means of evaluating the legitimacy of a token.
Take advantage of our PRO features by staking SWFL token and earn passive income as you trade! Benefit from trade options like limit-orders, stop-loss, and trade alerts.
Because Swapfolio is built as an interface and trading terminal for existing Uniswap smart contract protocols, you’re interacting directly with the Uniswap protocol, without intermediaries.
Control Your Uniswap Portfolio With Swapfolio
The Ethereum Mainnet network is going stronger than ever. With the new Launch of the Beacon network on ETH 2.0, we expect big things to happen soon!
The Uniswap protocol changed everything about trading on not just the Ethereum network, but it forever changed the standard on all other blockchains and DEXs, as well. As a core dApp in the Ethereum network, Uniswap V2, the UNI token, and the coming Uniswap V3 will forge a new chapter in the coming years.
Take advantage of the long-term trends by taking your crypto investment portfolio to the next level on Uniswap – with Swapfolio.
Join our community today and see what all the buzz is about!
To learn more about DeFi, or crypto, head over to our Wiki page where you can find answers to many of the most commonly asked questions. You’ll also be able to get info on our staking dApp, tokenomics, announcements, news, and more!