Uniswap | Unis wap – Is it Right For Bigger Trades?
The Uniswap model has many advantages, but it has several drawbacks, as well. It scales poorly, and most funds end up sitting in AMMs unused. Larger orders also incur exponentially greater costs than small ones. By creating larger liquidity pools, Uniswap can process large orders more quickly, and slippage can be significantly reduced. The Uniswap platform has undergone several iterations, and v3 brings additional improvements.
While it seems that Uniswap is a good option for bigger trades, the fact that anyone can list their token makes it vulnerable to fraud. While the majority of Uniswap tokens are legitimate, some are created with little background development, and promise great things. These companies dump coins as soon as trading reaches their desired levels, or steal funds deposited into their protocol. This makes the Uniswap protocol a poor choice for small trades.
The Uniswap platform relies on an automated market maker system to adjust asset prices based on demand and supply. It uses a mathematical equation to calculate how much the price of a given asset will be, and rewards the liquidity providers by allocating a certain percentage of the transaction fee. It has a variety of features, and is currently the largest platform of its kind. Once the system becomes more established, the Uniswap platform will be ready for more big trades.
The Uniswap protocol is designed to enable liquidity providers to automatically exchange a certain amount of ERC-20 tokens for an equivalent amount of ETH. The protocol works on a constant value, k, that is set by the exchange contract creators. A small percentage of each trading fee is sent to the Uniswap fund. Currently, the fund is turned off, but if the community approves the new fee, it would pay 0.5% of the pool trading fees.