What is Uniswap?
Uniswap V2 is the newest iteration of the Uniswap protocol, a decentralized exchange based on pools of tokens from liquidity providers. Argent's integration lets you earn fees for becoming one of those liquidity providers.
While Uniswap has emerged as one of Ethereum's most important projects, you should note that it is one of the more advanced use cases in Argent. Calculating fees can be complex, and the economics of being a liquidity provider mean it is possible to withdraw fewer assets than you put in. This is discussed in more depth below.
Why does it matter?
As Uniswap says, it is "transparent, censorship-resistant financial infrastructure for Ethereum". Anyone can swap tokens, add tokens to a pool to earn fees, or list a token on Uniswap.
This means that anyone can create new markets, provide liquidity, and build new financial applications on the Uniswap protocol.
How can I add liquidity to Uniswap with Argent?
To add liquidity, just open the Invest tab in Argent, select Uniswap and choose which assets you would like to deposit.
To make it easier, you only need to add one of the asset pairs (ETH, or the pool's token). We automatically split it into the two tokens the pool requires.
It's important to note that adding liquidity is one of the most advanced use cases available through Argent. Due to shifts in the composition of the pools due to trading, you should be aware that it is possible to withdraw less than you put in (this is called Impermanent Loss)
This video shows how to add liquidity in Argent
How does it work?
The Uniswap protocol is made up of a series of smart contracts that hold pairs of tokens. These smart contracts let you exchange any ERC tokens quickly and securely.
Anyone can earn a commission for contributing their tokens to a 'liquidity pool', which ensures tokens are available when needed.
A 0.3% fee is charged whenever a swap is made. Depending on how much you have contributed to the pool, you will receive a proportion of this fee (more details here).
While most exchanges work on an order book model - where the price is determined by the highest buy price and the lowest sell price - Uniswap uses liquidity pools, where the price comes from the ratio of Ether to tokens in a pool.
The price of a token on Uniswap is kept in check by arbitrage. For instance, if a token is priced too low, a trader can buy it and sell for a profit on another exchange until the price is balanced out.
Where can I go to learn more?
- For an introduction to Version 2 of Uniswap, check out this post.
- EthHub have put together a good graphical guide to Uniswap, which you can find here.
- You can find in-depth documentation here.
How does Uniswap make money?
Uniswap say that in the future they may take a 0.05% cut of any trade, which would go towards keeping the protocol running.
If this happens the liquidity provider fee will be reduced to 0.25%.
Argent users supply assets to Uniswap at their own risk.
- You could lose a portion of your principle, known as impermanent loss
- Returns are not guaranteed
- Different pools have different risks