Uniswap is one of the top decentralized exchange in the market. It has been garnering increasing attention with its performance in the recent bull run. It is leading the race for cryptocurrency exchanges as it enjoys the first-mover advantage. But how do decentralized exchanges work and what is the future of Uniswap?
What is the need for decentralized exchanges?
Cryptocurrency exchanges like Coinbase and Binance and the go-to place for buying or selling tokens but they have their fair share of problems. Centralized exchanges operate through a traditional order book where each sell order is fulfilled once a buy of similar price is registered and vice versa. Due to this, centralized exchanges suffer from problems of liquidity. If a buy order of similar amount is not registered then the sell order cannot be fulfilled – a problem of narrow market. Moreover, these exchanges also have the usual issues of centralization and transactions can also have high surcharges.
One of the use-cases of the blockchain technology is decentralized cypto exchanges like Uniswap. Uniswap – being decentralized – is not owned or controlled by a single entity. The DEX was created in 2018 and is built over the blockchain of Ethereum which gives it compatibility with all ERC-20 tokens.
It is an open-source project and works through an automated liquidity protocol mechanism. The mechanism incentivizes users to become liquidity providers and hence solve the problem of narrow markets. DEX ensures users are under control of their funds and all their private keys. This makes it more secure in case of a hack. Furthermore, Uniswap lists new tokens for free whereas centralized exchange charge phenomenal fees for listing. Decentralization also makes Uniswap more time efficient.
What is the future of Uniswap?
Uniswap stands at a price level of $29.96 at the time of publication. The price has increased by nearly 5% in the past twenty-four hours while it has grown by 20% in the weekly timeframe. Uniswap is the tenth largest cryptocurrency in the market with a capitalization of $17 billion. It is the largest decentralized exchange in the market.
The performance of the cryptocurrency in the past year had been phenomenal. It started off the year with a price of $4.45 and reached towards $44.97 – a phenomenal growth of more than 900%. UNI had been operating in single digit figures before the bull run of 2021 and has moved to double figure now. The cryptocurrency has established multiple support levels and has stabilized near $30.
Having such a strong footing, the future of the cryptocurrency is positive despite growing competition from rising decentralized exchanges like PancakeSwap. According to Wallet Investor, UNI coin is expected to have a price level of $56 in one year’s time while the five-year projection places it at $179. Digital Coin Price is also bullish on the cryptocurrency. Per their estimates, UNI will end the year at $44 and reach towards $103 by 2026.
