The daily trading volume on Uniswap started to compete with that of centralized exchanges in 2020. It is clear that investors continue to have a substantial demand for permissionless financial services. The survey indicates that Uniswap has generated a trading volume of 3.02 billion US dollars, of which approximately 9 million US dollars are LPs. Uniswap has therefore become an immediate success, but the majority of investors are still unaware of the liquidity mining that takes place on the platform. What exactly is Uniswap liquidity mining, then? How does it function? The Uniswap liquidity mining lesson is explained in great depth in the sections that follow. Investors should be able to quickly comprehend Uniswap liquidity mining after reading this introduction, I hope.
What is Uniswap?
Let’s first look at the introduction of Uniswap in the Uniswap white paper:
On Ethereum, the Uniswap protocol allows for automatic token exchange. Its design prioritizes zero rent extraction, gas efficiency, censorship resistance, and simplicity of use.
In summary, Uniswap is a blockchain-based exchange that facilitates quick exchanges between tokens and ETH as well as between tokens and other tokens. In this article, “Token” refers to “ERC20 Token.” Based on the Ethereum blockchain, Uniswap is a decentralized trading system for ERC20 tokens. The service is entirely decentralized, censorship-free, and permissionless since it is powered by a collection of smart contracts.
What’s Special About Uniswap?
Uniswap is well designed in the following aspects, as mentioned in the white paper:
ease-of-use
If you want to purchase or sell coins on the Uniswap exchange, all you have to do is determine which coins to sell, which coins to buy, and how much to buy or sell, then hit the Swap button to transmit the transaction. Once the transaction is on the chain, you may instantly acquire the coins you want. coins. Additionally, even if Token A and Token B are swapped, just one transaction may be made in Uniswap to complete the exchange, but in other exchanges, an intermediary may be needed.
gas efficiency
The white paper states that among numerous popular Ethereum exchanges, Uniswap transactions use the least amount of gas, which implies that Uniswap transactions need the least amount of miner fees.
zero rent extraction
No one has any rights under the contract design used by Uniswap, and the developer team does not get any money from the sale. However, this does not imply that using Uniswap to trade is free.
A gas cost is necessary in order for a transaction to be packed onto the Ethereum network. The quantity of the transaction has nothing to do with this sum of money. It is projected to be roughly $0.05 based on current exchange rates and network congestion.
What Currencies can be Traded on Uniswap?
Currently, ETH and 581 ERC20 tokens can be traded on Uniswap. On CoinGecko, you can see these tokens by transaction volume:
The top transactions are all very representative projects. Let’s introduce some of the more special ones:
- DAI:MakerDAO’s decentralized stablecoin, DAI, is linked to the US dollar.
- MKR: The governance token for MakerDAO. Uniswap is now the biggest trading platform for MKR.
- USDC: A stablecoin for the dollar created by Coinbase that can be exchanged 1:1 for dollars on the platform.
- WBTC: Bitcoin may be exchanged 1:1 for ERC20 Tokens, which are maintained by several reputable teams in the Ethereum ecosystem.
- WETH: An ERC20 token that is 1:1 convertible with ether thanks to smart contracts.
- cDAI: The token acquired when Compound loans DAI; it may be exchanged for DAI at any moment on Compound and will progressively gain value as a result of lending interest.
What is Liquidity Mining?
Liquidity mining, sometimes referred to as yield mining, is a means for cryptocurrency owners to stake or lock their coins in yield pools to earn rewards.
When cryptocurrency owners contribute money to liquidity pools, they become liquidity providers and become eligible to receive incentives from the Defi platforms that run the liquidity pools.
How Liquidity Mining Works
Liquidity providers, who are cryptocurrency owners that use Defi platforms to run liquidity pools, are involved in liquidity mining together with liquidity pools. By making deposits in liquidity pools, liquidity providers, often referred to as miners or liquidity miners, support cryptocurrencies.
Following that, the liquidity pool serves as a market where other users with an interest in the cryptocurrency fund in the liquidity pool may borrow or trade tokens. The Defi network levies certain fees for these other users that lend or trade tokens.
The liquidity providers get payments from the Defi platform in proportion to their contributions to the liquidity pool. As a result, liquidity providers will be rewarded more the more money they provide to liquidity pools.
A smart contract that automatically executes the contract if the criteria are satisfied contains the algorithm for allocating fee revenue.
The incentives are often given in the form of stable coins tied to the dollar. The most popular stable currencies for mining liquidity are DAI and USDT. Some Defi protocols, however, can provide a large variety of tokens, including additional ERC tokens like ETH.
Uniswap Liquidity Mining Tutorial
1.Buy ETH and USDT (already skipped): Open Bitpie Wallet – select “One-click buy and sell” or “Coin exchange” to get ETH or USDT
2. Pledge to obtain LPtoken in uniswap
Open Bitpie Wallet-Discovery Page-uniswap
3.Add a flow cell to obtain LPTOKEN
3.1Click UNI on the trading pair to add liquidity
3.2Search ETH-USDT
3.3Enter the injected quantity to get LPtoken
4.Pledge LPtoken
4.1Open Bitpie Wallet-Discovery Page-uniswap-UNI
4.2Select ETH-USDT pledge
4.3Stake and start mining
Note: For the first commitment, the token has to be authorized. A miner’s fee is also necessary for this process. The amount of ether in your wallet must be sufficient. If the miner’s fee is insufficient, you may instantly purchase more ether on the main page at the ether gas station.
Notes on Uniswap Liquidity Mining
- Preliminary preparations, such as using a reliable internet connection and Google Chrome, installing the MetaMask plug-in, importing the account, and copying the private key for import;
- Mining instruction: Place the ETH first in the fund pool, followed by the LP token in the UNI mining pool, the mining pool, the contract, the gas cost, the transfer, and the inspection of the contract interaction.
- Taking money out and receiving money: The commitment will be canceled if the quantity of UNI mining and the promised LP token are presented in the UNI mining interface.
- Find the pledged token fund information interface and switch the LP token to ETH-USDT. If you can’t locate it, click “Import it,” input the appropriate trading pair, and then after you’ve looked again, click “Remove” at the bottom of the interface to get rid of it. – The wallet will get USDT back.
- When you click on MetaMask to check the details about the contract withdrawal, you can see the tokens that the wallet has returned together with the gas cost. It is not advised for small capital users to go to Uniswap to engage in UNI mining operations due to the present mining revenue being relatively low and the gas charge being very exorbitant.
The answer to the question of how quickly one may comprehend the Uniswap liquidity mining instruction is provided above. Investors are now urged to carefully read the platform’s complete introduction before investing in liquidity mining. Exist any traps here? Some platforms have hefty fees. Additionally, keep an eye out for the major chains as they migrate between other platforms like heco, bsc, etc. Bridges, cross-chain bridges, and platforms with comparatively cheap exchange costs between stable currencies may all be used for currency exchange or currency transfers across several primary chains.
