At the beginning of 2020, DeFi contracts have locked approximately US$700 million in assets, and currently have locked assets of US$15 billion, an increase of more than 20 times. The open, credible, and fair nature of decentralized finance has attracted more and more people to pay attention to and participate in DeFi and gain benefits in the DeFi market.

In the DeFi ecosystem, the top layer of the food chain is still a decentralized exchange that focuses on trading and promoting liquidity. Among the existing decentralized exchanges in the market, Uniswap is the best.

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What exactly is Uniswap?

Uniswap is a decentralized exchange protocol deployed on the Ethereum chain. The release of Uniswap v1 in November 2018 has been funded and recognized by the Ethereum Foundation. Automated Market Maker (AMM) is a trading mechanism that uses smart contracts to achieve decentralized trust. There is no registration, identity verification, and withdrawal restrictions, which makes investors shine. In 2020, innovative projects rushed to Uniswap to inject liquidity into the platform.

For ordinary investors, what is the benefit value of Uniswap?

On September 17, Uniswap airdropped a total of 150 million UNI governance tokens, worth more than one billion U.S. dollars, to early participants in transactions and LPs (providing liquidity). Uniswap’s transaction volume and transaction volume instantly experienced steep growth. A transaction volume of US$33 billion was created in one month, accounting for nearly 60% of the total transaction volume. The price of UNI has also risen by nearly 30% in a month.

As the platform currency of Uniswap, we have seen that UNI and Uniswap complement each other.

Let’s make a horizontal comparison of the platform coins of centralized exchanges. For example, on Binance, the leading exchange that first launched a platform currency, the value of BNB has soared from 0.4 yuan on the line to more than 200 yuan, a 50-fold benefit, which also reflects the value of Binance Exchange as a leading trading platform.

In the same way, in 2021 when the DeFi ecosystem is about to bloom, more and more cryptocurrencies launched by decentralized DAPPs need to be circulated through decentralized exchanges. This is the value of Uniswap as the driving force of DeFi, and UNI as the mainstream currency. , Its appreciation space can be imagined. Compared with the appreciation space of BNB, 50 times of UNI is not far away.

To put it bluntly, the rapid rise of DEXs such as Uniswap not only benefits from its innovative product mechanism and rich investment targets, but also benefits from the dissatisfaction of the majority of users with CEX. After all, transactions here are freer and tokens are more abundant.

On the premise that the appreciation space of UNI is determined, what is the way to obtain UNI?

First, buy. The method of direct purchase in the secondary market can obtain relative UNI, which is to speculate in coins. It needs to be emphasized that this requires taking risks. No matter whether the market rises or falls, investors will probably start from profit, buy low and sell high, and cannot realize long-term holding based on the value of UNI.

Second, mining. The mining method of obtaining UNI is different from the previous need to purchase physical mining machines to obtain corresponding rewards. Uniswap obtains rewards and dividends through liquidity mining.

As we all know, mining is a heavy investment. It is impossible to mine without huge financial support. At the same time, fluctuations in the price of encrypted assets will affect the income of miners at any time. Once the price falls below the shutdown price, miners can only choose to shut down and stop production.

But Uniswap's liquidity mining does not require high mining costs. Uniswap realizes mortgage assets in the Uniswap fund pool, becomes a liquidity provider, and earns transaction fee dividends.

Traditional centralized exchanges provide buyers and sellers with a free trading market as an intermediary. The seller and the buyer reach a deal through a matching engine. During this process, users need to store assets on the exchange and place pending orders. When the purchase price is higher than or A deal is concluded when it is equal to the ask price.

Decentralized exchanges such as Uniswap do not have the concept of matching transactions. The essence of Uniswap is an AMM decentralized exchange. An automatic market maker (AMM) is a fund pool that creates two types of Tokens, and adjusts the number of Tokens in the fund pool according to price fluctuations. Users buy early participating users who are mortgaged in the liquidity pool Tokens in the transaction, rather than peer-to-peer transactions between buyers and sellers.

This involves why early participating users store their encrypted assets in Uniswap's liquidity pool, because the platform rewards trading users' handling fees in a certain proportion to users who provide encrypted assets for the liquidity pool, instead of going to Maintain platform operations.

Liquidity providers get transaction fees rewarded by the platform, the DEX platform gets more users and traffic, and other traders who use DEX can enjoy more convenient decentralized services. This is also the underlying logic of decentralized exchanges.

What reassures investors most is that the encrypted funds deposited by liquidity providers in the Uniswap liquidity pool can be withdrawn at any time without the need to invest in high mining machine costs, high electricity expenses and other costs.

In 2021, DeFi will show a scene of a hundred flowers blooming. On the basis of the explosion of the DeFi ecosystem, decentralized exchanges will become more powerful. Uniswap is the driving force of future finance, and UNI is just around the corner to climb the mainstream currency.