Uniswap is a decentralized exchange, with no intermediaries between the supply and demand sides, so how did Uniswap do it???
Simply, Uniswap built a model with similar functions to a vending machine, helping to connect the supply and demand sides.
Participating in Uniswap will have 2 main parts:
- Liquidity Provider: This is the supply side, providing assets to create liquidity for the market.
- User (user, trader): Users can trade any ERC-20 token when coming to Uniswap, in return, they have to pay 0.3% fee on each transaction
Workflow
- The pool on Uniswap will have 2 types of assets, for example, A and B, the liquidity provider will put 2 assets in it at a 1:1 ratio. At the same time, receive LP tokens, this is a token that represents ownership of a portion of assets in the Pool.
- Traders who want to exchange from A to B can put A in the Pool and receive B in return.
- Uniswap currently charges a 0.3% fee per transaction, which is paid to Liquidity Providers.
In short, the supply side (liquidity providers) and the demand side (traders) can meet without having to go through any intermediary. And still share the benefits with each other. Uniswap instead of being an intermediary for transactions, the project has created algorithms, running according to predetermined programs, helping everything run smoothly without the need for a third party, thereby creating a truly decentralized trading market.
5 stars for the brilliant idea of removing the traditional middleman Show Less
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