DeFi Protocol Development - Create Your Own DeFi Protocol like Uniswap
DeFi - The recent term in the FinTech Industry has created a massive trend with the army of revolutionizing decentralized finance protocols and their tokens. In just a few months the queue of DeFi protocols continued to extend with different tokens, different DeFi Projects, and their Protocols with unique financial goals.
After the COMPOUND and MAKER Protocols, the Uniswap protocol has created a huge mark in the DeFi industry, with its unique benefits focusing on decentralized traders, and that made the Uniswap protocol to stay on top to dominate the DeFi’s tech world.
People who were aware of the growth of DeFi applications, started to search for a way to create a similar protocol like Uniswap, and where we the Bitdeal stands a solution to provide technical support, for creating a defi protocol like Uniswap. Here we are going to guide you and explore how we can create a Uniswap Like Protocol. Before that let's have a short review of the Uniswap protocol as continues below.
Uniswap - The Popular DeFi Protocol
Uniswap is a popular decentralized protocol built on Ethereum for swapping ERC 20 tokens without the need of buyers and sellers for the demand creation. Instead, the demand is set automatically using an equation and balances the value of assets accordingly based on demand.
Uniswap is an automated liquidity protocol and open-source software that anyone can check at any time.
In simple terms, Uniswap is a DeFi protocol that allows traders to swap ERC 20 and ETH tokens anytime without intermediaries.
Who Invented Uniswap Protocol?
This Uniswap Protocol was invented by Hayden Adams in November 2018. The underlying technology that inspired Adams to implement this protocol was first described by Ethereum Co-founder, Vitalik Buterin.
The equation behind the creation of Uniswap is X * Y = K, which is also known as Market Maker Equation.
After completing one year of its launch Uniswap is making $22M trade volume and pooling value of $26M, in which half is contributed by ETH.
Thus Uniswap is beating over $150M Competitors and making its position and volume highest in the DEX world.
Specialties of Uniswap Protocol
There are about many decentralized open-source protocols available in
DeFi space and each has their own specialties. Here let us look at the key features of Uniswap that make it a more special protocol among all other DeFi Protocols.
Equation Instead of Order Books
In Uniswap decentralized protocol, the price of assets, the trade of tokens, token swapping, and all are calculated on the basis of the equation and there is no presence of an order book or any central authority. Thus, Uniswap allows for trade with a high degree of decentralization and also censorship resistance.
Constant Product Market Maker Model
The main difference between Uniswap and other decentralized protocols is that Uniswap uses a unique pricing mechanism which is termed as Constant Product Market Maker, which is similar to the Automated Market Maker model.
Every decentralized exchange faces the problem of liquidity and Uniswap is one that tries to solve the liquidity issues better than any other DEX platform. This Uniswap allows for the swapping of tokens without primarily relying on buyers or sellers to create liquidity.
Automated Smart Contract
Uniswap works based on ETH-ERC 20 Exchange Factory Contracts. Each token has one exchange contract and they are automated market makers between the price of ETH-ERC20 pair. Thus price determination and trades are executed automatically in Uniswap protocol.
Uniswap is the only decentralized protocol that users can swap, stake Ethereum tokens without any listing process or charging fees. This Uniswap offers for about 2,000 trading pairs and allows for seamless token swapping and trading.
What Uniswap Offers The World?
Uniswap, the best money making protocol offers complete control over your digital money. By Uniswap V1 and Uniswap V2, this DeFi protocol offers many trading features and functionalities to its users.
Here is the list of things that this DeFi based protocol offers its users.
- Complete Control over your funds
- No censorship for your assets and transactions
- High level of Liquidity - Add or remove liquidity to the pool
- Trustless way of exchanging ERC 20 tokens
- Make You earn ETH through Yield Farming and Staking
- Cent percentage Decentralized
- Low cost for DEX Trading
- Allows users to contribute liquidity to Uniswap Liquidity Pools
- Allows for direct token exchange
These are the major benefits one can acquire by utilizing the Uniswap Protocol.
How Does Uniswap Protocol Works?
Let us look at the working of Uniswap protocol or liquidity pools in Uniswap protocol, with the below example.
- In Uniswap, any liquidity provider can create a market by just depositing an equivalent value of two tokens.
- These two can be ETH and ERC 20 tokens or two ERC 20 tokens.
- These liquidity pools are commonly made with Stablecoins such as DAI, USDT, or USDC.
- Liquidity Providers get Liquidity Tokens in return which in turn refer to their share in the whole liquidity pool.
- These LP tokens can be redeemed for their share in the pool.
Let us take ETH/USDT liquidity pool as an example.
We can call the ETH portion of the pool as X and the USDT portion as Y. Uniswap multiplies these to the quantity and calculates the total liquidity of the pool as K.The exact idea behind the implementation of Uniswap is that the total liquidity of the pool K must remain constant always.
Thus, X*Y=K is the equation that decides the price of assets in the Uniswap protocol.
Key Features of Uniswap Protocol
Uniswap offers the following to its users
- Trade/Exchange any asset
- Earn through Staking of tokens
- Create your own liquidity pool
- Add or remove liquidity of existing pool
- Perform Yield Farming
- DEX Trading with 0.3% competitive fees
- Instant swapping of Ethereum and ERC 20 tokens
- Full control over the assets
- Create market through listing a token
- Permissionless Exchange of crypto assets, ie., completely decentralized.
What Is UNI Token?
UNI Token is the governance token of Uniswap protocol introduced in September 2020, without any ICO for token sales. Instead, it will distribute the tokens based on the below-set release schedule.
Up To now, Uniswap had offered 400 UNI to certain users who had used Uniswap Services previously, through running an airdrop.
Uniswap has decided to offer users a way to earn UNI tokens through skating tokens in particular liquidity pools in the near future.
As this UNI token is the Governance Token of Uniswap, any UNI holder can influence, vote for any development decisions on Uniswap protocol.
Any investor can buy this UNI token on any exchanges such as Binance, Coinbase, Huobi, Uniswap, and more. This token is experiencing fast success, by being in the top 50 coin listings soon after the launch.
How Does Token Swapping Occur In Uniswap?
Here let us look at How to swap tokens using the Uniswap protocol.
- You can access the Uniswap protocol through its Front-end at Uniswap.exchange.
- For the token swap, you also need an Ethereum address, for eg: you can use a wallet such as MetaMask.
- Now, you can add tokens or swap tokens to Uniswap liquidity pools.
- It is your choice of selecting the token that you want to swap out of and the token that you want to swap into.
- Finally, to proceed to swap, you need to approve transactions using your wallet and confirm for the swapping.
- Since Uniswap is an open-source protocol, already a number of front-end user interfaces have been created. For eg: InstaDApp, Zapper.fi.
Advantages of Creating DeFi Protocol Like Uniswap
There are many DeFi protocols playing a significant role in the decentralized finance globe. Here let us look at the key advantages of creating your own DeFi protocol like Uniswap.
- Permissionless Transactions, ie., No Man Power Involved
- Immutable - Highly resistive to any modifications
- Automated Price-Fixing - Presence of Smart Contracts act as AMM
- Most Popular DEX Platform - With 95% of DEX trading volume
- A high level of Liquidity drives more users for the protocol
- Can provide huge income, as Uniswap-like protocol built on Ethereum and have Gas fees for each transaction.
How To Create Your Own DeFi Protocol Like Uniswap?
As Uniswap, a popular protocol is making huge revenue in recent days and being a note-worthy decentralized protocol in the DeFi space, many crypto entrepreneurs have an idea of launching their own protocol like Uniswap.
It's not so tough to create your own DeFi open-source protocol like Uniswap and it is one of the best business choices one can make in this time to become a millionaire. As Uniswap is getting more exposure after the launch of its own UNI token and accounts for about 38,000 daily active users who swap their tokens on Uniswap, it is the right time for anyone to launch their own DeFi protocol like Uniswap.
There are many DeFi Protocol development companies, who can assist you with these DeFi related services.
Where To Get Developed Your Own DeFi Protocol Like Uniswap?
We Bitdeal - Leading DeFi Development Company offers the complete DeFi related services for all the nook and corner of the world. Starting from DeFi token development, DeFi Yield Farming Development to DeFi Staking, DeFi Liquidity Pool Development,DeFi Lending Platform Development and more, we offer the unbeatable DeFi solutions for all your business needs.
Our DeFi developers can create DeFi based open-source protocol like Uniswap with DeFi Liquidity Pools, DeFi Yield Farming, DeFi Staking,DeFi based DEX Exchange features and lot more functionalities as like in the Uniswap Protocol. We help you to reach out massive user base through the creation of your own DeFi based decentralized protocol like Uniswap.