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How to Make a Uniswap Trade – A Step-by-Step Guide 

Eliman Dambell
Last updated: | 10 min read
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.

Uniswap is viewed as a prominent decentralized exchange (DEX) operating on the Ethereum blockchain. The exchange offers a seamless platform for users to trade and buy various ERC-20 tokens without relying on intermediaries. Newly launched cryptocurrencies often list on Uniswap before they make it to centralized exchanges (CEX).

Below, we present a comprehensive step-by-step guide to navigating the platform and detail how to make a Uniswap trade.

What is Uniswap?

Uniswap is a decentralized exchange that enables automated trading of tokens on the Ethereum blockchain. By eliminating the need for centralized intermediaries, Uniswap facilitates automated token swaps directly from users’ wallets. It does this by leveraging smart contracts and liquidity pools.

Unlike traditional exchanges, Uniswap does not rely on order books; instead, it employs an innovative algorithmic pricing mechanism to determine exchange rates. With its user-friendly interface and commitment to decentralization, Uniswap has garnered widespread acclaim, among both new and seasoned traders.

In contrast to centralized exchanges, which require users to undergo lengthy registration processes and relinquish control of their funds to third-party custodians, Uniswap allows users to retain full control of their assets at all times.

How to Trade on Uniswap

Trading on Uniswap is a simple process due to its user-friendly interface. You can connect your wallet, find a token, and place a step in a few simple steps. Let’s break this down for you.

Step 1: Connect Your Wallet

Start by visiting the Uniswap platform and connect your crypto wallet. MetaMask is a popular choice, but Uniswap supports various wallets like Coinbase Wallet and Phantom. Select the one you want, and you will be guided to sync it to the Uniswap exchange.

Connect to wallets on Uniswap

Step 2: Select Tokens

Once your wallet is connected, choose the tokens you want to trade. If you’re swapping ETH for another token, ensure you have enough ETH for gas fees. Click on “Select a token” and enter the token’s wallet address, or search for it.

Select tokens on Uniswap

Step 3: Enter Amount

Next, enter the amount of the token you want to swap. Uniswap will automatically calculate the estimated amount of the other token value you’ll receive based on current market rates.

Enter trade on Uniswap

Step 4: Confirm Transaction

End the process by confirming the transaction on your wallet, and wait for it to be processed. Once the transaction deadline is confirmed, you’ll receive the swapped tokens in your wallet.

How does Uniswap work?

Uniswap operates on the principle of automated market-making (AMM) and utilizes liquidity pools to facilitate decentralized token swaps. These pools provide liquidity and allow users to contribute their assets to the platform, thereby enabling liquidity for various token pairs. This innovative approach ensures continuous liquidity and eliminates the need for order books, enabling trades to be executed seamlessly and without delay.

Another key aspect of Uniswap is its automated market-making (AMM) algorithm, which determines the prices of tokens based on the ratio of assets in the liquidity pools. This algorithm ensures fair and transparent pricing, mitigating the risk of price manipulation often associated with centralized exchanges.

So when a user wants to make a trade on Uniswap, they simply connect their crypto wallet to the platform and select the token pair they wish to trade. Uniswap then calculates the exchange rate based on the ratio of tokens in the liquidity pool and executes the trade at the prevailing market price. After the trade is completed, the liquidity pool is rebalanced to reflect the equivalent value of the new token ratios.

What You Need to Know Before Trading on Uniswap

Before you begin using the Uniswap decentralized exchange (DEX) it is important to understand some of the key functions. Here are some of the key things to know before using the platform,

Slippage Tolerance

Slippage

refers to the difference between the expected price of a trade and the actual price at which the trade is executed. When trading on Uniswap, users need to set a maximum amount of slippage tolerance to account for potential price fluctuations during high volatility. Setting an appropriate slippage tolerance ensures that trades are executed at or near the expected price.

This is important due to the volatile nature of crypto trading, where significant price swings can be a frequent occurrence.

Transaction Deadlines

Uniswap transactions are subject to Ethereum’s network congestion and transaction fees, known as gas fees. Users need to be mindful of transaction deadlines to avoid failed transactions or paying excessive gas fees. Setting appropriate gas fees and transaction deadlines ensures the timely execution of trades without incurring unnecessary costs.

Smart Contract Risks

As Uniswap operates through smart contracts deployed on the Ethereum network, there are inherent risks associated with smart contract vulnerabilities or exploits. Users should exercise caution and conduct thorough research before interacting with Uniswap or any DeFi protocol to mitigate the risk of potential financial losses due to smart contract bugs or hacks.

Liquidity

The liquidity of a trading pair on Uniswap directly impacts the execution of trades and the overall user experience. Pairs with higher liquidity typically offer tighter spreads and lower slippage, resulting in more favorable trading conditions. Before trading on Uniswap, users should assess the liquidity of their desired trading pairs to ensure optimal trading outcomes.

Gas Fees

Gas fees on the Ethereum blockchain are essential for processing transactions and interacting with smart contracts. However, gas fees can vary depending on network congestion and transaction complexity. Users should monitor gas prices and adjust their transaction settings accordingly to minimize gas fees while ensuring timely transaction execution.

How to Use Uniswap With Crypto Wallets

There are several crypto wallets that you can use to connect to the Uniswap exchange. Let’s take you through the process of how to connect some of these.

How to Use Uniswap with Metamask

MetaMask is a popular Ethereum wallet and browser extension that allows users to interact with Ethereum-based decentralized applications (DApps) like Uniswap. To use Uniswap with MetaMask:

Step 1: Visit the Uniswap website and connect your MetaMask wallet by clicking “Connect Wallet” in the top-right corner.

Setup Metamask on Uniswap

Step 2: Log in to your MetaMask account, and once synced you will be able to access Uniswap’s trading interface.

Login to Metamask on Uniswap

Step 3: Now choose the token you want to trade and enter the amount. Confirm the transaction in MetaMask, and once confirmed on the Ethereum blockchain, your trade will be completed.

How to Use Uniswap with Coinbase

Coinbase Wallet is a mobile cryptocurrency wallet that allows users to store, send, and receive various cryptocurrencies, including Ethereum-based tokens. To use Uniswap with Coinbase Wallet:

Step 1: Open the Uniswap website on your mobile browser and tap “Connect Wallet.” Select “Coinbase Wallet” as your preferred option and follow the prompts to connect your wallet.

Connect to Coinbase on Uniswap

Step 2: Once connected, you can browse available token pairs on Uniswap and initiate trades directly from your Coinbase Wallet.

Step 3: Review the transaction details and confirm the trade within the Coinbase Wallet app. Once confirmed, your trade will be processed on the Ethereum blockchain.

How to Use Uniswap with Trust Wallet

Trust Wallet is a mobile cryptocurrency wallet that supports a wide range of cryptocurrencies and tokens. To use Uniswap with Trust Wallet:

Step 1: Download the Trust Wallet app from the App Store or Google Play Store and create or import your wallet.

Download Trust wallet on App Store

Step 2: Open the Trust Wallet app and go into the “Discover tab”, where you can see the Uniswap exchange listed. Select this and you will be taken to the Uniswap site.

Select Uniswap on Trust Wallet

Step 3: Once there you will be given the option to connect. You can then explore available token pairs on Uniswap and initiate trades directly from your Trust Wallet.

Connect to Trust Wallet on Uniswap

What does the UNI Token Do?

The UNI token, launched by Uniswap in September 2020, plays a pivotal role in governing the protocol and empowering its ecosystem. UNI tokens holders have voting rights, allowing them to propose and vote on changes to the protocol, such as fee adjustments and governance proposals.

Additionally, UNI acts as a governance token and an incentive for liquidity providers on Uniswap, allowing them to earn a share of trading fees and governance rewards. Furthermore, UNI holders can participate in the decentralized governance of the Uniswap protocol, ensuring its continued evolution and decentralization.

It is a top 25 cryptocurrency with a market cap of $4.5 billion and a daily trading volume of $144 million. The token has experienced volatility in recent months after the U.S. Securities and Exchanges Commission (SEC) warned Uniswap of potential actions against it.

Which Countries Allow Uniswap Trading?

Uniswap operates on a decentralized and permissionless blockchain, meaning it can be accessed and utilized by anyone with an internet connection, regardless of their location. As a result, there are no specific restrictions on Uniswap trading based on geographic location. However, users should be aware of any regulatory requirements or restrictions imposed by their local jurisdictions regarding cryptocurrency trading and decentralized exchanges.

While Uniswap is accessible globally, regulatory scrutiny varies across different countries. For example, some countries like the United States have stringent regulations concerning cryptocurrency trading platforms, while others have adopted more crypto-friendly policies. China is one of the most notable countries that completely banned crypto trading.

Pros and Cons of Trading on Uniswap

Although there are several positives to using Uniswap, there are also some drawbacks, let’s look at both of these in more depth.

Pros:

  • Decentralization: Uniswap operates on a decentralized protocol, eliminating the need for intermediaries and offering users greater control over their funds.
  • Liquidity: Uniswap’s automated market-making mechanism ensures high liquidity for various token pairs, allowing for seamless trading experiences.
  • Accessibility: Anyone with an internet connection and a compatible crypto wallet can access and trade on Uniswap, promoting financial inclusivity.
  • Transparency: Uniswap’s open-source nature and transparent smart contracts enable users to verify transactions and ensure fair trading practices.

Cons

:

  • Impermanent Loss: Liquidity providers on Uniswap may incur an impermanent loss, a temporary loss of funds caused by fluctuations in token prices relative to when they provided liquidity.
  • High Gas Fees: Due to congestion on the Ethereum network, trading on Uniswap can sometimes be associated with high gas fees, especially during periods of network congestion.
  • Limited Token Selection: While Uniswap supports a wide range of ERC-20 tokens, some less popular tokens may have limited liquidity, impacting trading volumes and execution prices.

Who is Uniswap Trading Best Suited for?

Uniswap trading is best suited for traders seeking decentralized and permissionless access to cryptocurrency markets. It is ideal for traders who prioritize privacy, security, and control over their funds, as well as those interested in participating in decentralized finance (DeFi) ecosystems. Additionally, Uniswap trading may appeal to liquidity providers looking to earn passive income by providing liquidity to the protocol’s various liquidity pools.

Overall, crypto enthusiasts have continuously turned to Uniswap for its decentralized and innovative approach to trading. Its user-friendly interface and robust liquidity pools have attracted a diverse user base, ranging from casual traders to experienced investors. In 2023, Uniswap was found to have a bigger liquidity pool than Coinbase.

Alternatives to Trading on Uniswap

While Uniswap is a leading decentralized exchange in the cryptocurrency space, there are several options available to users seeking alternative trading platforms. Some notable alternatives to Uniswap include:

  1. SushiSwap: A decentralized exchange forked from Uniswap, offering additional features such as yield farming and staking.
  2. PancakeSwap: A decentralized exchange built on the Binance Smart Chain, offering lower transaction fees and faster transaction times compared to Uniswap. CNBC says it is the second most popular DEX outside of Uniswap.
  3. Curve Finance: A decentralized exchange optimized for stablecoin trading, offering low slippage and minimal fees for traders.

These alternatives to Uniswap cater to specific niches within the decentralized finance (DeFi) ecosystem, providing users with a range of options based on their trading preferences and requirements. To find more of the best decentralized exchanges in 2024 read our guide.

Conclusion

In learning how to make a Uniswap trade you now have a comprehensive viewpoint on the DEX ecosystem. Uniswap has revolutionized the cryptocurrency trading landscape by offering decentralized, permissionless, and user-friendly access to liquidity.

Despite its challenges, such as high gas fees and impermanent loss, Uniswap plays a significant role in the decentralized finance (DeFi) ecosystem, empowering users and promoting financial inclusivity.

Follow our dedicated Uniswap price page for the latest updates.

Trading on Uniswap FAQs

Why are Uniswap fees so high?

Uniswap fees can be high due to network congestion on the Ethereum blockchain, resulting in increased gas fees required to process transactions.

When are Uniswap trading fees lowest?

Uniswap trading fees are typically lowest during periods of lower network activity on the Ethereum blockchain, such as during off-peak hours.

Which wallets work with Uniswap?

Various cryptocurrency wallets are compatible with Uniswap, including MetaMask, Trust Wallet, and Coinbase.

What is slippage in Uniswap?

Slippage in Uniswap refers to the difference between the expected price of a trade and the actual price at which it is executed due to market volatility or changes in liquidity.

Can you make Uniswap trades in the US?

Yes, individuals in the United States can engage in trading on Uniswap, but they should be aware of regulatory considerations and tax obligations.

References

  1. SEC warns Uniswap against possible actions (Reuters)
  2. Crypto trading banned in China (Fortune)
  3. PancakeSwap second largest DEX platform behind Uniswap (CNBC)

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