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Check out How Uniswap Gets Some of Ethereum’s Biggest Liquidity

Tue, 01/17/2023 - 01:30
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Sabrina Martins Vieira
Find out how Uniswap was able to outperform Coinbase in liquidity
Check out How Uniswap Gets Some of Ethereum’s Biggest Liquidity
Cover image via U.Today

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After the collapse of FTX, the crypto market saw a boost in interest toward decentralized finance (DeFi), as trading in this sector is more transparent than centralized finance (CeFi).

While Sam Bankman-Fried (SBF) could make unethical moves on the centralized cryptocurrency exchange, such as transferring his customers' cryptocurrencies to Alameda Research, DEX Uniswap founder Hayden Adams would not be able to misuse the funds of users of the decentralized exchange.

The transparency and trustlessness of DeFi made it a standout in November of last year. Following the bankruptcy declaration of FTX, decentralized exchanges saw a surge in trading volume, reaching $32 billion. Uniswap, in particular, saw the lion's share of this volume, with $20.9 billion in trade.

The DEX saw a significant increase in activity on Nov. 8, with trading volumes tripling from the previous day, from $1.3 billion to $4.2 billion. However, Uniswap has even more to be proud of

Uniswap and great liquidity of Ethereum

Uniswap currently has one of the highest liquidities on the market for Ethereum (ETH), enabling it to outperform one of the leading centralized exchanges on the crypto market, Coinbase. But what has made the DEX grow so much?

Uniswap is a revolutionary platform that was among the first to launch on the Ethereum blockchain. It stands out for its use of automated solutions to address liquidity issues, which has helped it avoid the challenges faced by early decentralized exchanges. This has led to significant growth, becoming one of the largest DEXes on the market, with high liquidity for Ethereum.

Uniswap's services are becoming increasingly popular among experienced investors who value the self-custody of assets. This is because it utilizes an automated market maker (AMM) model, which allows DEX users to trade without needing an order book, providing them with greater control and autonomy over their assets.

As a result, Uniswap users are able to not only provide liquidity to the DEX but also to benefit from more efficient pricing and lower trading fees compared to centralized exchanges like Coinbase.

Is this the end of centralized exchanges?

It is not guaranteed that the rise of Uniswap means the end of centralized exchanges (CEXes). Some new crypto market participants may still prefer Coinbase due to its more user-friendly platform compared to DEXes on the Ethereum network.

For less experienced investors, the lack of support can be a challenge when trading on a decentralized platform such as Uniswap, where there is no central point of contact to resolve potential errors or issues.

This is not a problem for Uniswap, as individuals should take responsibility for their actions in the cryptocurrency market. However, those coming from traditional markets may still struggle to understand this concept.

But while DeFi solves its main problem, which is the user experience, communities and resources are now available to help you better understand how to use these platforms.

It is important to note that centralized exchanges typically provide a broader range of assets to trade, enabling better portfolio diversification for investors. In contrast, DEXes like Uniswap are generally restricted to trading tokens within their network, such as Ethereum.

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About the author

Sabrina has been creating content for the cryptocurrency market since 2018. Her career includes work for important news portals in Brazil, such as Cryptonizando and Guia do Bitcoin.
In addition, she is a partner of the portal and YouTube channel É Top Saber.
Her passion for blockchain news and education led her to create the news portal Bolhacrypto.
In order to help companies and projects in the cryptocurrency market to develop, Sabrina has been leading Varandacrypto, a company that offers content for blockchain projects.