TL;DR
The success of Uniswap can often feel uncredited. Or taken advantage of in many ways. Operating as the backbone of almost every DEX you touch. The Uniswap codebase is being used in literally thousands of products. Wherever you see the ability to trade within most Ethereum-based dApps, that’s Uniswap at work. Something that we as a community sometimes take for granted. With the UNI token falling far from its all-time high. Now’s the perfect opportunity to look closer and see what the future of Uniswap holds.
Uniswap is undoubtedly the most game-changing DeFi tool we’ve had since Ethereum first launched. Paving the road to an entirely new avenue for free enterprise on the blockchain. Not forgetting MakerDAO as the first example to showcase the power of Ethereum. Uniswap gave us so much more with the introduction of liquidity pools as mediums of exchange. Completely removing the need to trust any third party to trade assets. This is the true success of Uniswap, its lasting impression on the market that we undoubtedly take for granted. Without Uniswap, decentralized finance would look nothing like it does today.
A DEX History Lesson
The Beginning
Looking nothing like it does today. The ability to swap one token for another on Ethereum without an exchange didn’t exist until the introduction of the IDEX, EtherDelta, and ForkDelta between 2016-2017. This is the first example of utilizing the Ethereum Smart Contract protocol to perform simple swaps. It was not the most efficient or easy method. Keep in mind that this was before sidechains and layer2s started operating. The winner of this first round of DEXs was undoubtedly EtherDelta. With it’s main objective being to help build network effects on Ethereum through the use of Initial Coin Offerings. Giving us the ICO boom and introducing products like Kyber, Bancor, Aave, Balancer, and Synthetix.
Since many tokens relied on a central exchange order book and liquidity. This opened up the first opportunity to launch a project without relying on a CEX to succeed. Offering a decentralized order book that was open for anyone to use. But, eventually, problems started arising pretty quickly as more and more people started getting into crypto.
Issues
The biggest issue with this old method of finalizing swaps was that it did so through a mostly central order book. Ethereum being the main token at the time, you couldn’t really swap one ERC-20 token for another. Instead, you had to swap between Ethereum only. So if you wanted to pick up some BAT tokens you could only do so by trading ETH for them. While not an inefficient way of swapping tokens, it was a godsend for maintaining the momentum of the Ethereum network.
However, the limitations of settling these trades on Ethereum quickly became the biggest challenge as the network started getting clogged with increased traffic and was unable to reliably settle transactions in a reasonable amount of time. This made trades on these old DEXs extremely challenging. Sometimes taking full days to settle a transaction on Ethereum. While paying an exorbitant fee to do so. Turning this first iteration of DEXs into non-functional protocols. Eventually, Etherdelta was forced by regulatory agencies to block certain IPs and from that point, everything continued going downhill.
Solution
Head of Research Jesse is a passionate seeker of truth who enjoys educating others about Bitcoin. As a free thinker and 2nd amendment advocate, Jesse believes each individual has the right to monetary freedom. “The swarm is headed towards us” -Satoshi Nakamoto
