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Is Uniswap Really Decentralized (Explained)

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Uniswap is one of the world’s largest Crypto exchanges, built on the Ethereum ecosystem. The automated market maker runs on a peer-to-peer protocol. However, is it really a decentralized platform?

We answer that below. Also, read on to find out more about:

  • What a decentralized crypto is
  • Benefits of decentralization

Is Uniswap A Decentralized Exchange?

Yes. Uniswap is a decentralized exchange.

Uniswap is an Automated Market Maker (AMM) which runs on a decentralized peer-to-peer protocol that doesn’t use order books.

Besides that, Uniswap is permissionless and doesn’t run under a central authority. 

It gives users a secure and trustless platform to trade their crypto coins. You can exchange many crypto tokens using the Uniswap exchange platform. Any investor with an ERC20 token can easily swap it for any other crypto asset they wish.  

Uniswap lets its users participate in the protocol’s governance and forging its future. This happens using Uniswap’s native token, UNI.

What Does A Decentralized Crypto Mean?

In cryptocurrency, decentralization means allowing multiple parties to control decision-making over a network instead of placing it under a singular authority. 

Both tokens and networks can be decentralized, so let’s explore both.

A decentralized token allows all its users to participate in the governance of the token. It also offers a trustless network where trading and governance activities take place.

Participants holding the token can buy, sell or hold it without restrictions from a regulatory group, entity, or organization. 

On the other hand, decentralized exchanges offer platforms that allow participants to swap and trade different crypto assets in a trustless, permissionless, and borderless manner.

An excellent example of a decentralized exchange is Uniswap (UNI).

Using the UNI token, Uniswap allows users to vote and determine future protocol changes. The more significant your portion of ownership of the UNI token, the more authoritative your participation is. 

Learn more: Is Litecoin Decentralized?

What is a decentralized protocol?

A decentralized protocol is an ecosystem running a program or software in which many client and host nodes coexist to make a blockchain.  

How decentralized protocols work

Decentralized protocols provide their users with a ledger that holds the record of all transactions run in the network. Users don’t need to trust or know other participants in the network. 

If one user creates a false record or alters transactions in his ledger, it fails to pass as a correct transaction, and the rest of the participants on the network dismiss it. 

Uniswap is a perfect example of a decentralized protocol because it offers a trustless and permissionless platform for investors and participants to trade.

You don’t have to open a user account with Uniswap for you to start trading or swapping on the platform.

Is Uniswap A Decentralized APP?

Yes. Uniswap is a decentralized application.

As a decentralized protocol, Uniswap runs an open-source software that lets users swap cryptocurrencies and provide liquidity while earning interest on their trades.

Here are features that make Uniswap a decentralized finance application:

Trustless and Secure

To carry out your trades on the platform, you don’t have to know other participants.

Decentralization

No single person or institution controls all data within the protocol. Every participant is the owner of their data and is in control of their crypto-wallets.

Learn more: Does Uniswap Use Chainlink?

What Are The Benefits Of Decentralization?

Decentralization creates a better environment for cryptocurrency adoption. Let’s dive into the four main benefits:

Security

Decentralization ensures blockchain technology maintains its impervious nature. Having random participants reduces the risk of losing the network to bad actors, downtime, or attacks. Each user owns private and unique keys to their wallets. 

Decentralization ensures at no one overturn decisions on the network without approval from other users. 

Trustless

As stated earlier, users in a decentralized network don’t need to know one another. For example, an investor using Uniswap can get on the platform and swap his token for different crypto without ever meeting the investors who stake to provide liquidity on the platform. 

Also, most decentralized cryptocurrencies don’t require the participant to provide useful information. 

Learn more: Is Uniswap Proof Of Stake?

Transparency

Running open-end ledgers for every user is a critical way of preserving and safeguarding data in a network. All users get a real-time view of every transaction on the network and can verify any transaction that seems erroneous. 

Borderless

Without any single central authority, users can make transactions that experience fewer restrictions. Decentralized networks let users transfer or trade with other participants or on separate exchanges without barriers. 

Permissionless

Decentralization favors investors who have a strong bias against centralized systems. Unlike centralized networks, which undergo scrutiny and face hurdles from regulatory bodies, investors bear full responsibility for their investments in decentralized settings. 

You can hide your investments or net worth from authorities like the IRS or evade government restrictions.

Learn more: Does Uniswap Have An APP?

Is Uniswap Cheaper Than Coinbase?

Yes. Uniswap is cheaper than Coinbase. 

Since its launch, Uniswap charges 0.3% for transactions on the platform regardless of the transaction size or type of crypto investment. 

On the other hand, Coinbase charges fees of 0.5% of transactions under $10,000, and you may face extra costs for ETH fees when the markets encounter downturns. 

Is Uniswap Ethereum Based?

Yes. Uniswap is Ethereum based. 

Uniswap is a robust decentralized protocol running an Automated Market Maker formula built on the Ethereum network.

You can swap crypto tokens within wallets or across participants without intermediaries as a crypto exchange platform. However, for this, you need ETH for gas Fees.  

Uniswap, as a token, follows all the rules and standards issuing smart contracts known as ERC-20. All ERC-20 tokens rely on the foundation and framework of the Ethereum blockchain.

Final Thoughts

Uniswap is a decentralized exchange platform. All its features and mode of operation are designed to keep the user in control, and no central authority or agency can set rules within the exchange market.