Uniswap is one of the world’s largest decentralized exchange platforms. It runs on the Ethereum network and is an excellent place to swap ERC20 tokens. You can also stake these tokens and earn interest on them.
Although you can stake tokens on Uniswap, is Uniswap itself validated by the Proof of Stake Mechanism? Let’s find out about that and more.
Is Uniswap Proof Of Stake?
No. Uniswap doesn’t itself use Proof of Stake.
Uniswap is built on top of the Ethereum network. It uses liquidity mining to produce tokens. Anyone with crypto can participate in the production of UNI tokens by staking on the Uniswap platform.
Will ETH Transition To PoS Affect Uniswap?
Yes. It will.
Ethereum hosts Uniswap on its ecosystem as a smart contract. So, with the upcoming Serenity update to the Ethereum network, Uniswap benefits in several days:
Improved Transaction Speed
Ethereum 2.0 will validate transactions faster which means more transactions. Users of Uniswap will enjoy faster transaction speeds on the platform for this reason. Learn more about Uniswap’s speed in our guide on the topic.
Lesser Gas Fees
A better transactional throughput will reduce congestion on the Ethereum network. That will reduce gas fees charged on transactions while swapping tokens.
Ecosystem
Uniswap came from the inspiration of Ethereum founder Buterin. Therefore, Uniswap may take up the motivation and launch Uniswap V4 in the future with more functionality and better adoption.
How To Invest In Uniswap
How do you invest in Uniswap? Here are several ways you can do that:
Staking UNI token
Staking is a common way to invest in ERC20 tokens like UNI. When you stake UNI, you will earn interest when it gains market value.
A great example is when you buy 1000 UNI tokens at a hypothetical price of $5.5, which rallies to $5.9. The difference here is ($5.9 – $5.5= $0.4). Therefore, you’ll gain 1000 UNI x $0.4 = $400.
Provide Liquidity
Another excellent way to invest in Uniswap is to provide liquidity. You earn interest for providing the capital other users to trade.
When participants swap tokens, Uniswap charges them a small fee, as most DEXes do. Three factors determine the amount of fees charged on the trade: type, volume, and size of the liquidity pool.
Uniswap takes a cut from the fees, and investors get rewards from the remainder. So, the higher the liquidity you provide, the better your rewards. You earn higher interest rates on more volatile tokens.
Follow our easy steps below to buy your first UNI:
- Choose your preferred CEX or DEX.
- Set up your account.
- Select an option to top up money into your account.
- Determine the amount of UNI token you wish to buy.
- Confirm the token purchase amount.
- Keep the UNI in your preferred crypto-wallet.
Learn more: Is Uniswap Easy To Use (Beginner’s Guide)
How To Mine Uniswap?
We’ll see how you can mine Uniswap using Occam Razer and MetaMask from your PC.
- Open the Razer website
- Connect it to your MetaMask wallet.
- Sign the signature request.
- Open the OCC panel at the top of the page.
- Click on Uniswap Liquidity Mining.
- Click the Add liquidity to UniswapOCC to ETH pool.
- Ensure you have assets on your MetaMask wallet before clicking the above button.
- On the Uniswap liquidity, add OCC and ETH tokens to determine their worth before swapping.
- Select the ‘Approve OCC’ button.
- Allow Uniswap to use your OCC token.
- Click Save and confirm if you’re okay with the gas fees involved.
- Click Supply on the Uniswap platform to supply liquidity to OCC/ETH pool.
- Hit the supply button and wait for confirmation.
- You need to provide gas to facilitate the ETH transaction.
- Confirm the gas fees on the MetaMask browser extension.
- Click add UNI V2 to MetaMask.
- After the transaction from OCC to ETH, you will see the value of crypto on both sides.
- Approve the Uniswap liquidity token and sign the transaction.
- Wait for the transaction on the ETH network to confirm.
- You now have a UNI-V2 token you can swap for any token.
Is Staking Better For Crypto?
Staking is a lucrative way of investing in crypto. It’s easier to invest in crypto without involving yourself in the validating process. Let’s first learn how staking crypto works.
How Staking Works
Staking encompasses being part of a staking pool or staking in any of the many crypto exchanges.
Join a Staking Pool
To earn rewards from staking, you need to join a staking pool. These pools work ins a similar way to mining pools.
For each pool, there’s an administrator and a validator. The administrator ensures validators’ activities are congruent with the system’s requirements.
Some pools will charge you a fee for giving access. Also, both delegators and pool administrators receive rewards for maintaining the pool’s operations.
Staking on Crypto Exchanges
Staking on exchanges lets investors earn commissions or rewards instead of allowing their crypto investment to stagnate in their crypto-wallets. The advantage of staking on cryptos offloads the administrative tasks from the investor.
Even so, you must be cautious because staking exposes you to the risk of temporary investment loss.
Benefits of Staking Crypto
Here are some benefits to staking crypto:
- You gain interest or rewards from staking crypto. Note that different tokens have different rewards. Some have higher rewards than others.
- There is no need for equipment.
- Participating as an investor through staking gives you a sense of achievement for making smooth operations.
Downsides of Staking Crypto
Let’s look at the few downsides of staking crypto.
- The lack of proper regulations on exchanges exposes you to the risk of losing your entire cryptocurrency investment.
- There’s a risk of loss of value on the staked crypto. Since cryptocurrencies are volatile, You might lose your digital assets when token market prices slump.
- Most cryptos under the Proof of Stake mechanism limit the time you can access your crypto investments.
Learn more: Can You Stop Staking Crypto?
Which Crypto Is Proof-Of-Stake?
Many cryptocurrencies are Proof of Stake (PoS). Here’s a list of popular PoS cryptocurrencies with their tokens.
- Binance Chain: BNB
- Cosmos: ATOM
- Solana: SOL
- Cardano: ADA
Final Thoughts
From what we can observe, Uniswap doesn’t use the Proof of Stake mechanism. However, once the rollout of Ethereum’s Serenity update is complete, Uniswap will also move to a Proof of Stake model.
