Uniswap, the decentralized exchange based on smart contracts, officially surpasses Coinbase, one of the most popular crypto exchanges in the world, for trading Ethereum.
In the past 24 hours, Uniswap appears to be second only to Binance.
The reason for this is that following the implosion of FTX, traders are flocking to decentralized exchanges (DEX). Uniswap is one of them and has grown overnight to become the second largest Ethereum trading venue in the world.
Uniswap: why is it different from Coinbase (and others)?
Uniswap is the biggest decentralized exchange and the fourth largest among cryptocurrency exchanges by volume, used to trade ERC-20 and Ether tokens. Unlike most common exchanges, including CoinbaseUniswap uses a mechanism based on a pool of liquidity and its price is calculated according to a mathematical formula.
That is, it uses an innovative concept that the price of traded tokens does not directly depend on supply and demand, but on a mathematical formula.
This made Uniswap grow in popularity to the point that it even overtook Coinbase as an exchange against Ethereum. The inventor of Uniswap, Hayden Adamsshared the news on Twitter yesterday, citing analysis from Nansen’s CEO Alex Svanevik:
“DEX is starting to replace CEX? Total ETH/USD volume (or stables): Binance: ~$1.9 billion, Uniswap: ~$1.1 billion, and Coinbase: ~$0.6 billion.
DEXs differ from CEXs in that they allow customers to trade cryptocurrencies while maintaining full control over their fundsunlike centralized platforms, providing a higher level of protection against withdrawal blockages or network outages.
At the time of the tweet, Uniswap had hosted over $1 billionn value of Ethereum trades in the past 24 hours, nearly double the volume of Coinbase, the world’s second-largest centralized exchange (CEX) by total trading volume.
The numbers have since declined, although Uniswap continues to beat Coinbase, according to data from CoinGecko. Indeed, Coinbase currently accounts for $564,937,971 in Ethereum trades, while Uniswap accounts for $966.17 million.
However, Binance continues to be the undisputed leader in this category, with over $1.7 billion across all of its Ethereum trading pairs.
Changes in the crypto world following the collapse of FTX
The recent FTX exchange collapsein addition to causing significant market turbulence and driving down the price of other high-profile cryptocurrencies such as Bitcoinalso increased Ethereum exchanges, and not only.
Indeed, all DEXs accounted for $31 billion in cryptocurrency trades last week, according to Dune statistics. Of that number, Uniswap alone hosted $20.3 billion during the same period.
The spike began last Tuesday, when many exchanges saw an overnight doubling in trading volumes, including Curve, which jumped from $700 million to $1.3 billion. Uniswap exchanges have more than tripled during this period.
Specifically, on the same day, Binance announced that it had signed a non-binding agreement to save FTX for an undisclosed amount. Which we know never happened later as Binance backed down stating that the situation FTX found itself in was too complicated for its control to handle.
Uniswap: the decentralized exchange and its history
Uniswap is the brainchild of Hayden Adams after reading an article by Vitalik Buterin regarding decentralized markets and automated market makers. A mechanical engineering graduate at the time, Hayden decided to venture into developing smart contracts on Ethereum.
Thus, at the end of 2017, Adams launched the first decentralized exchange prototype allowing the exchange of a single token. Within months, the project grew and Hayden, who in the meantime was still unemployed and living off the Ether he had previously purchased, added support for multiple tokens.
During this time, Hayden met with Vitalik Buterin, who helped him refine the concept and improve the smart contracts. At the end of 2018, the first version was launched on the Ethereum mainnet and supported three tokens. In two years, Uniswap becomes the decentralized exchange with the highest daily volume, transaction of more than 200 million dollars per day.
Uniswap differentiates itself by being a decentralized exchange. This means that a token and/or cryptocurrency exchange platform is built in such a way that it is not operated by a centralized entity, but directly on the blockchain.
Despite the fact that centralized exchanges, as opposed to decentralized exchanges, facilitate the transfer of money from banks and credit cards to the crypto world and allow a large number of transactions to be processed, they actually introduce a vulnerability because they are prone to failure. , closure or fraud.
In contrast, decentralized exchanges are entirely governed by blockchain software ensuring peer-to-peer transactions and superior resistance to censorship or failure. However, the number of transactions per second they can process is a major limiting factor. In fact, the Ethereum network is currently almost saturated due to Uniswap.