INTRODUCTION
Over the years, the cryptocurrency space has fostered the buying and selling of crypto assets through decentralised exchanges (DEX).These exchanges sit at the core of a financial system built entirely to decentralize power, unlike in traditional financial systems.This financial system is commonly referred to as DEFI (short form; decentralized finance), and one of the top exchanges in this financial system is Uniswap. Here we will discuss who are the competitors of Uniswap.
In simple terms, these decentralised exchanges in DEFI act like our traditional banks because crypto-assets can be stored and exchanged through them.
Now, Uniswap is a decentralised exchange built on the Ethereum blockchain. Uniswap had the first-mover advantage as it was the first decentralized exchange to deploy the automated market maker (AMM) system, which took away the need for centralized powers.
AUTOMATED MARKET MAKER (AMM)
The automated market maker has since become a standard in the crypto space but has seen various alternatives to Uniswap’s model since its inception.
Automated market makers take away the need for order books and algorithmically predefine the price of assets. It makes use of liquidity pools in fulfilling orders.
These liquidity pools are pools in which users lock their crypto assets and get rewarded. The rewards paid to liquidity providers come from the transaction fees paid by users who bought or sold their crypto assets on an automated market maker system, like Uniswap.
TOTAL VALUE LOCKED (TVL)
Decentralized exchanges and applications are ranked by their total value locked (TVL). This TVL represents the total worth of the crypto assets locked into these decentralized exchanges.
The more TVL a decentralized exchange boasts, the more authority it commands in the decentralized finance space.
This authority is nothing new to Uniswap as it has remained the top decentralised exchange over the years, judging by its total value locked.
The TVL of Uniswap and other exchanges or applications effectively make them targets of hackers, as the TVL translates to funds locked into smart contracts on a blockchain (Ethereum for Uniswap). These hackers aim to exploit these intelligent contracts and lay their hands on these funds.
DECENTRALISED FINANCE (DEFI) HACKS
Uniswap has also been a victim of DEFI hacks, as it has had over $25 million stolen by a hacker in a single event.
When it comes to decentralised exchanges or decentralised finance in general, security is an essential aspect when deciding which service to use.
Besides ranking on TVL, decentralised exchanges can also appeal to crypto enthusiasts with their high level of security.
COMPETITORS AND ALTERNATIVES TO UNISWAP
In this article, we will discuss alternatives to and competitors of Uniswap. These competitors will spread across a few other blockchains. The Uniswap competitors and alternatives that we will discuss further are:
- dYdX: This is a decentralised exchange deployed on the Ethereum blockchain. dYdX remains one of the first decentralised exchanges to bring derivatives and margin trading on-chain, effectively decentralising derivatives and margin trading to some point.
- 1Inch: 1Inch is considered the best multi-chain alternative to Uniswap. Unlike Uniswap, 1 Inch supports a handful of other blockchains, including Ethereum.
1Inch is known widely for being a DEFI aggregator. As an aggregator, 1 Inch incorporates other DEFI protocols into itself, giving you access to various other decentralised applications and services at once.
It provides its users with the prices of an asset curated from a handful of various decentralised exchanges and allows them (users) to buy an asset at a price that suits them from those provided.
It also gives an estimate of gas costs for each protocol it provides. 1Inch even launched its own automated market maker (AMM), Mooniswap, which supports limit orders like centralised exchanges.
- Sushiswap: Sushiswap remains arguably the biggest Uniswap competitor on Ethereum. Notorious for its vampire attack on Uniswap just after its launch in August 2020, Sushiswap offered features Uniswap lacked with its launch.
It lets its users earn its $SUSHI tokens by depositing their Uniswap liquidity pool tokens in it. This heavily impacted Uniswap’s total volume locked negatively at that time and left Sushiswap on the brink of becoming the most prominent decentralised exchange on Ethereum.
However, to regain its place, Uniswap launched its own $UNI tokens, which succeeded in making them the users’ favourite.
Regardless of how it started, Sushiswap remains a prominent DEX on Ethereum.
- Quick swap: Quickswap is a Uniswap fork launched on the polygon blockchain. Polygon provides lower gas fees than Ethereum and faster transaction time to its users than Ethereum.
Quick swap uses the standard AMM functions to facilitate the swap of tokens and liquidity provision. Users that deposit their liquidity pool tokens in Quick Swap can also earn Quickswap’s $QUICK governance token.
- Pancakeswap: On the Binance Smart Chain (BSC), Pancakeswap stands as the most popular decentralised exchange.
Although Pancakeswap has introduced its user’s unique features, it functions similarly to Uniswap and lets its users trade crypto assets seamlessly on the Binance Smart Chain.
The significant advantage Pancakeswap has over Uniswap is the heavily reduced gas fees resulting from operating on the BSC.
CONCLUSION
The increasing competition in the DEFI space can only be healthy for it as more and more projects spring forth with more exciting features.
While Uniswap is almost an “industry standard,” it can lose its place in the decentralised finance space if it fails to keep up with the continuous innovations spreading like wildfire.
