Uniswap

I believe that some people who are skeptical of DeFi do not appreciate fully just how cumbersome it is to do these things via the traditional financial system. Doing these things without having to sign a single paper or shake a single hand is immensely powerful.

If you dislike something about Uniswap you can fork the GitHub repo, reuse 99.99% of the code and tweak some parameters. Juxtapose this with if you disliked as a something with the auction models available at NYSE. You want to try something custom? The answer is no.

I believe that too many have gone blind from their contempt towards the Ethereum community that they cannot see disruption when it is dancing right infront of them. Or they simply don't know enough about traditional finance to recognize which issues are being addressed here.....

Uniswap doesn’t rely on a single party pushing orders through a centralized API for there to be a bid/ask spread. The open-source & tweakable market making logic is embedded and operated by the blockchain itself. And it has just gotten started — Uniswap is just 12 months old.

Sure, spreads are not great yet, and Ethereum has other hiccups. But you'd be blind not to see the trend: the traditional model has stagnated. The DeFi model is tweaked, improved & experimented with constantly. Because in permissionless blockchains, innovation is a free-for-all.

The internet revealed there was a long tail of latent demand for niche products and services (e.g. laundry detergent for people with allergies) that weren't profitable to distribute when you have to pay for shelf space.

The internet had zero marginal cost to shelf space. In the same way, I suspect there is a lot of latent demand for financial services which just hasn't been able to profitable served yet but can be using blockchain-based smart contracts.

Uniswap potentially seems like another example of this on Ethereum. The Uniswap smart contract does not care what jurisdiction you are in - anyone that can access the network can supply liquidity or trade. Of course, these are not trustless, but they are trust-minimized in some ways and at least have a different set of tradeoffs than the current system.

With Abra they are a centralized entity that must comply with their regulatory jurisdiction (which they seem to be doing) and you are trusting their ability to maintain the peg.

With Uniswap, you are trusting the security guarantees of the Ethereum blockchain.

Unlike other DEXs where traders buy/sell based on prices + volumes in an order book, Uniswap's exchange contracts act as automated market makers, where prices are set automatically using the constant product market maker mechanism, which keeps reserves in relative equilibrium.

The constant product market maker formula calculates the exchange rate at which a trade will be executed based on the size of the transaction and the amount the incoming trade will shift this ratio.....

This pooled model smooths out the order book and allows for narrower spreads, requiring less active management on the part of market makers. Set it and forget it....

According to Defipulse, there's now over 9.2M worth of value locked in Uniswap, which makes it the 3rd largest player in DeFi (after MakerDAO and Compound, ahead of Lightning and Dharma). This is up from 500K at the start of 2019. Impressive growth.

Uniswap is the dex we have all been waiting for:

- competitive pricing due to optimal storage on the blockchain.
- permissionless economics allowing anyone to put assets on it.
- simplicity in design that reminds me of Google’s early days.

[Uniswap creator] Hayden Adams is a legend. Uniswap is genuinely one of the best pieces of software I’ve seen in a long time and it’s quite interesting to notice that the idea was born after a post by Vitalik Buterin on Reddit suggesting a better model for exchanges by getting rid of the order book and pooling the assets.

Uniswap is a bit like surge pricing for crypto. Ensure supply is always available by dynamically increasing the price.

The Uniswap Exchange experience is pretty magical - makes me feel like a wizard.