Uniswap, a Widely-Used Non-Custodial Crypto Exchange, to Add New Ethereum Token Pairs with Upcoming Software Update

By March 24, 2020Ethereum
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Uniswap, a widely-used non-custodial digital asset exchange, has revealed that the decentralized protocol’s second iteration will launch during Q2 2020. It will add new features such as support for additional ERC-20 compliant pairs, more peer to peer price oracles, flash swaps and a new protocol charge mechanism.

Uniswap’s trading volume has been growing steadily. The decentralized exchange (DEX) reported a 192% increase in trading activity from the beginning of this year. Uniswap has handled more than $380 million in crypto token trades during this time period.

As confirmed in a March 23, 2020 announcement, the Uniswap development team expects the exchange’s second version to be ready for launch during the second quarter of this year.

At present, the factory and an initial blockchain-enabled smart contract are currently running on several major test networks, including Ropsten, Rinkeby, Kovan, and Görli (for developer testing purposes).

The announcement confirmed that Uniswap version 1 will “continue to work for as long as Ethereum exists.”

One of the main features of Uniswap version 2 is its ability to “pool” any two ERC-20 (Ethereum) crypto tokens together.

Uniswap’s current version 1 limits users to being able to only swap an ERC-20 token with Ether (ETH). The newly developed feature will let users “maintain more diverse ERC-20 token denominated positions, without mandatory exposure to ETH.”

The stablecoin Dai and Circle and Coinbase’s USDC pair is a fairly stable pair that may be useful for trading. Allowing these types of pairs should help reduce trading fees, because traders wanting to swap between two ERC-20 tokens will not have to route via ETH.

The Uniswap team explained:

“If two ERC-20 tokens are not paired directly, and do not have a common pair between them, they can still be swapped as long as a path between them exists. Router contracts can be used to optimize between direct and multi-step swaps.”

Uniswap version 2 will aim to improve the exchange’s existing price feed model. The team says that Uniswap version 1 “cannot be used safely as a price oracle because the price can move significantly in a short period of time.”

The second version of Uniswap will quote the latest market price for token pairs at the beginning of every block, which should make it costly for hackers to exploit the price feed. That’s because they’d be forced to conduct a bad trade at the end of the last block and might lose their arbitrage if they are unable to mine consecutive blocks.

Uniswap version 2 will have a negligible protocol charge mechanism in order to make its services more sustainable.

The default charge will be set to zero, while the liquidity provider fee will be fixed at 0.3%. After the protocol charge mechanism is switched on, the charge will become 0.05% and the liquidity provider fee will be slashed to 0.25%.

The Uniswap team noted:

“Without any additional growth, [Uniswap] will generate more than $5 million in liquidity provider fees this year. If the protocol charge was on, ~$830,000 of this would instead go to a decentralized funding mechanism used to support contributions to Uniswap and its ecosystem.”

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