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Uniswap V2 starts with increased security, but is still expensive

May 19, 2020

The second iteration of the decentralized exchange Ethereum Uniswap V2 started on May 18th. following an announcement on March 23 that it will start in the second quarter of 2020.

A blog post by the Uniswap team describes the steps for the transition to the new platform.

Uniswap V1 remains as it cannot be switched off like the old version of MakerDAO. However, the team has set up an interface to migrate liquidity from V1 to V2.

Uniswap V2 starts with increased security, but is still expensive
Uniswap V2 starts with increased security, but is still expensive

The platform is based on users who invest capital in liquidity fundswhose size defines the amount of deviation during operation. In order to, Larger groups can accommodate larger amounts of operations.

The Uniswap interface has been updated for V2, allowing users to choose the version of the platform they want to use. the interface The user can also know which platform offers the best liquidity and the best price. For example, V1 is a better alternative to Ethereum operations than Dai, Cointelegraph found. The opposite is expected when liquidity providers migrate to the new platform.

The team also released an updated statistics platform to show real-time liquidity and volume.

Security improvements and flash swaps

As Cointelegraph previously reported, The new platform offers three major improvements in terms of usability and security. Now enables direct token exchange, which is particularly useful in stablecoin-to-stablecoin operationslike from USD Coin (USDC) to Dai (DAI). While this was previously possible, they used ether (ETH) as an intermediate step, which meant additional fees and slips.

Uniswap V2 wants to be a cheaper oracle for other decentralized finance projects (DeFi) because the previous design was misused in cases like the bZx hack.

A feature called flash swaps was also introducedThis is similar to the flash loan provided by platforms like dYdX. Users can borrow unlimited money from a liquidity fund, but must return it within the same block, otherwise the transaction will be void.

Borrowing Flash is particularly useful for price arbitrage between different DeFi platforms, although the Uniswap design can also be used to quickly enter lever positions on platforms like Maker or Compound.

The price of decentralization

In contrast to other decentralized exchanges No counterparties for a trade need to be found for the Uniswap liquidity pool modelThis can enable a higher trading volume compared to exchanges based on order books. However, using Uniswap can be expensive.

The current liquidity provider fee is $ 1.27 for 1 ETH operation at 211 DAI, which is approximately 0.6%.

Furthermore, The platform suffers from a significant difference between supply and demand. At press time, buying the ETH requires an estimate of 213.3 DAI, while the sale only generates 211 IAD, a loss higher than the trading fee. The purchase and sale of 1 ETH would therefore have a loss of more than 1%.

These are estimates as the price may continue to drop, especially for large stores. While Most of these problems are due to the low liquidity at launchUniswap V1 and even other exchange platforms like Kyber also suffer from similar dispersion problems.

The exchange platform, which announced support for Uniswap V2 at the time of its launch, uses intelligent contracts to split an operation across multiple exchanges. This can help reduce overall business losses by entering the DeFi ecosystem.

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