AMMs or Automated market makers have become quite popular in recent years. It refers to the foundation protocol that facilitates autonomous trading mechanisms in decentralized exchanges. In easier terms, this mechanism reduces the need for centralized authorities, allowing two users to swap assets on their own.
This brings us to Uniswap, which is an automated market maker and decentralized exchange. It uses smart contracts to set prices and execute trades or in other words, offer decentralized finance services. AMMs like Uniswap use their liquidity pools to provide crypto trading. It charges a small fee for every transaction and distributes it among liquidity providers on the exchange.
However, there are some downsides to Uniswap, such as not accepting fiat money, high gas fees, and no KYC requirements. This has led investors to search for Uniswap alternatives on the market. While there are some known ones such as SushiSwap and Kyber Network, it is up to crypto traders to do the research and find a good AMM like Uniswap. That being said, let’s look at a few tips on how to find a good Uniswap alternative.
- It should support Ethereum-based tokens
AMMs like Uniswap should allow users to quickly trade ERC-20 tokens, which are tokens on the Ethereum network. It should support the trading of a massive number of cryptocurrencies since Ethereum is a popular blockchain for launching new tokens.
- It should have a user-friendly design
Uniswap became popular due to its design, which was a departure from clunky designs and lackluster user experience. Thus, any alternative to Uniswap should also have a user-friendly interface that wouldn’t feel complicated to novices. It should allow users to swap one cryptocurrency for another or deposit crypto into the liquidity pool with some easy steps.
- Earning crypto with liquidity mining
Uniswap and similar AMMs operate using funds from users’ cryptocurrencies. They store these funds in liquidity pools, with each containing a pair of cryptocurrencies. Any alternative to Uniswap should allow liquidity mining. This is when anyone can deposit their cryptos into liquidity pools, allowing them to become a liquidity provider. There are some Uniswap alternatives that charge even fewer fees than Uniswap itself on every crypto trade.
- Should have ample liquidity
Any alternative to Uniswap should have ample liquidity, which is extremely important for decentralized exchanges. Failure to have enough funds will results in traders not being able to swap the cryptocurrencies they want. An alternative to Uniswap would have to match or get close to the size advantage that Uniswap has. It should have a very high amount of crypto funds in its liquidity pool. Users shouldn’t have any problems trading crypto or earning interest as a liquidity provider.
- Fast registration
Uniswap doesn’t require any personal registration or opening an account, which saves users ample time. Alternatives to Uniswap should allow you to connect crypto-wallets easily and trade cryptos as quickly as possible. While not having KYC requirements has its own drawbacks, the alternatives should have a small and concise signup process if they apply KYC.
- Wallet support
Any Uniswap alternative should support most of the popular cryptocurrency wallets such as Trust Wallet, MetaMask, Coinbase Wallet, and others.
- Fiat money support
This is a feature that is not present in Uniswap but could be of great assistance to crypto traders. They can only trade if they already have crypto inside a crypto wallet. Users thus have to buy cryptocurrencies from somewhere else before they can use Uniswap. Any Uniswap alternative should provide fiat money support to tackle this problem.
- Avoiding the risk of impermanent loss
One of the most exciting aspects of Uniswap is liquidity mining which provides a form of passive income to crypto holders. However, it also carries the risk of impermanent losses, especially with volatile cryptocurrencies. Any alternative to Uniswap should address this problem first.
AMMs such as Uniswap and others are right for individuals who want an easy and quick way to trade crypto tokens. It also allows them to earn high-interest rates on cryptocurrencies via liquidity mining. Considering the above points will help individuals find an appropriate alternative to Uniswap or something similar.