How to List Your Token on Uniswap
Read below for an unfiltered and easy to understand description of what Uniswap is, how it works, and how you can list your own token on the exchange.
Uniswap, made by Hayden Adams, was originally funded with an Ethereum Foundation Grant back in August 2018 (100k), raised a seed round from Paradigm capital in 2019, and recently raised $11M in a Series A funding round led by Andreesen Horowitz with additional investments from USV, Paradigm, Version One, Variant, Parafi Capital, SV Angel, and A.Capital.
What is Uniswap?
Well, it’s a decentralized liquidity protocol on Ethereum that allows for easy trading and listing or any ERC20 token. Any token can be listed and traded. It is completely decentralized, censorship-resistant, secure, audited, and permissionless and is the most popular automated market maker exchange.
Sounds amazing, please tell me more….
The protocol powers a marketplace of trading pairs. Each pair is managed by a Uniswap contract and anyone, including you, can become a “liquidity provider” for a pair by putting reserves in the pair’s pooled assets.
Sounds confusing, tell me with numbers…
So if the price of ETH is $400, for the ETH/USDT pair, a liquidity provider would put in 1 ETH and 400 USDT for example. Boom. A market is made for ETH and USDT. These pools on Uniswap are usually made up of stablecoins but this isn’t a requirement, and with Uniswap v2 you can actually pool any basket of assets in an LP. You just need to deposit an equivalent amount of two tokens and they can be ETH and an ERC-20 or two ERC-20 tokens.
Back up a second, how is this different from Binance, Ether Delta, and other shitcoin exchanges that I use?
Good question, but this is a decentralized exchange. You probably heard about the buzz for decentralized exchanges back in 2018; well now they are truly a reality. Finally.
There are two types of decentralized exchanges: order book-based DEX and automated market maker DEX. People are more familiar with order book dex’s because they have buy orders and sell orders and the exchange lists all the bids and asks in order. This is more familiar, but it is difficult to do in illiquid markets and is prone to manipulation and front running as we have seen on 0x and IDEX etc.
Uniswap is an automated market maker (AMM) protocol and relies on algorithmic agents rather than an order book. These algorithms make the market based on the liquidity pool and a price oracle. The algorithm determines the price from its formula rather than matching bids and asks through a list. This is much better for markets that are illiquid with little trading activity.
The algorithm uses x*y=k to determine the price of a pool where k must remain a constant. This means that the total liquidity of the pool is always constant. Using an example, let’s say Andrew buys 1 ETH for $400 from the ETH/USDT pool. By doing that I decrease the ETH portion of the pool and increase the USDT portion and then the price of ETH goes up a bit. The larger the liquidity pool, the lower the slippage, because there will be a smaller shift between x and y.
Uniswap charges 0.3% fees on all trades and then shares those fees with the liquidity providers on that specific pair pro-rata. LPs actually get “liquidity tokens” that represent their share of the entire liquidity pool and then those tokens can be redeemed for the share of the pool that they represent, meaning you’ll always be able to redeem your total principle + fees made being an LP.
Anyone or any project can list on Uniswap and there are no listing fees other than the gas transactions.
Wow please tell me how to do it!
- Go to Uniswap.org and connect wallet (MetaMask or any other ETH wallet that they support)
- Paste contract address of the ERC-20 token onto Uniswap
- Send tokens to your address
- Add liquidity as the first LP
- Note that the ratio of ETH to your token will determine the token price. For example, if I add 0.1 ETH and 10k STARS, the price will be 0.00001 ETH
- Once the token ratio is set, you need to approve Uniswap to handle STARS tokens and automate transactions for you
- Press Create Pool & Supply
- Then you go to the “Pool” tab to view your LP dashboard
Uniswap LPs are just pools of tokens that are secured by their own smart contracts. The incentive to provide liquidity to pools is the ability to earn a cut of a given Uniswap pool’s fees.
The uniswap.info website has information on all Uniswap liquidity pools.
As an LP, it’s important to understand the concept of impermanent loss. Remember that by being an LP I receive a % share of the pool. Let’s say I deposit 1 ETH and 100 USDT and there are 10 ETH and 1000 USDT in the pool. So I have 10% share of the pool and k, total liquidity, is 10,000.
If the price of ETH goes to 400 USDT, k needs to remain constant, so arbitrageurs will come in and deposit USDT and remove ETH to make a profit and keep the ratio of ETH/USDT proper to reflect the price. And there will be 5 ETH and 2000 USDT in the pool. So if I withdraw my funds, I would only get 0.5 ETH and 200 USDT which totals 400 USDT, but if I never used the pool I would have had 500 USDT with 1 ETH and 100 USDT. This is an impermanent loss.
Liquidity providers receive fees from all trades but they are also basically guaranteed to have trades occur when the price of the entire market shifts, because if the price of ETH or any other ERC-20 token changes on another exchange, because of the formula used to derive price on Uniswap, there will be an arbitrage opportunity between that exchange and Uniswap. Then the LPs benefit when the arbitrageur executes the trade. This is a main reason (the liquidity on Uniswap) that ETH gas fees have been so high for the past few months.
If you’re looking to list a token on Uniswap, message us at Nightly Crypto and we’ll help you out.
