Understanding the Differences: Uniswap v1 Fork, Uniswap v2 Fork, and Uniswap v3 Fork

 

Introduction

Uniswap is a decentralized automated market maker (AMM) and one of the leading decentralized finance (DeFi) platforms built on the Ethereum blockchain. It allows users to exchange, buy, and sell ERC-20 tokens without the need for intermediaries such as banks or exchanges. Uniswap was created in 2018 by Hayden Adams and has gained popularity in the DeFi space due to its unique features and ease of use. It is considered one of the key protocols in the DeFi ecosystem, with a current market dominance of over 50%.

Uniswap v1 Fork

Initially, Uniswap was developed as a proof-of-concept for automated market makers (AMMs) by the Uniswap team at the Ethereum hackathon ETHNewYork. Prior to Uniswap, AMMs were mostly limited to the prediction market Augur. However, Uniswap opened up the concept to a broader audience by allowing for the exchange of any ERC-20 token.

Key Features and Functionalities:

1. Automated Market Making: Uniswap uses a concept called automated market making, which allows for the exchange of tokens without relying on order books like traditional exchanges. Instead, liquidity providers deposit an equal value of two tokens into a liquidity pool, and the price of the token is determined by the balance of tokens in the pool. This allows for easy and efficient swap of any ERC-20 token.
2. Decentralization: Uniswap is a decentralized exchange, meaning it operates without a central authority or intermediary. This makes it less prone to manipulation and censorship, as well as more resilient to outages or hacks.
3. No Listing Fees: Unlike centralized exchanges, Uniswap does not charge any listing fees. This allows for a wider range of tokens to be traded on the platform, giving smaller projects the opportunity to gain exposure and liquidity.
4. Gas-Fee Model: Uniswap utilizes a gas-fee model, where transactions on the platform are paid for in Ether (ETH). This can result in high fees during times of network congestion, making it less attractive for smaller trades.
5. Permissionless: Anyone with an Ethereum wallet and access to the internet can use Uniswap. Users do not need to go through any KYC (know your customer) processes, making it accessible to anyone across the world.

Limitations and Criticisms:

1. Limited Token Selection: As Uniswap operates on the Ethereum blockchain, it is limited to trading ERC-20 tokens. This means that tokens from other blockchains, such as Bitcoin or Litecoin, cannot be traded on Uniswap.
2. Vulnerabilities: Uniswap has faced some vulnerabilities, including the “fake Uniswap app” scam in 2019 and the “reentrancy attack” in 2020. These incidents have raised concerns about the security and safety of using Uniswap.
3. Impermanent Loss: Liquidity providers on Uniswap are susceptible to impermanent loss, which occurs when the price of the tokens in the pool change significantly compared to when they were deposited. This can result in a loss of funds for the liquidity provider.
4. Front-Running: As Uniswap operates without an order book, it is susceptible to front-running attacks, where traders can manipulate the price to their advantage by submitting a transaction that is prioritized over other pending transactions.

Despite its limitations and criticisms, Uniswap remains a popular and innovative DEX in the DeFi space. Its success has paved the way for the development of future decentralized exchanges and has provided more accessibility and flexibility for users in the world of crypto trading.

Uniswap v2 Fork

Uniswap v2 is a decentralized exchange (DEX) protocol developed by the Uniswap team in March 2020. It is an upgraded version of Uniswap v1, which was launched in November 2018. Uniswap v2 was created to address some of the limitations of Uniswap v1 and to further improve its functionalities. The Uniswap v2 code is open-source and can be accessed on the project’s GitHub page.

Uniswap v1 was one of the first decentralized exchanges built on the Ethereum blockchain. It was designed to provide a user-friendly and secure platform for anyone to swap Ethereum-based tokens without the need for an intermediary or the need to deposit tokens into a centralized exchange. Uniswap v1 was a significant milestone in the development of decentralized exchanges, but it also had some limitations that needed to be addressed.

Key Features and Functionalities:

1. Liquidity Pools: Uniswap v2 still uses the automated market maker (AMM) model like Uniswap v1, where users can trade tokens using liquidity pools. However, there have been improvements made to the liquidity pools in Uniswap v2. These improvements allow for better efficiency and reduced slippage in trades.
2. ERC-20 and ERC-721 Tokens Support: Uniswap v2 supports both ERC-20 tokens and ERC-721 tokens, making it possible to trade both fungible and non-fungible tokens on the platform. ERC-721 tokens represent unique and non-interchangeable assets, such as digital collectibles, and their inclusion in Uniswap v2 greatly expands the token trading possibilities on the platform.
3. Flash Swaps: Uniswap v2 introduced “flash swaps,” which are essentially free, instant loans that traders can use to trade without needing to have the required assets upfront. This feature enables the execution of complex trading strategies and also provides liquidity to the market.
4. User-Defined Fee Structure: Unlike Uniswap v1, where the fee structure was fixed at 0.3%, Uniswap v2 allows liquidity providers to set their own custom fees within a range of 0.05%-1%. This gives liquidity providers more control over the fees they earn and allows for more competitive rates on the platform.
5. Improved Price Oracles: Uniswap v2 uses an improved price oracle system that takes into account the trading volume of each token pair and adjusts the prices accordingly. This helps in reducing price manipulation and also improves the efficiency of trades on the platform.
6. ERC-1155 Token Support: Uniswap v2 also supports ERC-1155 tokens, which are a more efficient and cost-effective version of ERC-721 tokens. ERC-1155 tokens have increased in popularity, and their inclusion in Uniswap v2 further expands the range of tokens that can be traded on the platform.

Uniswap v2’s improved liquidity pool design and price oracle system result in better efficiency and lower slippage in trades compared to Uniswap v1. This means that traders get better prices, and trades can be executed more quickly and with lower fees.

Uniswap v3 Fork

Uniswap v3 is the third iteration of the popular decentralized finance (DeFi) protocol, Uniswap. It was launched in May 2021 by the creator of Uniswap, Hayden Adams, and the Uniswap team. Uniswap v3 represents a significant upgrade from its predecessor, Uniswap v2, with a host of new features and functionalities. It is built on the same core principles of decentralization, open access, and security as previous versions but introduces new innovations and improvements to make it more efficient, user-friendly, and customizable.

Key Features and Functionalities:

1. Concentrated Liquidity

The most significant innovation of Uniswap v3 is the introduction of concentrated liquidity. LPs can now choose to provide liquidity at specific price points, known as price ranges, instead of just providing liquidity across the entire price spectrum. This allows for more efficient capital utilization and reduces impermanent loss for LPs.

2. Multiple Fee Tiers

Uniswap v3 introduces a customizable fee tier system, with the option for LPs to choose between three different fee tiers (0.05%, 0.30%, and 1.00%). This enables LPs to earn higher returns depending on their risk tolerance and investment strategy.

3. Range Orders

Range orders are a new trading feature in Uniswap v3 that allows traders to specify a price range within which their trade will be executed. This adds flexibility for traders and helps them achieve a better price for their trades.

4. NFT Positions

Unlike previous versions, Uniswap v3 uses non-fungible tokens (NFTs) to represent LP positions. Each NFT represents a unique position in a liquidity pool, making it easier for LPs to track and manage their positions.

5. Arbitrum Integration

Uniswap v3 has recently integrated with Arbitrum, a layer-2 scaling solution for Ethereum. This integration allows for cheaper and faster transactions on Uniswap and makes it more accessible to a wider user base.

One of the main goals of Uniswap v3 is to improve capital efficiency by reducing impermanent loss for LPs.