Each different cryptocurrency and project can be thought of as a “key” that unlocks a certain functionality. The Basic Attention Token unlocks the ability to purchase ads on the Brave browser, the DAI stablecoin unlocks the ability to participate in the DAI savings rate program, and ETH is the fuel that drives transactions on the Etheruem network. Each of these “keys” unlocks a valuable service, but one thing we know about keys is that they only fit the lock for which they are designed. Uniswap is the best DApp because it allows users to easily swap the crypto that they have for the crypto they need for a specific purpose.

Exchanges are Imperative for Crypto Success

I have written a beginner's how-to tutorial about Uniswap before, but today, I have a different mission. In this article, my goal is to convince you that Uniswap is the best decentralized application. This consists of two steps. There are countless forms of decentralized applications including gaming, gambling, investing, exchanges, and many others, so my first task is to convince you why and exchange should be the number one decentralized application. After that task is complete, I will lay out my arguments why, among a variety of exchanges, I believe that Uniswap deserves to be crowned the "Best DApp."

To illustrate the importance of exchanges, consider a brief scenario. You have earned 20 BAT From using the Brave browser and watching advertisements during the month of December. What do you do with that BAT? Remember, there are no exchanges, so you can't sell your BAT. In fact, you can't even say that your BAT is “worth” $3.60 Because there are no exchanges to facilitate the conversion from BAT to dollars. You can’t put that BAT into a DeFi interest account because you don’t have any ETH to fund the transaction. If it were not for exchanges, all you could do with BAT is use it within the Brave ecosystem to purchase ads or perhaps buy some merchandise from the Brave store.

This certainly isn’t a criticism of Brave or BAT. Without exchanges, any cryptocurrency would be confined to its specific niche. There would be no way to change from BAT to USDC or from DAI to ETH. Because it would be impossible to convert and trade among the different cryptos, each crypto would be confined to it’s own little box and would be worthless outside of its designed environment.

Exchanges in the general sense are vital because they unite many disparate projects and coins into a cohesive economy. They allow users to transfer value earned in one ecosystem to another ecosystem. Because of exchanges, I can take my BAT earnings from Publish0x and Brave and convert them into DAI for DeFi lending. Or, I can take my 1UP from writing articles on Uptrennd and purchase ETH to fuel transactions. If it weren’t for exchanges, what use would my 1UP have outside of Uptrennd? What use would my BAT have outside of Brave? Both my 1UP and BAT represent real value that I have worked to earn, but without an exchange, that value can’t be transferred outside of the platform where it was earned. If I don’t want to boost a post with 1UP or purchase and add with BAT, then all of my labor that went into earning that BAT and 1UP was essentially for nothing.

Exchanges allow the transfer of value and enable the division of labor that are so crucial to a functioning economy. Let’s suppose that I am especially interested in DeFi and can write high quality DeFi tutorials, but my passion is playing CryptoKitties. Exchanges allow me to use my talent for writing articles to earn BAT which can then be traded for ETH and used to purchase Kitties.

Without exchanges, I couldn't trade my BAT for ETH, and all of my labor writing articles would not help me collect more Kitties. I would have no reason to write articles, so the readers would lose out on reading articles that are (hopefully) beneficial to them. The sellers of Kitties would lose out because I wouldn’t be able to spend money on their products, and I would lose out because I am neither writing articles nor playing CryptoKitties. Obviously, this is just one small example, but exchanges are absolutely imperative to the functioning of the crypto economy. They allow users to transfer value from one crypto platform to another and enable collaboration among various users.

Uniswap is the Best Decentralize Exchange

I hope that my proceeding arguments have demonstrated why I believe some form of decentralized exchange should win the title of “Best DApp.” But, why do I specifically think that Uniswap should win out over all the other decentralized exchanges? In my personal opinion, Uniswap is the best DEX in terms of ease of use, security, and fees.

Ease of Use

Ease-of-use is the number one priority for an exchange. We have to remember that cryptocurrency has a very broad spectrum of users. Some of them are savy tech users, while others, like myself, are simply fans of crypto for the opportunities and freedom that it brings. For non-tech experts like myself, a simple, clean interface makes it so much easier for me to enjoy all of the benefits that cryptocurrency offers.

I believe Uniswap stands out among its peers because it offers such an intuitive user experience while also providing all the desired functionality. As demonstrated by the screenshot, Uniswap is pure functionality and simplicity. Once MetaMask is connected, I simply select an input token and the token that I want to receive and click trade. The system automatically uses a default slippage, but advanced users could easily change this if they wanted.

Contrast Uniswap’s simple, basic interface with IDEX. Let me be 100% honest, everyone has their favorite crypto exchange, and I'm not going to say anything bad about another decentralized exchange. We are all on the same team here, but as a non-techincial user, the landing page and interface from IDEX is completely confusing to me and doesn’t work for me. I can't figure out what's going on, and it's very hard for me to understand. Some people may love it, but I believe that the “Best DApp” should be an application that is easily understood by the masses and simple-to-use. In my personal opinion, Uniswap stands out in this respect.

Security Considerations

Let's be honest, there have been quite a lot of high-profile hacks, security breaches, and outright scams within the cryptocurrency world, so any “Best DApp” should focus heavily on providing the most secure experience possible. Unfortunately, I'm not a computer programming expert, so I have to rely on third parties and external audits to help understand the security of different projects. According to Karp (2019), DeFi projects face three main types of security risks: technical risks, external risks, and economic incentive failure risks.

Uniswap’s contract system has been audited as well as passed a lightweight verification process. Obviously, nothing is perfectly secure, but both of these steps reduce risk considerably and demonstrate that Uniswap is serious about providing user security. According to Karp, one of Uniswap’s hallmark features is that Uniswap’s smart contracts are entirely self-contained, so they don't have any Oracles, administrative rights, or governance that could cause external risk (2019). Uniswap’s sole economic incentive is the .3% fee per trade (Karp, 2019). This fee is split among the providers of liquidity and is designed to encourage people to deposit their funds into the liquidity pool. From my perspective, the only risk associated with the .3% fee is that it might be too low to incentivize people to deposit liquidity. In my opinion, this is a minor risk as it would simply affect the profits from being a liquidity provider and not the actual security of the funds themselves.

Equitable Fee Structure

Unlike other businesses that can differentiate themselves by offering a better customer experience or throwing in bonus deals, cryptocurrency exchanging is a very straightforward process, and competitive advantage largely comes down to trading and transaction fees. Uniswap’s .3% trading fee is considerably lower than the fee on a centralized exchange like Coinbase Pro (.5%), but I have to be fair and point out that IDEX does offer a slightly lower fee at (.2%). Althought IDEX can offer a slightly lower fee, I believe that Uniswap more than makes up for this minor fee difference in terms of usability and simplicity. It may not have the absolutely lowest fees, but Uniswap’s fees are still very competitive and should be considered a strength and not a weakness. Further, Uniswap does not have a native token such as Kyber's KNC. This means users don't have to purchase a "Uniswap Token" to use any of the features, and everyone is on the same, level playing field.

One of my favorite reasons that Uniswap should be considered the “Best DApp” is because its fees go back to the users. If I make a trade on Uniswap, my .3% trading fee is distributed to the individuals who facilitated that trade by depositing their own crypto into the liquidity pools. The more liquidity that an individual has supplied to the liquidity pool, the larger proportion of that trading fee that they get back. This is a very equitable model because it gives a reward and an economic incentive to individuals who are facilitating these decentralized exchanges by providing liquidity.

When I trade with a centralized exchange, my fees go to support a big corporation. There's nothing inherently wrong with that, but I much prefer knowing that my trading fees on Uniswap are going to individuals all across the world who have deposited their own cryptocurrency. It feels like a win-win, community that is all supporting each other. I get to have the benefit of exchanging one cryptocurrency for another, and these individuals get to receive a portion of the funds to compensate them for making that trade possible.

Summary

There are countless cryptocurrency projects that are revolutionizing the way that we earn, bank, blog, browse the web, and more. All of these different projects are great, but we need exchanges to act as a bridge that allows the translation and conversion of value among the different cryptocurrency coins and tokens issued by these various projects. Uniswap stands out for its easy to use interface, great security, and a highly equitable fee distribution model and deserves to earn the title “Best DApp.”

References:

Karp, H. (2019, October 2). Understanding Risks in DeFi: #1 Uniswap. Retrieved December 16, 2019, from https://medium.com/nexus-mutual/understanding-risks-in-defi-1-uniswap-e5e790692635.

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