Read more: Uniswap Price Prediction for 2021 and Beyond – is UNI a Good Investment? What is Pancakeswap? That being said, the higher the gas fees of Ethereum, the higher the trading fees on Uniswap. This is not necessarily a bad thing, however, the gas fees of Ethereum tend to reach some very high level at times. Source: UniswapĮven though Uniswap is continuing to release new improved versions of its DEX, it is still built on the Ethereum network. For instance, if we want to swap some Shiba Inu to Dai stablecoin, our Shiba Inu will first be converted to Ethereum, and then that Ethereum will be converted to Dai. To execute a trade on Uniswap, the coin that you want to swap must first be swapped to Ethereum, and then be swapped to the coin that you chose. When it comes to Uniswap, their platform has a 0.3% trading fee for every trade that occurs – if you were to execute a trade worth $1000, you would pay a $3 trading fee to the liquidity providers. This is a perfect scenario where we can see what centralization and decentralization mean in terms of fees. Moreover, centralized exchanges use trading fees to enrich themselves, while decentralized exchanges use trading fees to reward liquidity providers for adding liquidity to pools and making instant trading possible.

When compared to most centralized exchanges, the trading fees in decentralized exchanges are usually lower. Through automated market makers, trading in Uniswap is automated and fully decentralized, making trades unstoppable whenever there is enough liquidity provided in liquidity pools. This system is a big addition to the decentralized finance (DeFi) ecosystem, allowing decentralized exchanges to be truly independent. Unlike centralized cryptocurrency exchanges, Uniswap does not use the traditional market of buyers and sellers, but rather uses an automated market maker (AMM). This decentralized cryptocurrency exchange was founded in 2018 by mechanical engineer Hayden Adams. Additionally, we will try to tackle the drawbacks and benefits of both DEXs respectively. In today’s article, we are going to elaborate more on decentralized exchanges – Pancakeswap and Uniswap in particular. Today, we have decentralized platforms of all kinds ranging from decentralized wireless networks like Helium to decentralized exchanges like Mdex. This technology has come a long way from where it started. That being said, this technology provides a platform for safe and decentralized transactions by getting rid of a third party such as banks, governments, or other financial institutions. The Bitcoin system is a pure P2P network that uses every participant on the network for keeping track of the transactions occurring on the network. With the introduction of Bitcoin in 2008, the world saw hope in building an almost flawless global financial system. The main goal of blockchain technology and the cryptocurrency industry as a whole is decentralization – and they are moving towards it rapidly.

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