Uniswap is a decentralized exchange running on Ethereum and this post will describe how to make a trade on Uniswap using a Metamask wallet. Various Ethereum wallets can be used on Uniswap, but if you do not currently have a wallet, please follow this link to read my previous post on how to create a Metamask account. An Ethereum wallet is required to use Uniswap.
When I arrive on the Uniswap page, I choose the SWAP link from the top menu, then I can toggle the token I would like to sell and the one I would like to buy. I can enter the amount, and the price is calculated by Uniswap based on their current pool.
I decide to sell 0.5 ETH and receive 89 UNI. I notice that that the gas cost for the transaction is about 10% of the value of the transaction, so I adjust the gas price to only 2.5% of the transaction cost, thinking that if the gas is too low, it will just take longer to clear the ETH blockchain. I execute the exchange and see the transaction show up on Etherscan, click here to view the TX. But soon realize that my contract fails because it ran out of gas. I then see the 0.5 ETH returned to my wallet but my gas is lost.
So now I’ve wasted $20 worth of ETH gas, so I do some more research and see that it takes the same amount of gas to execute any size of transaction since the ETH blockchain needs ot execute the same smart contract each time. So a 0.1 ETH uniswap transaction and a 1 ETH transaction cost the same gas. Obviously it would be better to execute a bigger transaction to spread the gas fee over a larger amount.
So it turns out the price of ETH gas has a big impact on the cost of using uniswap. I decide to make 3 trades. I swap 1 ETH for 191 UNI, 1 ETH for 75 LINK, and 1 ETH for 1.5 MKR. At the time of writing, the gas for each transaction is about $25 USD and the notional value of each trade is about $1000 USD. So a gas cost of 2.5% per transaction.
Now I have three new ETH tokens to pool on uniswap, I go through this process next. I pool my three new coins with wrapped ETH on uniswap by clicking on the POOL link in the top menu, choose my pairs, and execute the transactions. Since my Metamask account is linked to my uniswap profile, the transactions execute by Metamask and once again I choose my gas amount to pay. Once again, I pay about 2.5% of the value I am pooling in ETH gas.
Overall, these transactions are expensive at the time of writing. This is a function of the high price for ETH gas. I suspect more miners will be drawn into ETH because of the currently high gas price. Seems like the volume of transactions happening on ETH are outpacing miners ability to add supply (hence the higher gas price).
The current annualized yield for the coins I pooled on uniswap are as follows based on the past 24 hours of data:
Let’s see what happens over time.