In the current Crypto exchange market, Uniswap is among the biggest names and has earned a lot of admiration from users. However, security or safety is one of the most important things when it comes to being involved in digital currencies. So, in this blog, we analyze whether Uniswap is a safe option for new users.
Is Uniswap Safe? Uniswap is a safe and secure trading platform for cryptocurrency. However, users are encouraged to do their research before trading with Uniswap.
Uniswap was built in 2018 on the Ethereum blockchain. It has been faring well among its competitors. Uniswap is most recognized for offering its users 400 UNI tokens for free to ward off advances from Sushiswap. It is the largest decentralized exchange (DEX) on the Ethereum blockchain and so it’s bound to attract a lot of users currently and in the near future.
Uniswap Safety Breakdown – What To Watch Out For
Even with its success in the decentralized exchange market, Uniswap has come into some criticism when it comes to safety.
By default, Uniswap has been built to offer security to clients while they swap tokens. However, its approach involves giving users control over their safety. Decentralization of Uniswap comes with some perks and disadvantages in terms of security.
One of the downsides of using Uniswap is that anyone can list their token, meaning that scammers can list fake coins too. In July of 2020, Uniswap started receiving complaints related to “Fake tokens”. Because of its decentralized nature, there is no review process to confirm whether a token is real or not.
Scammers can create tokens that bear similar names to popular De-Fi platforms. Then, unaware users will purchases these worthless tokens thus losing their money. There is no confirmed amount of how much money people have lost to these scammers. Different projects have had to make announcements about fake tokens that claim to be associated with them.
Uniswap decided to take some steps come august, where they introduced lists. It would have been challenging to find a decentralized solution this decentralized challenge so they decided to go with popular opinion.
Lists establish whether tokens are legitimate by the number of lists they are included on. They also consider how reputable these lists are. It is a reliable attempt that does not disrupt the decentralization of this DEX while still making it easy for a legitimate project to add its tokens. We are yet to see whether scammers will find a way around this.
Risks of Transaction Failure
In the process of swapping coins, there is some risk of transactions failing. It might be minimal but it’s there. There are three reasons why this might occur
- Low gas fees- Gas fees are the fees you are charged for the transaction. If you pay low fees, a transaction might take longer. If a transaction takes longer than the hard deadline that’s coded into it the transaction might fail.
- The token price exceeds the maximum price set for each token. It might occur if you set a maximum amount you intend to pay for a token and the token price exceeds the maximum before the transaction.
- Insufficient liquidity in the pool- Sometimes when you try to purchase tokens you might encounter the message “insufficient liquidity for this trade”. It not much of a risk because the transactions will be reverted and it’ll be like they never occurred.
Safety in the User’s Hands
Like other DEX, Uniswap grants its users full custody of their assets. So, a client does not have to be worried about losing their funds if an exchange is hacked like in a centralized exchange.
Because of the self-custodial nature of Uniswap, users don’t have to give up their anonymity or personal details. With CEX, clients are required to provide some of their personal details in a KYC process (Know your customer). Sometimes this will include a copy of your driver’s license, ID, or passport. Since Uniswap does not need your information, clients are a little safer from giving information to potential scammers.
Users are always advised to conduct due diligence before getting involved with Uniswap tokens. Your safety becomes your responsibility and Uniswap won’t be liable for any mishaps that occur when trading tokens.
In fact, on the Uniswap website, they clearly explain that Uniswap protocol involves risks, including but not limited to loss of your digital assets due to price fluctuation and losses while your digital assets are being supplied.
Uniswap should also beware of false website links that scammers might use. To go to the Uniswap website, just go directly to the Url, Uniswap.org. You don’t need to use the search engines since that’s where some false links might appear. You should even bookmark the website to be safe.
Uniswap is popular because its unique system offers plenty of benefits that ultimately outnumber the risks. We have mentioned some of them but here is the full list.
- Self-Custodial- You maintain full custody of your funds and so you can’t lose them in case you get hacked during an exchange or if the exchange goes bankrupt.
- No KYC process- There are no lengthy KYC processes and users don’t need to share their personal information with anyone. This speeds up the exchange process and there is less chance of your information being exposed to the wrong people.
- Low fees for trading- Uniswap charges a flat rate of 0.30% across all trades which is much cheaper than other decentralized exchanges.
- Early Access to new coins – Uniswap users are usually among the first to acquire new tokens because they don’t go through the vetting processes of CEX. So they can benefit from the high fluctuations early on.
Uniswap is relatively safe in terms of ensuring clients don’t need to lose their anonymity. However, most of the safety responsibility is handed to the customers. As a Uniswap user,you are encouraged to do your due diligence before trading with Uniswap as they will not be liable for any losses.
The decentralization makes things move faster and offers more opportunities for new projects. However, as a cryptocurrency and De-Fi beginner be responsible with your finances.