Uniswap V2: Does It Provides Increased Security Features?

The Uniswap v2 was launched with increased security features on May 18, 2020. But the platform is a bit expensive and the liquidity problem as like any DeFi platform remains as an issue.

Even though the Uniswap platform is updated from version 1 to version 2, it allows users to choose which version of the platform they wish to use.

What are the security features added to uniswap v1? What is the difference between uniswap v1 and v2? How does uniswap v2 work? Read this article till the end to get answered to these questions.

What is Uniswap?

Uniswap is a transparent, censorship-resistant financial infrastructure for Ethereum. It is a protocol that runs on the Ethereum blockchain that allows decentralized token swaps and was created by Hayden Adams who was inspired to create the protocol by a post made by Ethereum founder Vitalik Buterin.

You can swap tokens, add tokens to a pool to earn fees, or can list a token on Uniswap. Users can also exchange their Ethereum tokens on uniswap with their funds. How does it work? Let’s see.

It is completely on-chain and users can truthfully swap ERC20 tokens. Uniswap pools tokens into smart contracts and users trade against these liquidity pools. Anyone can create new markets, provide liquidity, and build new financial applications by using the Uniswap protocol.

Difference between Uniswap and Uniswap v2

Recently uniswap v1 got upgraded to uniswap v2. Let us check what are the upgraded features. Uniswap v2 is a decentralized exchange protocol similar to uniswap v2.

The major difference is that, in uniswap v1, you can only create ERC-20/ETH trading pairs in V1, but now you can create any ERC-20/ERC-20 as well, which is a large improvement.

This attracts more users to uniswap v2 as the feature is a big plus to help users reduce the trading fee. Unlike version one of uniswap, uniswap v2 has flash swaps that allow you to withdraw as much as you want of any ERC20 token on Uniswap at no upfront cost and do anything you want with them.

The upgraded version also has improved the efficiency of margin trading protocols that borrow from lending protocols and use Uniswap for ERC20 token conversion. 

How does Uniswap v2 work?

The series of smart contracts that hold the pairs of tokens in Uniswap will let you exchange any ERC tokens quickly and securely. Users can earn commission by contributing their tokens to liquidity pools and a 0.3% fee is charged whenever a swap is made.

The new version of Uniswap implements new functionality that enables high decentralized and manipulation-resistant-on-chain price feeds. The flash swap feature introduced in v2 is similar to a flash loan and users can lend unlimited money from a liquidity pool, but they must return it within the same block, or the transaction is rendered invalid.

Uniswap v2 is the new iteration of the Ethereum decentralized exchange protocol, uniswap. It is formed to essentially provide a mechanism to keep a token’s value balanced. Even though it introduced new features like flash swaps to increase the reliability and security of users, it is still expensive and not affordable for everyone.