“Amulets” might be a better word than “tokens” for some of the crypto assets emerging on blockchains today.
Version 2.0 of Uniswap is now live and it is, among other things, an amulet-minting machine, though probably everyone’s still going to call them “tokens.” Tokens are little more than keys that allow you to access something, such as a game or a laundry machine. Amulets have surprises inside; they can generate something new from within, for anyone with the skill to unlock them.
“Version 1 was almost this like proof-of-concept,” Hayden Adams, Uniswap’s founder, told CoinDesk. “It was the first implementation of this protocol. It got a lot of things very right. And that’s proved by usage and traction.”
Uniswap is a system on Ethereum for trading any ERC-20 token for any other, using Ethereum’s core cryptocurrency, ETH, as the medium of trade. It currently has $43 million of liquidity (assets locked into the protocol) with $13 million in activity on the platform in the last 24 hours, according to Uniswap.info. It’s one of the key so-called “financial primitives” powering decentralized finance (DeFi).
But Adams believes the platform can be pushed a lot further. Uniswap v2 – which he described in a blog post in March – will work the same way as Uniswap v1, but it will take off its key limitation – running all token swaps through ETH. Plus it will add some new features, such as a new oracle system, that many other DeFi projects may find useful.
More amulets, stranger amulets
The headline feature of the new Uniswap will be the ability for anyone to create any token pair they want, so long as it exists on Ethereum.
This is likely to lead to unexpected use cases, but the most obvious use out of the box is a new way to use stablecoins. Popular ERC-20s like MKR, ZRX, WBTC, OMG and others are very likely to be quickly paired up with stablecoins, such as USDT, USDC and dai.
Coinbase has already added liquidity to the ETH/USDC pair on Uniswap v1, after all. “Having stablecoin pairs on Uniswap is a pretty huge improvement. It’s probably the most requested thing since Uniswap launched,” Adams said.
Read more: Coinbase Pumps $1.1M USDC Into DeFi Sites Uniswap and PoolTogether
The top-line advantage of having a direct pair of any two tokens is it should lower transaction fees for trades (v1 always requires two trades between any two ERC-20s). Another advantage: It allows liquidity providers to lower their volatility on one side of a pool. A MKR/ETH pool is volatile on both ends, but a MKR/USDT pool should only be volatile on the MKR side. “A lot of people don’t want the ETH exposure,” Adams said.
As mentioned above, these token pairs are created by users. If someone thinks WCK (wrapped CryptoKitties) and SOCKS (actual socks) should have a token pair, then they can set it up. Users pay a tiny fee to the liquidity pool for each trade (0.3%) and that ultimately goes back to liquidity providers (each gets it proportional to how much of the pool they have posted).