Get to Know Uniswap and PancakeSwap: Key Platforms to Watch

Uniswap is an AMM-type DEX. It is a representative DEX with a large number of users, and in addition to Ethereum, it also operates on Polygon, Optimism, Arbitrum, and Celo.

The number of users and daily transaction amount are among the largest in the world

Uniswap is an AMM-type DEX that runs on smart contracts and is led by a company called Uniswap Labs. Although there is a company that leads the development, the direction of operation and development is decided by voting by the DAO. Uniswap's swap fees are very low and it is available 24 hours a day. The ease of use, which only requires connecting wallets, is probably the reason for the large number of users.

In an AMM-type DEX, transactions are made through pooled crypto assets rather than connecting wallets between users. Therefore, in the AMM type, incentives are paid to those who deposit crypto assets into the pool to maintain the amount of crypto assets in the pool and ensure liquidity of transactions. If you deposit funds into the pool, in addition to interest, a portion of the fees paid by the user at the time of the swap is returned, so there are benefits for the depositor as well. Naturally, Uniswap also adopts this incentive system.

Although Uniswap has many benefits, its use also comes with risks. First of all, Uniswap is not permitted under Japanese law. Although it is not illegal, use is at your own risk and users are not protected. In addition, fiat currency cannot be traded on Uniswap. You need to purchase the underlying cryptocurrency at a real exchange.

In addition, if you make a profit by swapping between cryptocurrencies that can be exchanged for fiat currency, you will be taxed. Consult with an expert to avoid unknowingly committing tax evasion. In addition, there are many scam coins that take advantage of the fact that any cryptocurrency can be swapped.

Uniswap is a very easy-to-use tool for understanding DeFi. That's why you should be sure to understand the disadvantages before using it.

Advantages

• Decisions are made by the DAO
• Just connect to your wallet and you can use it
• Supports yield farming
• Cryptocurrency swaps can be done at low cost

Disadvantages

• Not approved by Japanese law
• Swaps with Japanese yen are not supported
• Tax calculations are difficult
• There are many scams among the currencies in circulation