Uniswap Review: Pros, Cons, and More
What could be improved
Doesn’t accept fiat money
Uniswap doesn’t let you buy crypto using fiat money, such as the U.S. dollar. You must have crypto already in a crypto wallet that you connect to the exchange.
This is common among decentralized crypto exchanges, and it’s why many don’t require personal information on clients. It’s still a big inconvenience. Before you can use Uniswap, you need to buy crypto somewhere else. Many users do so on another crypto exchange, transfer that crypto to a wallet, and then connect the wallet to Uniswap.
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High gas fees
Gas fees are the transaction fees a blockchain charges. Uniswap is built on Ethereum. Because of Ethereum’s immense popularity, its blockchain has encountered congestion, causing gas fees to increase. While Uniswap itself charges low fees, traders also pay Ethereum’s gas fees. These can be expensive, especially on smaller transactions.
For example, gas fees are often at least $30 to $50, depending on then-current congestion. That’s regardless of the amount — so if you’re trading $1,000 worth of crypto, it could cost 3% or more in gas fees. Trades of $100 or less aren’t worth it, because gas fees can cost 30% or more.
Ethereum is transitioning to a proof-of-stake system, and one benefit is more efficient transactions with much lower fees. But for now, Uniswap is really only good for high-value transactions.
Risk of impermanent loss when staking
Staking crypto in liquidity pools is one of the most exciting aspects of Uniswap — instead of just holding your crypto, you can earn interest and grow your holdings. Many liquidity pools earn very high interest rates, however, liquidity pools also carry the risk of impermanent loss. That’s when the value of your crypto drops from the time you staked it in a liquidity pool. If this happens, you may lose money.
The risk of impermanent loss is higher with more volatile cryptocurrencies. These are often the cryptocurrencies where you can earn the most interest, so it’s important not to choose the crypto you stake solely by the potential rewards.
No know-your-customer (KYC) process
Since it doesn’t require creating an account, Uniswap doesn’t have a KYC process. Whether this is good or bad depends on your perspective.
For traders who want to keep their activities private, exchanges like Uniswap are ideal. The problem is that exchanges without KYC are also more likely to run into regulatory issues. Crypto enthusiasts may appreciate anonymous crypto trading, but their governments and tax authorities don’t.
The SEC launched an investigation of Uniswap in 2021. Although the exchange hasn’t faced legal issues yet, it and other decentralized exchanges without KYC could be first on the list in the future.
