Uniswap on Arbitrum was launched on August 31, 2021, with such key improvements on top of the previous version as lower trading fees and immediate confirmation of transactions.
Uniswap is a powerful decentralized protocol that delivers concentrated liquidity resulting in higher efficiency of funds for liquidity providers. The platform has transformed the automated market-making (AMM) industry introducing a set of tools for easy and smooth automatic execution of trades. Launched in 2018, Uniswapt acquired its true popularity in 2020 with the release of the second version of the Uniswap protocol. With the release of Uniswap v3, the system acquired more flexibility and efficiency.
Arbitrum is the first permissionless Ethereum layer 2 equipped with full Ethereum smart contract functionality. It has a comprehensive feature set that includes such options as permissionless usage, fraud proofs, etc.
The decision concerning the Arbitrum integration was taken by the community that voted in favor of Uniswap 3 protocol deployment on Arbitrum. The voting results revealed that 41 million users supported the initiative as this fully decentralized platform is governed solely by the members of its community. Thus, UNI token holders are allowed to vote to decide upon the future of the platform.
As has been mentioned above, Arbitrum is not the only project that was chosen to improve the scalability of the Uniswap network. The major competitor of the Arbitrum network is Optimism that postponed its launch in May 2021. This may have been the key reason why the Uniswap team paid attention to other networks with scalability solutions.
Arbitrum has proved to be an excellent solution for scaling the Ethereum network in 2019 after the Offchain Labs startup received investment from Coinbase Labs. The developers working for Arbitrum asserted that they could reduce gas costs 55 times for their port of the Uniswap v2 testnet with its help. They also could support 390 swaps per second, while the Ethereum mainnet enables only 7 swaps per second on average.
At the time of launch, the Arbitrum network supported 33 assets. The list included such cryptocurrencies as WETH, WBTC, and USDC. However, new assets are added as the network evolves. The three key modes of Arbitrum include Arbitrum Rollup, AnyTrust Sidechains, and AnyTrust Channels. Also, it’s worth adding that by supporting standard EVM contract deployment, Arbitrum enables the deployment of standard Solidity smart contracts on Arbitrum Chains. It can be easily done with the use of existing developer tools.
The benefits of using Uniswap on Arbitrum
Thanks to the Layer 2 technology, Arbitrum is capable of solving the problem of scalability efficiently as it delivers extra bandwidth without compromising blockchain security. As a suite of Ethereum scaling solutions, Arbitrum enables high throughput indices and inexpensive smart contracts. At this, the system remains trustlessly secure.
Arbitrum strives to achieve the throughput of 80K ArbGas per second. ArbGas is the currency used for tracking the execution costs on the Arbitum chain. In some aspects, it resembles ETH gas, but it doesn’t have a hard ArbGas limit. Besides, it is much cheaper than gas on Ethereum. Arbitrum is compatible with popular ETH wallets such as MetaMask.
Instant confirmations have considerably accelerated the work in the system. Those who want to take advantage of this benefit can migrate their assets using an Arbitrum bridge.
Arbitrum continues catering to the needs of customers by adding the support for BLS (Boneh–Lynn–Shacham) signatures, integrating token bridge directly to Uniswap UI, and so on. A fully functional Uniswap runs on rollup without losing any features and there is no need to download any software to deploy contracts on Arbitrum.
Also, another feature of Arbitrum is the support of full composability which enables the deployment of smart contracts on Arbitrum mainnet for anyone. All projects that have joined the ecosystem can be found on the dedicated webpage. At the time of writing, there are already more than 100 projects using Arbitrum technology including wallets, tools, dApps, bridges, and on-ramps in the list.
In the system, there are different levels of control that cover contract upgradeability, the capability to make a pause in the work of the system, and validator whitelisting. Thus, the developers have selected a responsible way to test the system, develop the infrastructure further, and take measures if something goes wrong. The team has the rights over the bridge contract only at launch to be able to remove the potential problems. In the future, these controls will be restricted and then totally eliminated as the process of decentralization continues.
The governance token UNI was released in September 2020 though the company didn’t plan to release the asset before. The token appeared due to a vampire mining technique used by SushiSwap that drained liquidity from Uniswap. SushiSwap is a Uniswap’s clone, and the only unique feature it introduced is a token that became a competitive edge of the platform. This incident made Uniswap change the decision concerning the token, thus UNI was created. The token entered the Coinbase listing almost immediately after the issuance. The distribution of tokens on Uniswap is often criticized as it allocates 40% of tokens to developers, team, investors, and advisors.
The founder of the platform is Hayden Adams, a former Siemens engineer who was fond of blockchain technologies and monitored the news of the industry. He was so excited about the article about AMM written by Vitalik Buterin that he has decided to make an attempt and bring this idea to life.
The Uniswap team started working over the platform after it received the grant from Ethereum Foundation. One can say that the sum of 100,000 USD has been used effectively. The company that was launched as an experiment became one of the most powerful decentralized brands.