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uniswapv2.md

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Uniswap V2

Uniswap V2 Protocol is an automated liquidity protocol powered by the constant product formula.

how uniswap v2 works

Features

  • Swap: Swap 2 ERC20 tokens
  • Pool: Possibility to be liquidity provider in pool
  • Vote: Vote on Uniswap gouvernance (check Governance part)
  • Charts: Analytics for pools

Who?

Liquidity Providers

Provide liquidity to the pool and earn fees from swaps.

Traders

Swap ERC20 (can be a simple user or arbitrageur)

Developers/Projects

Uniswap is completely permisionless, meaining anyone can create a pool. Project can then list their token on Uniswap and provide liquidity to their own pool.

Architecture

architecture

Code

Package: uniswap-v2-core

  • UniswapV2Factory.sol: Factory contract to create new pools using CREATE2.
    • a bytes32 in assembly will represent the address where the variable is stored. Also bytes32 represent an array of 32 bytes slot. The first slot being the size of the array.
    • add(bytecode, 32): give the start of the actual bytecode
    • mload(bytecode): take the 32 bytes which corresponds to the first 32 bytes of the bytes32 = the size of the array.
bytes memory bytecode = type(UniswapV2Pair).creationCode;
bytes32 salt = keccak256(abi.encodePacked(token0, token1));
assembly {
    pair := create2(0, add(bytecode, 32), mload(bytecode), salt)
}
IUniswapV2Pair(pair).initialize(token0, token1);

  • UniswapV2Pair.sol: Represents the Pair (pool) created by the Factory.

    • mint: add liquidity to the pool (by minting LP tokens)
    • burn: remove liquidity from the pool (by burning LP tokens)
    • swap: swap tokens
      • this is allowing flashswap as we will optimistically send the token and then execute the calldata. The calldata should send back the token to the pool (with fee - see doc). For calls without calldata, then we will expect to have already the token_in in the pool.

  • UniswapV2ERC20: simple erc20 token implementation (with some utils)

Note 1: the Core smart contraft only deal with ERC20. So no native token (ETH -> wETH). Note 2: we first need to send the tokens to the pair contract before calling the functions. The logic is to calculate the difference of balance before and after to understand how much token where sent

Package: uniswap-v2-periphery

  • UniswapV2Router02: a bunch of methods to interact with Pair
    • addLiquidity / addLiquidityETH
    • swapTokensForExactTokens / swapTokensForExactETH / swapExactTokensForTokens / swapExactETHForTokens
  • UniswapV2Library: library to calculate the price of a pair
    • getAmountsIn / getAmountsOut (chained call for any number of hops)
    • getAmountIn / getAmountOut

Maths

Checkout this youtube video from Solidity Programmer for details explanation of calculations in uniswap v2.

Simple swap

simpleswap

Slippage

slippage

Get amount in/out

getamountin

Liquidity

liquidity

Impermanent loss

impermanentloss

Governance

The Uniswap protocol is governed and upgraded by UNI token holders, using three distinct components; the UNI token, governance module, and Timelock. Together, these contracts allow the community to propose, vote, and implement changes to the uniswap protocol.

Any addresses with more than 2.5M UNI delegated to it may propose governance actions, which contain finished, executable code. When a proposal is created, the community can cast their votes during a 3 day voting period. If a majority, and at least 4M votes are cast for the proposal, it is queued in the Timelock, and may be executed in a minimum of 2 days.

Opportunities

  • Each project has to list the token here. This is the easiest way for user to start trading it.
  • As a mev searcher, sandwitch attack are possible.
  • flash loans can help build strategies requiring funds not owned by the user.

Issues/Flows

  • Price impact created when trading to stable assets.
  • Mev possible with sandwitch attack

Resources