Now that all of our tools are set up, let’s jump into Uniswap and make our very first trader directly on the blockchain. It’s going to be a fun ride.
In the previous article we have covered all the necessary steps that a prudent investor and trader needs to set up in order to make his experience in the world of Decentralised finance as simple and rewarding as possible. Here is where the magic will start to happen. When you move to Uniswap, hit the “use app” button and connect your Metamask wallet, you will complete the final step. When you are using a centralised exchange, you have to wait a couple of days just to verify your identity and other important information. Here, you have done this step in literally 2 seconds. Now we are connected, let’s make a simple exercise and use our ETH in order to purchase some TYC tokens.
Purchasing TYC token on Uniswap
Wait a minute! Why does this Uniswap interface look so simple? Well because it IS simple! We connect your Metamask wallet, enter the amount of tokens we want to buy using our Ether and hit “swap”. Then we wait for our transaction to confirm and presto! You have your token neatly sitting inside your Metamask wallet. It’s fast, easy and intuitive, but there are a few fine points that you need to be aware of in order to execute a proper exchange. Let’s use a small example. We are using Ether cryptocurrency ( ETH ) in order to buy Tycoon token ( TYC ) on a decentralised exchange. Here is how we do it.
Step 1. Preparing your wallet
Remember when we mentioned that anyone is welcome on Uniswap? Well that also applies to ingenious scammers who promptly copy legitimate coins and convince the unsuspecting users into purchasing a completely fake token. How can we avoid this at all times? Very simple! We never use a ticker symbol or a name of a coin when we select our asset, ( they could be fake remember? ) we ONLY use the ERC20 contract in order to search for and identify our coin. The ERC20 contract can be found on popular coin tracking websites such as:
At this current time, your metamask wallet doesn’t yet see your future TYC token balance. How could it? After all, it’s impossible for any wallet to keep up with all the new coins and tokens. So let’s teach this little orange fox about our token, shall we?
First you need to open a coin tracking website ( mentioned above ) and locate the TYC token’s contract address; 0x3A82D3111aB5faF39d847D46023d9090261A658F ( usually it’s mentioned alongside the useful information about the coin you are researching ).
This is the ONLY correct way to search for the AUTHENTIC token that we want to purchase. Remember the mantras that you need to keep in mind? Looking for ANY ERC20 token on Uniswap must only be done using the ERC20 contact address and NOT by the name or ticker symbol of that coin.
Inside your Metamask wallet at the bottom there is an option to “add token”. Here we will use our contract address in order to locate and add the TYC token to our wallet. This way your TYC token balance will be displayed correctly after you have purchased it. Simply paste the contract address inside the field that states “contract address” and hit “Add token”. Now you will notice that the “asset” section of your wallet will proudly display your shiny new, freshly added TYC token. It will be sitting at a nice round “0” balance. This means your Metamask can now properly display your token balance after your purchase. Great job! Let’s move on.
Step 2. Locating the TYC token on Uniswap
Now that your Metamask wallet is connected to Uniswap exchange, it’s finally time to make your first purchase. Exciting isn’t it? Let’s take a deep breath and do it properly.
First we can select the coin we would like to swap. In our case we select ETH ( Ether ) and set our prefered amount of Ether balance that we wish to exchange. This is done in the upper part, since we are “selling” Ether for a new token. In the bottom section we will again use the ERC20 contract address: 0x3A82D3111aB5faF39d847D46023d9090261A658F in order to locate and “add” our TYC token to the list of the assets that Uniswap will offer us later on. This is an extremely important step and it’s exactly here where most newcomers to Uniswap end up making expensive mistakes. Now we verify that our ERC20 contract is correct and that our TYC token is located properly.
REMEMBER if you simply search for “TYC” or “Tycoon token”, chances are that you will stumble onto a fake version of the asset. This is why we ONLY search for our tokens using the correct ERC20 contract address. The ERC20 token address cannot be forged. Now our balances are set and we can execute the exchange for real.
Step 3. Executing your transaction
This section requires your fullest attention, since the majority of mistakes are made here. First of all it’s always important to keep in mind that EVERY transaction on Uniswap is executed on the blockchain and that means we will have to pay Gas fees to the Ethereum network for this decentralized privilege.
Simply put: If you have 1 ETH sitting in your Metamask wallet, ALWAYS KEEP SOME ETHER for paying the transaction fees. In our case we will exchange 0.7 ETH and we will keep 0.3 ETH for paying transaction fees. It’s critically important that you always keep at least some Ether for these transaction fees. This way you won’t ever get caught off guard during that important moment when you want to buy or sell your token very fast.
Now we got this covered, we can hit “swap”. Here is where something cool will happen. Your Metamask wallet will wake up and ask you to confirm your transaction. This is done because from the moment you connect your Metamask wallet to Uniswap, The WHOLE of Uniswap suddenly becomes an extension of your wallet.
Again before you confirm your transaction, it’s important to set your ETH gas price properly. In our case we will use the “fast speed” and subsequently higher price for gas. This is done intentionally in order to “bribe” the Ethereum miners into processing your transaction FIRST. High transaction fee results in a fast transaction. It’s as simple as that. Again many newcomers make the same mistake time and time again. When people think they will be saving money on gas fees, their trade usually ends up being stuck in a “pending transaction” for hours on end and if they are lucky, this transaction will be confirmed EVENTUALLY. This is off course not the purpose here. We want to work fast, therefore we will opt for “fast transaction” and high gas fee.
When you finally make your choice and confirm the transaction in your Metamask wallet, you can watch the magic happen before your eyes. Your transaction will be broadcasted directly onto the Ethereum network and after just a few seconds your Ether will be promptly swapped into TYC token. While your transaction is confirming, Uniswap will even provide you with a handy popup where you can follow your transaction progress on the Ethereum network IN REAL TIME. Simply click on the transaction hash and it will take you right into Ehterscan blockchain explorer where you will see this digital wizardry for yourself.
Usually Uniswap will ask you to “unlock” your token and off course this requires an extra transaction, so don’t be surprised if you have to confirm your transaction 2 times. Now we wait a few seconds and finally succeed! Your transaction is confirmed and you are now a proud owner of your TYC token! Just one more step remains.
Step 4. Checking your transaction
Uniswap will greet you with a nice green popup informing you of your successful transaction. This might sound simple to a seasoned crypto OG, but to all newcomers this will truly be a “giant leap for mankind” and the best news is that you have completed it all by yourself. Let’s verify that your TYC token balance is now correct shall we?
Inside your Metamask wallet ( under the tab called “assets” ) you will now be able to see your complete TYC token balance. Great job! But wait, there is more! If you go to https://zerion.io and connect your Metamask wallet to this handy app, it will also give you your complete asset balance of ALL the tokens you now own. In our case it will be TYC and a little bit of ETH ( in order to pay for network gas fees during new transactions ). It’s important to keep in mind that all of the ERC20 token ( in this case TYC token ) is also stored in the same account as your ETH on Metamask. It’s literally only one account for all of your tokens.
Again there are many excellent Uniswap tutorials online. Please take the time to go through them if something isn’t immediately clear to you, because this is just a small example of what can be done in the deep ocean of decentralized finance.
Finally congratulate yourself on your very first successful transaction on Uniswap. If you followed all the steps correctly, it’s truly a walk in the park and a pure joy to play around with. Let’s now take the time to mention a few important points where most people make costly mistakes. Not only will you save yourself hours of headache, but you will also supercharge your DEFI experience in the process.
Most common mistakes and pitfalls
If you are just starting out with DEFI, it’s extremely important to take your time, brew a nice hot coffee and plow through a few pages of tutorials and wisdoms. We cannot cover most of the information in just 2 articles, but we can certainly help you to avoid 99% of the mistakes when working with Uniswap and Metamask wallet inside the decentralized finance ecosystem.
When you simply “trust” something like a Chrome browser with your precious cryptocurrency, it might sound a bit frightening. After all, Google hasn’t been a trustworthy company for years now. How can we be sure that our coins are truly safe? The simple answer is: we can’t! This is why a prudent long term investor always transfers his coins and tokens into a cold storage wallet ( such as a Ledger or a Trezor ) if you plan to hodl your TYC tokens for a long time. Oh by the way did you back up your 12 word recovery phrase and your password on 3 pieces of paper? Just a friendly reminder!
When we use on-chain transactions, we will have some time delay. This can cause the price of your token to change ( it can move up or down while your transaction is confirming on the blockchain ). This price movement is called slippage. Your Uniswap interface allows you to set the percentage of slippage that you will be comfortable with. For example if you set your slippage to 5%, this means you have a certain “wiggle room” where the price can move while your transaction is confirming. Sometimes you will receive more tokens than you expected and sometimes less. It’s extremely important to know about slippage, because when you work with on-chain transactions, you will have to constantly deal with this peculiar phenomenon. This will be explained more thoroughly in our upcoming posts.
We can’t stress this enough, but many newcomers don’t use the ERC20 contract in order to find the correct token inside their Metamask wallet and inside Uniswap. Scammers and impersonators go out of their way to set up fake tokens that look just like the real thing in order to prey on the ignorance of unsuspecting investors. This is why it’s so damn important to use ONLY the ERC20 contract address for selecting the token you wish to buy and sell on Uniswap. There can be NO exception to this rule. Do yourself a favour and make it a habit. If you screw this up, you risk buying a fake token. It’s critical to remember this.
Lately the popularity of the Ethereum network has taken a heavy toll on the gas fees. Thousands of people are lining up to do their daily wheeling and dealing on the Ethereum network and off course this sends the network gas fees soaring. Many new investors try to penny pinch their way out of this situation and eventually end up with a transaction that is stuck on “pending” for hours and even days on end. Don’t make this mistake. If you want your transaction to go through in a speedy manner, never skimp on the gas fees. You will save yourself a lot of headaches later on. With the release of new Ethereum upgrades ( and subsequently the ETH 2.0 main net ) the fees will be reduced to more “democratic” levels that are accessible to one and all. At this point in time however, the high cost of the transactions is the price that we have to pay for using decentralized finance that doesn’t treat every single participant as a suspect in some money laundering scheme. It will get better with time.
Uniswap ( nowadays at least ) works best on a desktop computer. There is an option to use DEFI applications on mobile devices, but it will definitely take some time to polish everything up and make it a bit more “grandma friendly” later on. Therefore it’s extremely important not to treat Uniswap as some kind of a novelty. In fact this simple user interface is so powerful, that it literally gobbled up a huge market share from large hairy chested centralised exchanges in a time span of less than a year. It’s a good idea to treat it like any other trading terminal and make your trades on your own terms using your desktop pc.
Last but not least all fluff aside, defi is still in its infancy and off course it has a quite high barrier to entry for any newcomer in this space. Metamask, Uniswap, Brave browser! It’s a hell of a hassle to set up everything and have it running properly. Luckily for us, there are literally thousands of excellent courses and tutorials ( most of them are free just like this one ) that will help you up to speed in less than a day. We are moving through a fast paced digital world and our ability to learn and adapt quickly will serve you extremely well.
Again congratulations on your very first successful transaction in the almighty and world changing decentralised finance space. Although it doesn’t look spectacular at this point, later on you will tell about it to your grandchildren in the same manner as our parents told us about the rise of the internet. Defi is here to stay and it will definitely become huge. It’s simply inexcusable to ignore it.
In the following chapters, we will be diving deeper into DEFI space and will be covering even more important topics such as liquidity providing, impermanent loss and many other fascinating snippets of wisdom that will blow the mind of any beginning investor and trader alike. Stick around for more.