Now we set up all our tools and are ready to jump into Uniswap and make our 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 to make his experience in 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 using a centralized exchange, you must wait a couple of days to verify your identity and other important information. Here, you have done this step in literally 2 seconds. Now we are connected, let’s do a simple exercise and use our ETH 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 number 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 to execute a fair exchange. Let’s use a small example. We use Ether cryptocurrency ( ETH ) to buy Tycoon tokens ( TYC ) on a decentralized exchange. Here is how we do it. Do you like learning posts about how to trade on Uniswap? Stay with Insights to the end.
Step 1. Preparing your wallet
Remember when we mentioned that anyone is welcome on Uniswap? That also applies to ingenious scammers who promptly copy legitimate coins and convince unsuspecting users to purchase a 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 to search for and identify our currency. The ERC20 agreement can be found on popular coin tracking websites such as:
Your Metamask wallet doesn’t yet see your future TYC token balance. How could it? After all, no wallet can 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 noted alongside the valuable information about the coin you are researching).
What is the next?
This is the ONLY correct way to search for the AUTHENTIC token 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, there is an option to “add token” at the bottom. Here we will use our contract address 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. 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. Your Metamask can now correctly display your token balance after your purchase. Great job! Let’s move on.
Step 2. Locating the TYC token on Uniswap
Now that you connected your Metamask wallet to the Uniswap exchange, it’s 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 choose ETH ( Ether ) and set our preferred amount of Ether balance 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 to locate and “add” our TYC token to the list of the assets that Uniswap will offer us later on.
This is a crucial step, and it’s precisely where most newcomers to Uniswap make expensive mistakes. Now we verify that our ERC20 contract is correct and that our TYC token is located correctly.
If you search for “TYC” or “Tycoon token,” the 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 and trade on Uniswap
This section requires your full attention since most 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.
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 critical 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 extraordinary 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.
Set your ETH gas price properly
In our case, we will use the “fast speed” and subsequently higher gas price. This is done intentionally 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 on Uniswap 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, of course, not the purpose here. We want to work fast. Therefore we will opt for “fast transaction” and high gas fee.
When you finally decide 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 a TYC token. While your transaction is confirmed, Uniswap will even provide you with a handy popup where you can follow your transaction progress on the Ethereum network in real time.
Click on the transaction hash, and it will take you right into Ehterscan blockchain explorer, where you will see this digital magic for yourself.
Usually, Uniswap will ask you to “unlock” your token, and of course, this requires an extra transaction, so don’t be surprised if you have to confirm your transaction twice. Now we wait a few seconds and finally succeed! Your transaction is approved, 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 indeed be a “giant leap for mankind,” 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 entire 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 (to pay for network gas fees during new transactions ). It’s essential to remember 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 only one account for all of your tokens.
Many excellent Uniswap tutorials online
Please take the time to go through them if something isn’t immediately apparent 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 critical 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 starting with DEFI, it’s imperative to take your time, brew an excellent hot coffee and plow through a few pages of tutorials and wisdom. We cannot cover most of the information in just two articles. Still, we can help you avoid 99% of the mistakes when working with Uniswap and Metamask wallets inside the decentralized finance ecosystem.
It might sound a bit frightening when you “trust” something like a Chrome browser with your precious cryptocurrency. After all, Google hasn’t been a trustworthy company for years now. How can we be sure that our coins are truly safe? Tgenuinelymple 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 hold your TYC tokens for a long time. Oh, by the way, did you back up your 12-word recovery phrase and password on three pieces of paper? Just a friendly reminder!
Use on-chain transactions for trade on Uniswap
When we use on-chain transactions, we will have some time delays. This can cause the price of your token to change ( it can move up or down while your transaction is confirmed on the blockchain ). This price movement is called slippage. Your Uniswap interface allows you to set the percentage of slippage you will be comfortable with.
For example, if you set your slippage to 5%, you have a certain “wiggle room” where the price can move while your transaction is confirmed. Sometimes you will receive more tokens than you expected and sometimes less. It’s essential to know about slippage because when you work with on-chain transactions, you must 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 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 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. Please do yourself a favor and make it a habit. If you screw this up, you risk buying a fake token. It’s critical to remember this.
The Ethereum network takes a heavy takes on the gas fees
Thousands of people are lining up to do their daily wheeling and dealing on the Ethereum network, and of 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 stuck on “pending” for hours and even days on end. Don’t make this mistake.
If you want your transaction to go through speedily, 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 accessible to one and all. At this point, however, the high cost of the transactions is the price 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 take some time to polish everything up and make it a bit more “grandma friendly” later. Therefore it’s essential not to treat Uniswap as some novelty. This simple user interface is so powerful that it gobbled up a significant market from large hairy-chested exchanges during a time of year. It’s a good idea to treat it like any other trading terminal and make your trades on your terms using your desktop pc.
Final words about how to trade on Uniswap
Last but not least, all fluff aside, DeFi is still in its infancy, and of course, it has a pretty high pretty to entry for any newcomer in this space. Metamask, Uniswap, Brave browser! It’s a hassle to set up everything and have it running properly. Luccorrectly us, there are 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 decentralized 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 become huge. It’s simply inexcusable to ignore it.
In the following chapters, we will be diving deeper into the DEFI space. We 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.