QuickSwap is a decentralized exchange and an automated market maker built on the Ethereum layer-2 network, Polygon. Users can freely swap Polygon-based tokens and earn rewards for liquidity to trading pools on the network.
The protocol is a fork of the Ethereum flagship decentralized exchange, Uniswap. QuickSwap positions itself as a solution to the heavy transaction fees tied to the Ethereum network. This article covers every essential detail you need to know about the Polygon-based project.
Here is an overview of the topics we will cover in the guide:
- What is QuickSwap?
- How Does QuickSwap Work?
- How to Use QuickSwap to Swap Tokens
- Is QuickSwap the Same As Uniswap?
- Is QuickSwap Safe to Use?
- What Are the Risks of Using QuickSwap?
- Conclusion
What is QuickSwap?
QuickSwap is a decentralized platform functioning as an automated market maker on the Polygon blockchain. It was launched in October 2020 by Nick Mudge and Sameep Singhania.
The codes governing the protocol were forked from the Ethereum-based platform, Uniswap. Its services are, therefore, similar to those of Uniswap. However, QuickSwap distinguishes itself through the speed and low cost associated with the Polygon chain.
Like all DEXes, users on the QuickSwap platform do not need to undergo a Know-Your-Customer (KYC) process. The only thing traders use in accessing services on QuickSwap is a digital wallet with an available balance in MATIC, Polygon’s native cryptocurrency.
QuickSwap has a native cryptocurrency called QUICK. It serves as a utility and governance token for the QuickSwap ecosystem.
How Does QuickSwap Work?
QuickSwap uses the automated market maker (AMM) model to offer exchange services to customers. The protocol also provides yield farming, swapping, and staking features. Let us discuss these characteristics one after the other.
Automated Market Maker (AMM)
An AMM enables users to trade cryptocurrencies without an intermediary. The mechanism is an upgrade to the traditional cryptocurrency exchanges that adopts order books.
In a typical example, order books managed by centralized platforms display the buy and sell orders. Traders use the data to buy or sell assets. The disadvantage of order books is the lack of transparency, making them susceptible to manipulation.
AMMs build on the concept of an order book by relying on mathematical computations called smart contracts to conduct trades. With this method, a user does not need a central authority to match their transaction with another trader at the other end. Instead, a user interacts with an algorithm to facilitate trades. The algorithm also determines cryptocurrencies’ prices.
Interestingly, AMMs enable users to become market makers by creating or contributing to liquidity pools (LP). Anyone who deposits their funds into such a pool is called a liquidity provider. These get rewarded with trading fees derived from the trades in the pool.
In the case of QuickSwap, liquidity providers need to deposit equal amounts of two particular cryptocurrencies (a token pair). For example, Bob has $100 and wants to provide liquidity to the MATIC/USDT trading pair. He needs to split the fund into two equal parts; $50 in MATIC and $50 in USDT. Bob would then deposit the funds this way into the liquidity pool.
When users supply funds into liquidity pools, they are issued liquidity pool tokens representing their participation in the system. Liquidity providers earn 0.25% from fees generated on the platform, proportional to the quantity of their stake.
Token Swaps
The crypto token swap is a process that allows a trader to convert one cryptocurrency into another without undergoing the crypto-to-fiat process, which usually takes longer time and resources. It also allows traders to milk profits from an uptrend in a particular cryptocurrency. Crypto natives call this the take-profit scheme.
QuickSwap enables users to swap ERC-20 tokens with a minimal 0.3% transaction fee and near-zero gas fees. The fees accrued from the swaps are delegated to the platform’s liquidity providers. The platform offers an interface that is keenly similar to that of Uniswap.
Dragon’s Lair (Staking)
Crypto staking is the process of locking an amount of cryptocurrency into a protocol to support its operations. During this period, the asset owner has no access to the cryptocurrency. Anyone who stakes their cryptocurrencies receives more crypto assets as a reward, based on the quantity they have invested.
The Dragon’s Lair is QuickSwap’s staking feature. Holders of the protocol’s native asset, QUICK, can stake them on the platform. Anyone who stakes QUICK gets rewarded in dQUICK tokens. They also receive 0.04% in trading fees.
How to Use QuickSwap to Swap Tokens
Here is the step-by-step process to swap tokens on QuickSwap:
Step 1: Open the QuickSwap website in a Web3 wallet that supports Polygon. Fund your wallet with sufficient MATICs for the trade.
Step 2: Click on the Swap tab on the home page. Here is a pictorial representation:
Step 3: By default, MATIC to USDC appears on the landing page. You can change the cryptocurrencies to swap and receive to get those of your choice. The quantity of both tokens and the dollar equivalent will appear on the screen.
Step 4: Click the Swap button below to execute the swap. A transaction preview page will pop up with a request to confirm. Once you complete the trade, you will receive your preferred cryptocurrency.
Is QuickSwap the Same As Uniswap?
Admittedly, QuickSwap’s code was derived from Uniswap. However, QuickSwap is not the same as Uniswap.
A key difference is the parent blockchain housing both projects. QuickSwap lives on the Polygon network, which adopts the Proof-of-Stake (PoS) consensus mechanism. It makes the DEX process transactions faster. However, Uniswap runs on the Ethereum blockchain, with lower transaction throughput.
Another difference between the duo is the utility token used in their ecosystem. QuickSwap uses QUICK as its native token, while Uniswap’s native cryptocurrency is UNI.
Is QuickSwap Safe to Use?
Like most smart contract-based protocols, QuickSwap is risky to use as the platform may have vulnerabilities yet to be uncovered by hackers.
QuickSwap already suffered a security breach where a hacker hijacked the project’s domain. At that time, the project utilized the web hosting service provider GoDaddy for its domain name system (DNS). After about seven hours, the protocol regained access to its domain only after losing $107,600 to the attacker.
Although the team behind QuickSwap made the affected users whole, the breach shows that the project is not foolproof and is susceptible to exploits. Meanwhile, users have reported no further security issues since the May 2022 hack.
What Are the Risks of Using QuickSwap?
An investor weighing the answer to the question: “Is QuickSwap safe?” should know the risks involved in using the platform. Like every other DeFi protocol, QuickSwap has its risks. Here are common risks you can face while using exchanges like QuickSwap:
- Vulnerable Smart Contracts
Unaudited and weak smart contracts can become valuable tools for attackers to facilitate security exploits. Several exploits in the past have proved this. The solution is to employ a professional auditing firm to carefully audit smart contracts before they become accessible to public users.
- Impermanent Loss
An impermanent loss is common on platforms offering liquidity pools. It occurs when the cryptocurrency’s price, while in a liquidity pool, falls below the amount it was when deposited. It is impermanent since the value tends to go back up. It becomes permanent only when the trader withdraws their funds from the pool. If you are diving into liquidity pools on QuickSwap, be sure to notice this while investing.
- Attack From Bad Players
DeFi protocols have become a playground for bad actors intent on exploiting any security loophole. The biggest among such heists is the Ronin bridge attack which swept $625 million from the play-to-earn game Axie Infinity. Also on the list is QuickSwap’s domain hijack, as discussed earlier.
Conclusion
This article has provided details to the question: “What is QuickSwap?” It has shown that QuickSwap and Uniswap are different. More importantly, potential investors have seen the answer to the question: “Is QuickSwap safe?”
