Disclaimer: This article is for educational purposes only. Do not trade or invest based on the information in this article. The methods and tools described in this article are of high risk and the author makes no claim as to the safety or validity of them. The author is not responsible for any losses incurred as the result of reading this article. Always consult a professional financial advisor before considering any investments or trades.
2. Decentralized Exchanges: one can utilize a Decentralized Exchange (DEX) in order to find cryptocurrency tokens that are not listed on major exchanges. The key to a DEX is there is no centralized entity or company that controls the exchange. They are based on software running on the blockchain (e.g. Ethereum). In this manner, new tokens can be listed nearly immediately. This has the advantage of speed and accessibility, but also means that scam tokens can also be listed. Sound scary? Yes, it is, but that’s why we have this tutorial! For our purposes, we will focus on Uniswap, a popular DEX.
3. Finding the coin you want to trade: with so many fakes, the obvious question becomes how do you know which ones are real? I just want to hold the MetaHero currency, $POW, what do I do?!? We’ve got you covered. There’s a few ways to find the the coin you’re looking for.
You can line up contract in etherscan and nerd out, or an easier way is to go to CoinGecko and search for the exact coin you want. In our case, we search and find $POW. There’s a few, so we choose the “Metahero Universe (POW),” as shown in Figure 4. Note the ‘Info’ section on the right-hand side. To be 100% sure this is the right coin, verify the ‘contract’ number against the contract listed in the project’s ‘official links’ section. That way you know you’re dealing with the one and only $POW, and not an imposter.
After you’ve completed the previous steps, you’re ready to hop proceed to Uniswap. Scroll down on the $POW page on CoinGecko and select the ‘Markets’ tab, shown in Figure 5. This tab lists all of the exchanges where the underlying token is listed. $POW is a smaller coin and we see it’s only listed on Uniswap. If you search for a larger coin, such as $ETH, there will be hundreds of results. We see the POW/WETH pair. What this means is that you can trade POW for ETH and ETH for POW. The ‘W’ in WETH just means that it’s a wrapped version (Uniswap automates this aspect, so there’s no need to worry about it). Click on the ‘POW/WETH’ link and you’ll be taken to Uniswap.
4. Trading on Uniswap: now we are on the final step. when you get to Uniswap, you’ll need to connect your Ethereum wallet. I’m using MetaMask in our example. Once you connect, the trading pairs will automatically populate, with your $ETH and $POW balance. I have not yet traded, so I only have $ETH at this point, and no $POW. You can place an amount to trade and you will be shown the necessary parameters (see Figure 6). In the example, I select to trade 0.5 $ETH for an estimated 12584.1 $POW. Note that this amount is variable and will depend on any other trades and price fluctuations that could occur between now and trading. The price impact of the trade is shown as -0.30%. This means that this trade will move the price of $POW an estimated 0.30% higher than my purchase price (called slippage). Further, we see a network fee (this is the fee of using the Ethereum network). Finally, the Auto Router can be seen if we click the ‘+’ and shows a 1% fee. This is the fee for using this Uniswap pool. These parts are all quite complex — the general rule of thumb is if you trade on Uniswap you’ll likely pay about 1%-3% in fees, slippage, etc. If you have never traded the coins on Uniswap, you will likely have to approve the coins for trading (which allows Uniswap to move the coins around to trade them for you). Once you’re approved and the trade is set, then click Swap and execute the trade. You will see a confirmation that the transaction has been submitted, with the option to ‘Add POW to Metamask.’ I’d recommend doing this, so that MetaMask can track your newly acquired POW. Once the transaction executes, you’ll see your $ETH balance go down and the $POW balance go up. Keep in mind the $POW trade was an estimate and the actual amount received will vary based on the slippage and any other trades occuring around this time.
*Note that if the price impact is too high, then it may not allow you to trade. You can adjust your slippage settings by clicking the settings button on the top right, but in general it’s good to stick to the defaults. If you need to raise your slippage, I’d recommend to keep it as low as possible. Otherwise you can end up buying a coin for a price that’s quite different than what it ends up at, if others hop in and trade before you execute yours, which is called front-running.
5. Conclusion: This tutorial was an educational piece to show how to find and trade Tokens on a DEX. For concrete purposes, we use the example token of $POW, the currency of the MetaHero Universe, and Uniswap, a popular decentralized exchange. I hope you enjoyed this tutorial and learned something new. Please let me know what you think and what other topics you’d like to hear about!
Originally published at https://rustysailor.medium.com on March 29, 2022.
