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Home > Cryptocurrency & Blockchain > Cryptocurrency Exchanges > Uniswap



WHY ARE UNISWAP FEES SO HIGH?

Crypto investors who use UniSwap will notice fees are ridiculously high right
now. Here's why that's happening.

By Mark Prvulovic

May 14 2021, Published 4:16 a.m. ET

UniSwap is easily the most popular decentralized exchange (DEX) on the market
right now. Unlike centralized exchanges, which have a much smaller, curated
selection of tokens, almost anyone can set up a coin and trade it on UniSwap.
For that reason, most serious altcoin and meme coin traders gravitate to the
exchange. However, many traders have recently noticed fees on UniSwap are
unusually high.



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There are a few reasons why fees are currently so steep. UniSwap has its own
platform fees, but often traders are paying an arm and a leg for gas fees as
well as slippage margins. 

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HOW DO UNISWAP FEES WORK?



UniSwap fees can be broken into a few categories. The first is called the
liquidity pool fee, which is a flat platform fee for swapping any two
cryptocurrencies on the platform. For end-users, think of this like your
standard transaction fee on a regular broker. On UniSwap, this is just 0.3
percent.

The next (and probably the biggest) fees you face are gas fees. UniSwap has no
control over gas fees which are entirely due to Ethereum's congestion issues.
Gas is used to pay for transactions of all cryptocurrencies built on the
Ethereum blockchain. Considering how popular Ethereum has become, not to mention
the rise of ERC-20 altcoins and Ethereum-based NFTs, it’s not surprising the
Ethereum blockchain can’t handle this traffic.

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> Bought my first meme coin #AKITAINU for fun. Testing out #Uniswap....those
> fees are a killer. lol. pic.twitter.com/rkbX1wygT3
> 
> — Sith Sou (@sith_sou) May 9, 2021

> Bought my first meme coin #AKITAINU for fun. Testing out #Uniswap....those
> fees are a killer. lol. pic.twitter.com/rkbX1wygT3
> 
> — Sith Sou (@sith_sou) May 9, 2021

Unlike major credit card companies, which can process thousands of transactions
a second, Ethereum can only process 14 transactions per second. Gas fees are
skyrocketing because demand for transaction bandwidth is crazy high, while the
supply remains steady. The planned Ethereum 2.0 upgrade could radically lower
gas fees, but we won’t see a full launch until later this year. For most crypto
traders, gas fees are the biggest reason why it seems like fees are so high on
UniSwap.


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WHAT ARE SLIPPAGE FEES?

The last type of fee you’ll see on UniSwap is called slippage.You see this in
regular financial markets as well, but mainly with stocks that have low trading
volumes. When a big buyer or seller makes a trade, this causes a movement in the
price of said asset, or slippage.

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> Swapped #ShibaCoin for #eth , gas fees on #uniswap are crazy!! 200 buck for a
> swap and 50 buck for a confirmation for using SHIBA. Lost 300 on transaction,
> remember to set slippage rate to +15% and choose the most expensive option
> pic.twitter.com/mYaczKnBb4
> 
> — tiffany (@tiffany19971114) May 11, 2021


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If you’re trading large quantities of small, obscure altcoins, you’ll cause
prices to fluctuate  as a result of your trades. For that reason, slippage might
be eating into your trading profits. That’s likely not the case if you’re just a
small-time trader. However, having high slippage fees will help process your
transaction faster in case prices fluctuate a lot during your trade.


HOW TO LOWER YOUR TRADING FEES

The only real way to lower your trading fees is by trading during off-peak
hours. During the morning between 12 a.m. and 8 a.m. ET, gas fees tend to be
lower as there’s less demand. Sunday also tends to have lower gas fees compared
to the rest of the week.

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