Defi Wars: Uniswap vs. Aave - Which Should You Try First?

If you are new to the world of Decentralised Finance (DeFi), trying to figure out where to start and how the different platforms and protocols work can feel like a landslide. So in this article I will compare two of the most beginner-friendly (and powerful) DeFi protocols and save you the stress.

Lets talk about Uniswap and Aave.

What is Uniswap Exchange?

Uniswap is a big name decentralised exchange (DEX) on the Ethereum blockchain that lets you swap cryptocurrencies directly from your wallet without sign-ups or middlemen.

How does Uniswap Work?

In order to work, Uniswap uses an automated market maker (AMM) system, where prices are set by smart contracts based on the amount of tokens in liquidity pools ( What’s a Liquidity Pool? Its a shared pot of crypto tokens locked in a smart contract by users for trading, lending and borrowing without the influence of a middle man.)

Basically, with Uniswap, users can trade a wide range of tokens, provide liquidity to earn fees, and maintain full control of their funds.

Why do beginners like Uniswap?

1. Uniswap is super simple: You connect your wallet, choose the token you want to swap, and done.

2. You don’t need an account: Your wallet is your account its that simple.

3. Liquidity pools: You can even earn passive income by adding your crypto to a pool so others can trade.

Uniswap is like that friendly neighborhood market where you can trade instantly, and you don’t even have to trust the shopkeeper because there isn’t one.

What is Aave Protocol?

Aave is a top decentralised lending protocol that allows users to borrow and lend cryptocurrencies without going through a bank or central authority.

How does Aave Protocol work?

With Aave, lenders deposit crypto into liquidity pools to earn interest, while borrowers can take out loans by putting up collateral. Aave also offers unique features like “flash loans” (instant, uncollateralised loans repaid in the same transaction) and flexible interest rates, making it a versatile tool for DeFi users.

Why do beginners use Aave?

1. Aave allows you lend out your crypto and earn: What’s more attractive than earning idle income? Nothing really and Aave does that.

2. You can borrow crypto on Aave: Using existing coins as collateral users can easily take out a loan without selling them.

3. Flexible rates: With Aave, users can choose between stable and variable interest depending on their strategy. For instance, if you borrow 1000 USDC, with stable rate, you might pay 5% interest per year that stays roughly the same while with variable rate, it could start at 4%, but if many people borrow the same asset, it could rise to 6% or drop to 3%.

So for beginners, Aave is a great way to put idle crypto to work and understand the basics of DeFi lending.

What are the key differences and similarities between Uniswap and Aave?

So finally should beginners use Aave or Uniswap?

The answer is, it depends. If you want to start simple and just trade tokens, go with Uniswap but if you want to earn passive income or borrow without selling your coins, then Aave is definitely worth exploring.

Either way, start small, learn the ropes, and never put in more than you can afford to lose. The beauty of DeFi is that it gives you control but with that control comes the responsibility to understand what you are doing.

What Next?

• Share this guide with someone still confused about Uniswap and Aave.

• Subscribe to my blog for more Web3 breakdowns

• Connect with me on LinkedIn for professional enquiries.

You can also continue to learn more about DeFi Protocols in this YouTube video below: