The Optimistic Side of Uniswap.
In the previous issue of Insights, I showed you an alternative way to swap tokens on Ethereum. It involves sending transactions to miners directly, which can help you save a few bucks and avoid frontrunners. But it’s still pretty expensive.
Today, I want to show how you can swap assets cheaply and quickly using good ol’ Uniswap. To do so, we will use the recently launched Layer 2 network called Optimism.
To be frank, I’m pretty excited about Optimism finally launching. There were a few years of promises and delays, but I’m optimistic about the results.
The main feature of Optimism is that it enables fast and cheap transactions by taking them off-chain, processing them separately, and then recording results back on Ethereum. This way, there are far fewer transactions on Ethereum, meaning fewer people bidding up gas prices.
Uniswap recently integrated Optimism. But, if you go to the exchange you won’t find an ‘on’ switch. To get access to fast and cheap transactions you will need to get your hands dirty.
First, you need to add Optimism data to your Metamask. If you were using Binance Smart Chain, Polygon, or Fantom with Metamask, the process should be pretty straightforward.
Follow this link and click ‘Connect.’ A Metamask window will pop up asking you to add a new network and switch to it. Accept both messages. You are now on Optimism, and your balance is zero ETH. Time to change that.
Go to this link to get to Optimistic Ethereum Gateway, a bridge that you can use to transfer funds from Ethereum to Optimism. First, open Metamask and switch back to Ethereum by clicking on the networks selector at the top of the extension’s screen. Close the extension once you’re done.
At the top right of the website, you will find the ‘Connect Wallet’ button. Click on it. Select ‘Metamask’ from options and approve the connection. You will then see a window for depositing/withdrawing ETH to/from Optimism.
Stay on the ‘Deposit’ tab. It looks like a Uniswap window, but the first field is for the amount to deposit, and the second is the amount to receive. I will use ETH, but you can also send SNX, DAI, USDT, and WBTC by clicking on the asset button.
Note that depositing and withdrawing funds from Optimism costs money. Moreover, withdrawal takes one week. You read it right, one week due to the security model of Optimism.
Unfortunately, you won’t be able to go back and forth between Optimism and Ethereum to make single trades. On the other hand, deposit/withdrawal costs are around the same amount as three swaps on Ethereum, so you can make many more trades on Optimism for this price.
When you specify how much you want to send to Optimism, click on Deposit and approve the transaction. The Gateway will show you estimates of how much it will cost to withdraw funds at the current prices. When you approve everything, you will need to wait for 20 confirmations for your assets to transfer.
Switch back to Optimism in your Metamask and open Uniswap. When you connect your wallet, you will now see a switch to Optimism in the top right corner of the screen. Time to trade.
Currently, the asset selection is quite limited. Like it is with the deposit, you can only trade ETH SNX, DAI, USDT, and WBTC. I think, right now, it makes sense to use Optimism if you actively trade BTC or ETH against stablecoins but still want to retain full control of your assets and not use a centralized exchange. I’m pretty confident that we’ll see more assets on Optimism very soon.
Trading on Optimistic Uniswap is the same as trading on the Ethereum mainnet. Select an asset pair, specify amounts and click ‘Swap.’ I just bought 3 USD for ETH and paid a $0.5 fee. A comparable trade on Ethereum could cost $10 or more.
And there you have it. As I said, Optimistic Uniswap is at a nascent stage of development and is pretty limited. But, it’s already a viable alternative to centralized exchanges or Polygon.
The experience will get better with time, and soon we should be able to easily and cheaply trade using familiar tools like Uniswap.
Disclosure: The author of this newsletter holds ETH. Read our trading policy to see how SIMETRI protects its members against insider trading.