Coinbase Pro vs. Uniswap - The Ultimate User Guide
Coinbase Pro vs. Uniswap – Do you enjoy the ease and security of trading with a centralized exchange such as Coinbase or do you prefer trading on the largest decentralized exchange in the world? Although both Coinbase Pro and Uniswap are excellent options for trading cryptocurrency, there are several important differences that traders of all levels should understand.
Coinbase Pro vs. Uniswap - Introduction
Both Coinbase and Uniswap have been in the news lately, albeit for different reasons. Coinbase shares were listed on April 14, 2021, under the symbol COIN. Shares initially opened for trading at $381 before quickly rising above $400. At that price, Coinbase is valued at $100 billion, making it the country's most valuable exchange. This is a milestone event for the cryptocurrency industry and could inspire other cryptocurrency exchanges, such as Kraken and Gemini, to go public as well.
Meanwhile, Uniswap has also been receiving its fair share of attention due to the rising popularity of decentralized exchanges. There can be no denying, that as of now, Uniswap is the king of DEXs followed closely by SushiSwap. In fact, Hayden Adams, the founder of Uniswap, tweeted in February that the popular decentralized exchange became the first to process over $100 billion in volume.
Back in September of last year, there was a Uniswap airdrop for users who had previously executed a trade directly on the decentralized exchange. Each user received 400 UNI, Uniswap’s native token. The opening day price bounced between $3 and $5 which made each trader’s airdrop worth somewhere between $1,200 and $2,000. Today, that airdrop is worth approximately $12,000.
Although the specific features of each platform will be covered shortly, it’s important to note that the debate between using a centralized exchange like Coinbase and a decentralized exchange like Uniswap often comes down to a user’s ideals. Do they prefer an easy-to-use, regulated, and streamlined exchange like Coinbase or would they rather keep their assets in cold storage and interact peer-to-peer, thereby bypassing the middleman?
Satoshi Nakamoto, the creator and visionary behind bitcoin once said:
“A lot of people automatically dismiss e-currency as a lost cost because of all the companies that failed since the 1990s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.”
Well, it certainly appears that Satoshi preferred the idea of decentralization but what is the right choice for most users? This blog will highlight the main benefits and drawbacks of each platform so that every crypto trader can make an informed decision on what is best for their particular situation.
Coinbase Pro vs. Uniswap - The Basics
Coinbase, founded in 2012, is a cryptocurrency exchange based in San Francisco. The company was founded by Brian Armstrong, one of the most highly regarded figures in the crypto industry. The company generates more than $2 billion in annual revenue and has a user base of more than 35 million spread across 32 countries. Coinbase has several product offerings including its main exchange, Coinbase wallet, and Coinbase Pro (the company’s advanced trading platform).
Uniswap, the world’s most active decentralized exchange, was founded by Hayden Adams in 2018. Over the past couple of years, there has been growing interest in the idea of decentralized finance (DeFi). In a nutshell, DeFi means that financial products are available on a public blockchain network where anyone can interact with them without having to deal with a middleman such as a bank, brokerage, or financial institution. Uniswap is essentially a peer-to-peer network where traders interact directly with each other.
Coinbase Pro vs. Uniswap - How to Get Started
For those not familiar with Coinbase, it’s important to mention the basics of getting started. New Coinbase users will normally open an account at coinbase.com or by downloading the Coinbase app. Coinbase makes it very easy to get started but that convenience comes at a cost, in the form of significantly higher fees. Although all trades are executed on the Coinbase Pro platform, trades entered on coinbase.com or through the mobile app will incur much higher fees. Trades placed directly on Coinbase Pro won’t be as expensive. So, it makes sense for all Coinbase users to place their trades on the Pro platform at pro.coinbase.com. One other important fact to remember is that each platform, Coinbase and Coinbase Pro, has a separate wallet. So, if you already have an account setup and wish to trade on Coinbase Pro, you’ll want to follow these steps.
Fortunately, Uniswap is a one size fits all experience. Users can go to uniswap.org and begin by clicking the “Use Uniswap” button at the top right of the homepage. One major difference between Coinbase Pro and Uniswap is that you don’t need to transfer assets to the exchange. Instead, you simply store your assets in a compatible wallet such as Ledger, MetaMask, or Coinbase Wallet, and then connect that wallet directly to Uniswap. Once connected, a user is ready to trade. For those of you interested in setting up a private wallet, you can learn more about it by visiting the official sites for Ledger and MetaMask.
Below are the homepages for each platform. The main difference between the two is that Coinbase Pro appears to be significantly more complex than Uniswap. Uniswap is a fairly basic platform without any sort of charting or advanced order types which means the interface is rather easy to navigate, even for beginners.
- Available at pro.coinbase.com or through the Coinbase Pro app.
- Available at uniswap.org
Verdict: In terms of getting started, nothing beats the DeFi experience. Not having to fill out forms and wait for account approval is probably an important factor for some. The rising popularity of cryptocurrency trading is causing several of the largest centralized exchanges to become backlogged with new account applications which can often result in delays. Those who are in a hurry to get started and begin trading crypto may want to consider Uniswap.
Coinbase Pro vs. Uniswap - Trading Experience
The trading experience on Coinbase Pro and Uniswap is very different because each platform is catering to a slightly different audience. Whereas Coinbase Pro caters to traders looking for a high-end, powerful, and sophisticated trading experience, Uniswap is more focused on supplying as much liquidity as possible for as many cryptocurrencies as possible while also staying true to its main principle of decentralization.
In order to begin trading on Coinbase Pro, a user will need to select a particular asset such as Bitcoin
Uniswap is perhaps the easiest and fastest exchange for customers to start trading. Since there are no forms needed, users can simply connect their wallet and begin swapping assets immediately. After navigating to uniswap.org, a user can click the “Use Uniswap” button at the top right and then they will be asked to connect their wallet on the next screen.
Once the wallet is connected, the order entry page will appear. Unlike Coinbase Pro, users do not have the ability to use different order types. All orders are essentially market orders and will be executed at the best available price.
In the above Uniswap order entry ticket, users will see all the relevant details. It will show your connected wallet’s available balance in the asset you want to swap, the swap ratio (in this case, a user can swap .01 ETH for 19.9695 USDC), the price, the slippage tolerance, and the minimum amount that will be received.
Slippage tolerance is a setting that can be adjusted depending on how aggressive a user wants to be. The higher the slippage, the higher the chance for executing at a worse price, but also the greater certainty of completing your trade. Generally, for very liquid cryptocurrencies, users can use a very low slippage such as .1%, .5%, or even 1%. If it’s an illiquid coin, a much higher slippage may be required. One way to determine that is to look at the potential price impact created by your order. In the above example, there is essentially no impact at all.
When a user is ready to make the trade, simply click the swap button and a confirmation window will appear.
After clicking confirm swap, users will then have one final pop-up where a user can adjust the gas speed. The higher the gas, the more expensive the transaction is but the faster the transaction will execute. So, if speed is the primary concern, selecting the fastest speed may be the way to go.
Verdict: For most traders, Coinbase Pro is probably going to be the best option. More order types mean that traders will be able to pursue different strategies at different times. In addition, while storing one’s digital assets in an offline wallet might be appealing, many users, especially those just getting started, will simply opt to keep their assets directly on the exchange for easy and fast accessibility.
Coinbase Pro vs. Uniswap - Trading and Account Fees
Since cryptocurrency is still a relatively new market without much regulation, fees are quite a bit higher than what traders might be used to for other assets like equities. Fortunately, the gains in the crypto market are more than making up for the high crypto exchange fees that traders have to contend with. In terms of comparing Coinbase Pro fees vs. Uniswap fees, well, it’s a bit complicated because the fees are calculated so differently.
Coinbase Pro uses a maker-taker pricing model to determine its trader fees. A maker is someone who provides liquidity and will generally pay lower fees, especially in the higher pricing tiers. A taker is someone who takes liquidity (i.e. someone who places an order that gets filled immediately). If part of the order gets filled immediately, a user would pay the taker fee on the filled portion and a maker fee should the remaining part of the order be filled at a later time.
Source: Coinbase Pro
As of April 2021, bitcoin is trading at around $56,000. If a user wanted to buy 1 bitcoin and was filled immediately, that user would be charged a taker fee of 0.50% (the tier is based on your level before the current trade is made). In this example, buying 1 bitcoin at $56,000 would result in a fee of $280, charged in the form of a price mark-up. For those of you looking to buy much smaller quantities of bitcoin, let’s say 0.1 BTC, the fee would be $28.
In addition to trading fees, account holders will also have deposit and withdrawal fees to deal with.
Source: Coinbase Pro
While ACH deposits and withdrawals are free (standard practice), they do take a lot longer to process than bank wires. So, for those of you who want to deposit money as fast as possible to take advantage of a trading opportunity, wires are normally going to be the best option. But, also keep in mind that your bank will most likely charge you a wire fee as well ($25-$40) so the fees can certainly add up when depositing money this way.
The fees to trade on Uniswap are calculated based on the gas fee, which in its simplest form, is a measure of how busy the Ethereum blockchain is at any given moment. Gas is priced in small fractions of Ethereum (ETH), more often referred to as GWEI. This gas is used to allocate resources so that decentralized apps such as smart contracts can execute as securely as possible while maintaining the principle of decentralization.
Although gas isn’t strictly a function of Ethereum’s price, there is somewhat of a correlation. If Ethereum is rising or falling, especially at the current value of almost $2,000 per ETH, the network is likely to be busier than normal as traders look to take advantage of profit-making opportunities or perhaps close out of some of their long positions.
One important aspect is that the size of a user’s order does not impact the gas fee. The gas fee is set by the miners strictly based on how busy the network is. What does that mean in practical terms? Well, it means that traders with large portfolios won’t be as affected as those with smaller balances. Over the past couple of months, gas fees have typically ranged anywhere from $30 to $150. Traders also have the option to adjust the speed of the transaction (slow, average, fast). A fast transaction will be significantly more expensive than a slower one but will also have a much better chance of filling right away so there is a cost/benefit ratio that each trader will need to consider. So, if a trader wanted to buy $100 worth of Ethereum, trading on Uniswap probably wouldn’t be the most prudent move. Using a centralized platform such as Coinbase Pro would certainly be the better option for that particular trader.
However, if someone wanted to purchase $100,000 worth of Ethereum, there is no question that Uniswap would be the best option as the trader would simply pay the gas fee of up to $150 (at the network’s busiest time). In this example, if the trader opted to execute on Coinbase Pro, they would potentially have to pay 0.50% for a taker order and 0.50% for a maker order (again, pricing tier at Coinbase Pro is based on your account history before the current trade, not after). That would be a $500 trading fee in either example. Now, that doesn’t necessarily mean that all large traders should execute at Uniswap. But, in terms of fees, it’s hard to argue against Uniswap for large traders.
Because Uniswap is not an on/off ramp for FIAT, there are no FIAT account deposit or withdrawal fees to worry about. Rather, the fees will be to transfer digital assets in and out of one’s private wallet. Again, those fees will be paid in ETH and are dependent on the gas fee at the time. However, they will be significantly lower than when executing trades.
Verdict: This is a toss-up as it completely depends what type of size a trader will be executing. For beginners and small traders, Coinbase Pro is the best option. For large traders and whales, Uniswap will allow them to save significant money on trading fees.
Coinbase Pro vs. Uniswap - Liquidity
Liquidity is a very important subject for a lot of crypto traders and happens to be one of the biggest differences between Coinbase Pro and Uniswap.
As of April 2021, Coinbase Pro supports 50 cryptocurrencies and more than 150 trading pairs. Some of the most popular pairs include Bitcoin (BTC/USD, BTC/EUR, BTC/GBP, BTC/USDC), Ethereum (ETH/USD, ETH/BTC, ETH/EUR, ETH/USDC), and other coins such as Filecoin (FIL), Stellar (XLM), and Litecoin (LTC). The latest information can be found in sites such as CoinGecko and CoinMarketCap.
Whereas Coinbase Pro generally lists the most popular crypto projects across the entire space, Uniswap is compatible with ERC-20 coins. Although some of the largest coins like ETH, LINK, USDT, and USDC are available on Uniswap, the DEX is more popular among traders looking to trade some of the smaller coins that often can generate huge returns within days or sometimes even hours. Smaller projects that are just starting and often can’t afford expensive listings at some of the bigger exchanges will turn to Uniswap since there is no listing fee. All they have to do is supply liquidity.
In terms of the absolute number of coins listed, Uniswap is hands down the winner. However, while CoinGecko shows that there are more than 1500 coins listed on Uniswap, the majority of them have very little volume. In addition, traders should be aware that bitcoin cannot be traded on Uniswap. However, WBTC (wrapped bitcoin) can be traded.. Although wrapped bitcoin is backed 1:1 by bitcoin through the token's minting process, traders won't be holding actual bitcoin when they own WBTC.
Verdict: This is a toss-up. While Uniswap has far more coins, many of them are fairly low volume and probably coins most casual traders have never heard of. Coinbase Pro, while having a far more limited selection, does tend to focus on the most popular coins which ensures that they are coins that many traders have at least heard of.
Coinbase Pro vs. Uniswap - Security
Security is a really important issue for almost everyone involved in the space. The crypto industry has come a long way since 2009 but not without having to endure several notable exchange hacks. While hacks are interesting to write about and always seem to make headlines, the fact is that exchanges, especially the largest ones, take security very seriously.
Coinbase is known as one of the most secure exchanges in the world. Since 98% of its crypto is stored in offline, encrypted wallets, the risk of theft is significantly reduced. In addition, Coinbase also uses several other security features such as two-factor authentication (2FA), SSL encrypted web traffic, and AES-256 encrypted wallets and private keys.
Another way that Coinbase tries to stay ahead of hackers and nefarious actors is with its bug bounty program.
Coinbase offers bounties of up to $50,000 for developers who identify software security vulnerabilities. Up to this point, 506 issues have been resolved for a total bounty payout of more than $515,000. Whereas not all exchanges are transparent about security threats, Coinbase regularly notifies its customers of attempted phishing attacks and to stay vigilant.
Despite the hack that occurred in April 2020, Uniswap is generally regarded as a very safe exchange to trade on. One really great aspect of Uniswap is that the exchange does not take custody of a user’s assets, unlike centralized exchange. Because Uniswap is a peer-to-peer exchange network, each trader in a transaction is simply swapping assets directly from their private wallet.
While Uniswap itself might not have significant security issues, there are risks that traders need to be aware of when interacting with the exchange. There are countless phishing attacks that occur when a user goes to the wrong site. Uniswap.org is the only legitimate site with which to trade on. If a user accidentally misspells Uniswap or goes to a different site with the name Uniswap, there is a chance that a malicious attack could take place.
Additionally, users need to take great care when using their own private wallet. For private wallet usage, traders should always use a strong password, don’t stay logged in longer than necessary, and never reveal their private seed or mnemonic phrase to anyone. If a hacker gets access to your seed, they will be able to access your wallet and drain your assets.
The freedom of decentralized finance is great but with freedom comes great responsibility. You are on your own when interacting in this space so always take great care when interacting with private wallets and decentralized exchanges such as Uniswap.
Verdict: It’s hard to go against Coinbase for security. While Uniswap is very safe, Coinbase has a near-flawless record and continues to take measures to improve security. Since Coinbase will be a public company one week from today, more scrutiny will inevitably follow the business which will keep it on its toes in terms of meeting regulatory approval. For those who value interacting in a decentralized manner, Uniswap is a great choice but the burden of responsibility is on each individual user to protect their assets and act in a safe and responsible manner.
Coinbase Pro vs. Uniswap - Customer Support
Unfortunately, customer support is an area that has fallen a bit short in the cryptocurrency industry. Exchanges simply don’t have the manpower to handle all the emails from existing and prospective account holders. That being said, in terms of customer support, there are some significant differences between Coinbase Pro and Uniswap.
One aspect of the crypto industry that takes a bit of getting used to is that there is nobody to call. Coinbase (and Coinbase Pro) do not offer live phone support. There is a help center on Coinbase’s website where customers can check to see if their particular issue has already been addressed. If not, customers will have to fill out a form to get assistance. In practical terms, especially given how busy exchanges are at the moment, customers should expect to wait at least 24 hours for a response, regardless of the urgency.
Unlike Coinbase Pro that at least has a support team that a customer can email, Uniswap does not. Uniswap does have a FAQ page as well as a Discord group (chat group similar to Telegram), where users can seek support but that is more of a community group where your peers can attempt to help you with your issue. There is no guarantee of a resolution or even that someone will respond. As mentioned earlier, there is are pros and cons to interacting in the DeFi space. There are a lot of benefits but at the end of the day each user is ultimately responsible for their own trading. So, take great care and proceed with caution.
Verdict: It’s hard to choose a winner when both customer support options are relatively poor. However, given that Coinbase at least has a support team that responds to customer emails, Coinbase is the winner by default. As the leader of the decentralized trading space, Uniswap should really consider getting better in this regard.
Coinbase Pro vs. Uniswap - The Final Word
There is a lot to like about both Coinbase Pro and Uniswap. Each platform was built with a specific audience in mind. Coinbase Pro caters to those who want to deposit money directly from their bank and begin trading in a safe, secure, regulated, and seamless manner. Uniswap is the preferred choice for those who value decentralization and being able to fully control their assets and trading environment.
For those just getting started in crypto, and even for those who have relatively smaller account sizes, Coinbase Pro is certainly the best option. For those traders who have a lot of experience and trade with a lot more size, it becomes more of a toss-up and probably boils down to personal preference.
At the end of the day, both Coinbase Pro and Uniswap will likely continue to grow over the coming years as the cryptocurrency market continues to mature. It will be interesting to check back in a few years and see how each has performed.