An independent explainer
What is Uniswap?
Uniswap is a decentralized exchange. It is a set of smart contracts that lets anyone swap crypto tokens straight from their own wallet. There is no sign-up, no order book, and no company holding your funds.
- Type
- Decentralized exchange (DEX)
- Launched
- November 2018
- Created by
- Hayden Adams
- Model
- Automated market maker
- Governance token
- UNI
- Custody
- You keep your keys
01 · How it works
An exchange with no one behind the counter.
A traditional exchange matches buyers with sellers. Uniswap uses an automated market maker (AMM) instead: you trade against a shared pot of tokens, and a simple formula sets the price.
- 01
People pool tokens together
Liquidity providers deposit two tokens, say ETH and USDC, into a shared smart contract called a pool. No company holds the funds. The contract does.
- 02
A formula sets the price
There is no order book. The pool prices trades from the ratio of its two reserves. The more of one token you take out, the more expensive the next unit gets.
- 03
Traders swap against the pool
You send one token in and get the other out, all in a single transaction from your own wallet. Nobody has to be on the other side of your trade at that moment.
- 04
Fees go to liquidity providers
Each swap pays a small fee, often 0.3% but it depends on the pool. The fee stays in the pool and is shared among the people who supplied the liquidity.
02 · Try it
See the formula move the price.
This sandbox runs the same constant-product math as Uniswap v2. Nothing connects to a wallet or a blockchain. It is only here to show what happens inside a pool when you trade.
Pool · ETH / USDC
You receive about
29,614.74 USDC
- Price before
- $3,000.00
- Your average price
- $2,961.47
- Fee to LPs
- 0.0300 ETH
- Price impact
- 1.28%
The curve is every combination of reserves where ETH × USDC = k. When you sell ETH, the pool slides down the curve. The bigger your trade compared to the pool, the further it slides and the worse your average price. Try a deep pool to see the price impact shrink.
A simplified v2-style model for learning. Real pools, routes and prices differ.
03 · History
Four versions, one idea.
Each version of the protocol is a separate, open-source set of contracts. Older versions keep running on-chain after newer ones launch.
- v12018
The proof of concept
Every pool paired a token with ETH. It showed that a simple formula, x × y = k, could run a working exchange entirely on-chain.
- v22020
Any token to any token
Pools could pair any two ERC-20 tokens directly. v2 also added built-in price oracles and flash swaps, and it helped kick off the "DeFi summer."
- v32021
Concentrated liquidity
LPs could focus their capital on a chosen price range, which made it far more efficient. Pools got several fee tiers, and positions became NFTs.
- v42025
Hooks and a single contract
All pools live in one "singleton" contract, which makes multi-hop swaps cheaper. "Hooks" let developers plug custom logic into a pool, such as dynamic fees or limit orders.
04 · Vocabulary
Words you’ll run into.
- Liquidity pool
- A smart contract that holds reserves of two tokens. Traders swap against it, and anyone can add liquidity to it.
- Liquidity provider (LP)
- Someone who deposits tokens into a pool. In return they earn a share of the trading fees in proportion to their stake.
- Slippage
- The gap between the price you expect and the price you get. Big trades and small pools mean more slippage. Your slippage tolerance caps how much you will accept.
- Price impact
- How much your own trade moves the pool price. A trade that is large compared to the pool has a high price impact.
- Impermanent loss
- When token prices move, an LP can end up worth less than if they had just held the tokens. Fees may or may not make up the difference.
- Gas
- The network fee paid to process your transaction. It goes to the blockchain, not to Uniswap, and it changes with network demand.
- Router
- The contract or app logic that finds the best path for a trade, sometimes across several pools, to get you a better price.
- Hooks
- Uniswap v4 plugins that run custom code at set points in a pool’s life, such as before or after a swap.
05 · The UNI token
Who decides how Uniswap changes?
UNI is the protocol’s governance token. It launched in September 2020, and every address that had used Uniswap before then received a free airdrop of 400 UNI.
UNI holders, or the delegates they choose, vote on proposals that shape the protocol. These cover things like whether protocol fees are switched on, how the community treasury is spent, and which new blockchains Uniswap is deployed on.
Ideas are debated on the governance forum and then voted on on-chain. Changes that pass are carried out by smart contracts, not by any single company.
How a proposal travels
- 1
Discuss
An idea is posted on the governance forum for feedback.
- 2
Temperature check
An off-chain poll shows whether there is support.
- 3
On-chain vote
Delegates vote with their UNI weight over a fixed period.
- 4
Execute
If the vote passes, the change runs after a timelock.
06 · Stay safe
Self-custody means you are your own bank.
Uniswap can’t freeze, reverse or recover a transaction. That freedom comes with responsibility. Keep these habits.
Check the URL every time
Scammers copy the Uniswap interface on lookalike domains. Bookmark the official app and use only that bookmark.
Never share your seed phrase
Uniswap will never ask for your recovery phrase. Anyone who asks for it, in a DM, a "support" chat or a pop-up, is trying to rob you.
Verify the token contract
Anyone can create a token named after a popular asset. Check the contract address against a trusted source before you buy.
Mind your approvals
Approving a token lets a contract spend it. Approve only what you need, and revoke old approvals you no longer use.
Set a sensible slippage
A very high slippage tolerance can expose you to front-running. Keep it low unless the token really needs more.
Understand the risks
Smart contracts can have bugs, tokens can go to zero, and transactions can’t be undone. Only use money you can afford to lose.
07 · FAQ
Common questions.
Ready to go further?
Use the official sources below. Type them yourself or bookmark them, and be wary of links from ads, DMs or search results.