Uniswap: A Comprehensive Guide to the Leading Decentralized Exchange (DEX)

Uniswap is one of the most used decentralized applications (dApp) among crypto traders and it has been leading the industry since years. This trading platform has played a key role in the development and growth of the decentralized finance (DeFi) ecosystem.

Uniswap is a decentralized exchange (DEX) that has played a significant role in the development and growth of the decentralized finance (DeFi) ecosystem. It enables trading of crypto assets without going through centralized exchanges, which require users to give personal information and complete KYC. Uniswap allows users to trade one cryptocurrency in exchange for another in a secure, quick, and decentralized manner.

On Uniswap, trading is also called swapping as one asset is essentially swapped with another asset. While centralized crypto exchanges like Binance or Coinbase use orderbook to match users’ trades, Uniswap employs a novel mechanism of Automated Market Makers (AMM). This method uses liquidity pools for executing orders where two or more assets are locked within a smart contact. When a trader places an order (for example swapping 1 ETH into USDT), the AMM will trade 1 ETH for USDT at standard market rate from the ETH-USDT liquidity pool. These liquidity pools constantly function to update the price of assets everytime a trade is executed. For the liquidity pool, when ETH is sold, the amount of USDT will increase hence decreasing ETH price and if ETH is purchased, USDT amount will decrease, essentially setting a higher price for ETH.

Launched in 2018, Uniswap quickly became popular among crypto traders and it did not require to go through KYC or any mandatory sign-ups processes. Users found it easier to trade in Uniswap than crypto exchanges like Coinbase or Binance at the time. It was developed by Hayden Adams and he is currently CEO of the Uniswap Labs, the development arm looking after Uniswap Protocol.

Here is the timeline of Uniswap, from its launch in 2018 to February 2024:

- 2018: Launch of Uniswap

- 2020: Uniswap V2 & UNI Token Launch

- 2021: Uniswap V3 Launch

- 2023: Uniswap V4 Announcement

- 2024: Unichain Introduction

- 2025: Uniswap V4 and Unichain Mainnet Launch

UNI is the native token to Uniswap that is used for various tasks within the protocol’s ecosystem. It was launched in 2020 as an ERC-20 token on Ethereum blockchain. Initially, the token was rewarded to liquidity providers but it is now available to purchase across multiple markets. UNI token now also plays a crucial role in Uniswap governance which helps in introducing new developments and advancements to the platform.

Unichain is the native blockchain for Uniswap. It is a layer 2 network, solely focusing on improving functionalities of the Uniswap decentralized exchange platform. Unichain mainnet went live on February 11 after one year of continuous development. One of the most enticing features of Unichain is its 1-sec block time and 95% reduced gas fee. With its efficient architecture, Unichain aims to drive mass adoption by making decentralized trading more accessible and cost-effective for users worldwide.

Uniswap v4 is the newly launched iteration by the Uniswap protocol that introduces several enhanced features and functionalities, compared to v3. As one of the key developments, this version introduces “hooks” which are customizable smart contracts functions. It essentially helps in employing advanced trading strategies, dynamic fees and onchain limit orders. This version also brings major changes to liquidity pools with it reducing fees by 92% for creating new pools. Another significant functionality Uniswap v4 brings is “singleton” pools architecture. This concept combines all liquidity pools in a single smart contract and makes token swap more affordable. With all these new functions, v4 not only upgrades Uniswap’s capabilities but also enhances the overall user experience (UX) within the DeFi ecosystem.

Uniswap is used for various purposes besides just swapping crypto assets, such as yield farming, launching liquidity pools, launching initial market for tokens, etc. To swap crypto assets on Uniswap, one must have a crypto wallet and funds in the respective blockchain. Followings are the steps:

- Open Uniswap dApp and click on “Trade” and opt for “Swap.”

- Click on the ‘Connect’ button on the top right corner to connect your wallet.

- Choose which asset you want to swap from your wallet. To swap ETH in USDT, select ETH in the first input box and USDT in second.

- Enter the amount of ETH you want to swap to USDT and make sure you have enough ETH in balance to cover gas fees.

- Now verify all the details and click on the ‘Swap’ button.

- Now it will automatically lead to the Metamask wallet from where you will need to confirm and complete the transaction.

Once one, your ETH will be swapped into USDT and it can be seen in Metamask wallet.

Adding liquidity in Uniswap is quite a complex process but it’s not as hard as newcomers find. All you need is funds