Describe Uniswap. Beginner’s Guide to the Primary Ethereum DEX

In financial applications like loans, insurance, and derivatives, the decentralized finance ( DeFi ) ecosystem uses non-custodial, autonomous financial products to replace centralized intermediaries.

Uniswap is an example of one of the main items in the DeFi habitat, the fragmented crypto exchange, or DEX.

DEXs aim to address many of the issues with unified exchanges, including the danger of mismanagement, subjective fees, and hacking. Decentralized markets do have their own issues, most notably the lack of liquidity, which means that there is no cash moving around an exchange that speeds up and speeds up trading.

Uniswap was designed to try and resolve decentralized markets ‘ cash concern, by allowing the swap to switch tokens without relying on buyers and sellers creating that cash.

We go over the workings of Uniswap and how it became one of the top fragmented markets built on Ethereum.

What is Uniswap, exactly?

Uniswap is an Ethereum protocol that allows customers to switch tokens without a mediator.

In other words, Uniswap uses a straightforward mathematics equation and cash lakes, or cash lakes, to do the same thing as most exchanges, which match buyers and sellers to determine rates and execute deals.

The DEX started out on the Ethereum mainnet, expanding to include favorite Ethereum layer-2 sites like Center, Arbitrum, and Optimism, as well as more than a dozen EVM-compatible cryptocurrencies.

How does Uniswap job?

By acting as an automated cash process or automated market maker ( AMM), Uniswap stands out from other major centralized markets like Bitcoin and Binance.

In other words, the system allows users to transfer in and out of tokens without using third parties to make trades, rather using token liquidity pools to do so.

For example, if you wanted to make an exchange for an cryptocurrency called Durian Token, you could start a new Uniswap smart commitment for Durian Token and create a cash share with—for case —$ 10 worth of Durian Token and$ 10 value of ETH.

A new consumer may then come and transfer in either direction with the liquidity pool created, subject to the liquidity.

In contrast, Uniswap uses a continuous equation: x * con = k to determine the price of a key, rather than connecting buyers and sellers.

In the formula, x and y represent the quantity of ETH and ERC-20 tokens accessible in a cash swimming and k is a constant value. To calculate the price of a certain token, this formula uses supply and demand as the ETH and ERC-20 tokens ‘ harmony. When one uses ETH to purchase Durian Token, the source of Durian Token decreases while the source of ETH rises, leading to a rise in the price of Durian Token. As a result, the supply of Citrus Token raises.

As a result, the price of currencies on Uniswap may just change if investments occur. Basically, Uniswap’s goal is to balance the value of cryptocurrencies and their exchanges based on the amount of money people want to spend and purchase them.

Uniswap V2 and V3

Though Uniswap launched back in November 2018, it wasn’t until a couple of years after that the process began to see major grip.

A significant update was made with the launch of Uniswap V2 in May 2020, allowing for immediate ERC-20 to ERC-20 key derivatives and removing Covered Ether ( WETH) where necessary. Additionally, Uniswap V2 added support for previously incompatible ERC-20 tokens like OmiseGo ( OMG) and Tether ( USDT), as well as a number of technical improvements that made it more user-friendly.

As cash mine and offer farming systems substantially increased in popularity in 2020, Uniswap saw a corresponding boom in interest.

This, in addition to the 0.3 % exchange fees that were distributed to liquidity providers and the platform’s popularity as a launchpad for popular DeFi project tokens, helped Uniswap advance in the rankings to become one of the top DeFi platforms by total value locked ( TVL), a measure of the total value of crypto assets that were locked up in the platform.

In May 2021, Uniswap V3 was released, adding a number of new features. These additions included focus cash, which enables profitability providers to manage cash within a tailor-made price range, adding greater flexibility to the roles of liquidity providing.

Additionally, V3 added additional fee tiers for cheaper oracles and LPs to keep the DEX’s price information current.

Uniswap V4 and hooks

After several years of V3, Uniswap underwent a substantial upgrade In January 2025 with the unveiling of Uniswap V4.

With the introduction of “hooks,” the most recent version of the Uniswap Protocol focuses on lowering the cost of liquidity pools as well as allowing for new development opportunities.

Hooks are modular plugins that give developers more customization options, enabling them to change fees, liquidity pools, and other details.

For example, the introduction of a dynamic fee hook allows for fee adjustments based on market conditions, while an auto-rebalancing hook can automatically rebalance a liquidity position for optimization.

Other Uniswap initiatives

The protocol has overseen a number of other significant initiatives, including the creation of&nbsp, its own blockchain, and wallet products, in addition to Uniswap V4.

Unichain

Shortly after the launch of Uniswap V4, in February 2025 Uniswap rolled out the mainnet for its own blockchain, Unichain—an Ethereum layer-2 network built to scale DeFi transactions.

We’re here to make DeFi faster, less expensive, and more decentralized, which is why we created Unichain as a permissionless service from day one, according to Uniswap Labs founder Hayden Adams.

Developers and applications from other networks can easily deploy on Unichain, resulting in a more robust ecosystem of applications, despite the chain’s focus on cross-chain compatibility.

For example, the Survivor-esque experience Crypto: The Game, which was acquired by Uniswap Labs in June 2024, launched its latest season’s NFT access passes on Unichain alongside more than 80 other applications.

Uniswap wallet and mobile app

The mobile application and self-custodial wallet by Uniswap were released on the Apple App Store in April 2023, enabling iPhone users to use DeFi products on the go. In October that year, the protocol’s mobile application also made its way into Android’s Google Play Store.

In addition to enabling new crypto users to purchase crypto via Venmo through a MoonPay integration and offramp from crypto to fiat in the same way, the application has been updated with a number of features.

UNI token launch and airdrop

In September 2020, Uniswap launched UNI, the network’s governance token, airdropping 400 UNI tokens—nearly$ 18, 000 worth at the token’s peak price—to every wallet address that had interacted with the Uniswap protocol before September 1.

The airdrop represented an influx of$ 6.43 billion worth of UNI tokens at the top, making it the largest ever crypto airdrop, despite the token having fallen 86 % from its peak as of April 2025, according to CoinGecko data.

Holders of a voting interest in the protocol’s operation have immediate ownership of Uniswap governance, the UNI community treasury, the protocol fee switch, and the Uniswap Default List ( tokens ) as governance tokens. uniswap. tokens for SOCKS liquidity, such as.

SEC and Uniswap

Like a number of other crypto projects, Uniswap came under scrutiny from the U. S. Securities and Exchange Commission, with the regulator reportedly opening a probe into Uniswap Labs in 2021.

The SEC sent a Wells notice to Uniswap Labs in April 2024 informing the company that it would be subject to a lawsuit stemming from securities charges.

However, Uniswap Labs revealed in February 2025 that the regulator had closed its investigation into the business without making any charges in one of the many crypto investigations that the SEC shuttered following Donald Trump’s inauguration.

The firm’s COO Mary-Catherine Lader revealed that Uniswap Labs had spent “tens of millions” in its legal battle with the regulator, while Uniswap Labs CEO Hayden Adams accused the SEC of having pursued its case “despite having no clear legal basis, as part of a strategy of arbitrary enforcement to try to force DeFi into a regulatory framework that doesn’t fit—all while refusing to provide clear rules or a path to compliance”.

The outlook for Uniswap

The Uniswap Foundation was optimistic about the protocol’s potential as a “foundational infrastructure for digital value transfer” by the year 2025.

” The Uniswap community is entering 2025 with the momentum of three positive catalysts: a more collaborative regulatory environment, the launch of Uniswap v4, and the debut of Unichain”, wrote the Foundation’s Executive Director Devin Walsh.

The community backed that optimism by voting overwhelmingly in favor of governance proposals in March 2025, which set aside approximately$ 77 million to further aid the growth of the protocol, with a particular emphasis on accelerating the success of its V4 release and Unichain rollout.