Uniswap Unboxed: Explaining What Uniswap Is in Crypto 

Peer-to-peer (P2P) trading is one of the hottest segments of decentralized finance (DeFi), and Uniswap remains one of the leading decentralized applications (dApps) offering spot-swapping services to crypto traders. Uniswap’s decentralized crypto exchange (DEX) is so hot it often spikes to levels rivaling centralized crypto exchanges (CEXs) and major markets like the New York Stock Exchange. 

With such high trading activity in the crypto community, Uniswap has become one of DeFi’s defining dApps and one of the most influential protocols in web3 and a significant player in the crypto ecosystem. 

Uniswap’s history

After losing his mechanical engineer position at Siemens, Hayden Adams turned his attention to the cryptocurrency sector and the possibilities of the Ethereum blockchain. Specifically, Adams sought to create a decentralized exchange based on an idea Ethereum’s founder Vitalik Buterin proposed in a 2016 Reddit post. After years of experimentation and development, the first version of this DEX—Uniswap—went live in 2018, allowing crypto traders P2P swaps between Ethereum (ETH) and other ERC-20 tokens. 

Uniswap Labs released the second version of Uniswap (aka Uniswap V2) in 2020, which enabled direct swaps between ERC-20 tokens and decentralized oracle price feeds. The same year, Uniswap released its UNI cryptocurrency and airdropped this token to traders who previously interacted with the protocol. 

In 2021, Uniswap V3 introduced “concentrated liquidity” to the DEX, allowing liquidity providers to limit the price ranges they’re comfortable releasing digital assets for P2P swaps. This enhanced control is designed to minimize the impact of impermanent loss, in which liquidity providers lose potential gains due to volatile shifts in their cryptocurrency’s prices and adjustments in their pool’s composition. 

Uniswap continues introducing new products and services to expand its role in the DeFi ecosystem, including a mobile wallet app for Android and iOS devices. Aside from Ethereum, Uniswap now integrates with many other blockchains, including Arbitrum (ARB), Polygon (MATIC), and Optimism (OP). 

How does Uniswap work?

Uniswap uses an “automated market maker” (AMM) model to fulfill crypto transfers without relying on a centralized intermediary or detailed order books. In the AMM model, preprogrammed “smart contract” commands automatically handle all trade requests, and users link their self-custodial crypto wallets to exchange virtual assets. 

To attract crypto funds to its protocol, Uniswap lets anyone contribute to smart contract-controlled “liquidity pools,” each containing a 50/50 split of a cryptocurrency trading pair like ETH and USDC. Traders who deposit crypto into a liquidity pool make their funds available for P2P swaps on the Uniswap protocol. As an incentive for contributing to a liquidity pool, Uniswap rewards liquidity providers with a percentage of the total trading fees for their crypto pair. 

Uniswap FAQs

What is the UNI token?

Launched in 2020, UNI is Uniswap’s native cryptocurrency built using Ethereum’s ERC-20 standard. In addition to rewarding liquidity providers and traders for using Uniswap’s services, the UNI token plays an essential role in Uniswap’s decentralized governance portal, giving holders the right to vote on upcoming proposals. 

As an actively traded DeFi token, it’s easy to find the Uniswap coin price by searching “Uniswap price” on crypto price aggregators or exchanges and reviewing the latest Uniswap price chart. 

What makes Uniswap special? 

Uniswap was the first DEX to incorporate an AMM model into its infrastructure, giving users the opportunity to participate in market-making and earn rewards for providing liquidity. For traders, Uniswap provides an intermediary-free environment to swap spot cryptocurrencies on a growing list of blockchains, offering a convenient, censorship-free way to take ownership of their virtual currencies. The success of Uniswap also proved that blockchain-based, P2P crypto exchanges could rival even the most competitive CEXs.

How do traders use Uniswap? 

After launching Uniswap’s dApp on its official website, traders choose the blockchain they want to integrate with (e.g., Ethereum, Optimism, or Arbitrum) and connect a compatible self-custodial wallet like MetaMask. After successfully linking their crypto wallet, traders can swap virtual assets or deposit funds into a liquidity pool to earn trading fees. 

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