The decentralized finance (DeFi) ecosystem makes use of non-custodial, autonomous monetary merchandise to exchange centralized middlemen in monetary purposes comparable to loans, insurance coverage, and derivatives.
Uniswap is an instance of one of many core merchandise within the DeFi ecosystem, the decentralized crypto change, or DEX.
DEXs purpose to unravel most of the issues of centralized exchanges, together with the danger of hacking, mismanagement, and arbitrary charges. Nonetheless, decentralized exchanges have their very own issues, primarily lack of liquidity—which suggests an absence of cash sloshing round an change that makes buying and selling quicker and extra environment friendly.
Uniswap was designed to attempt to resolve decentralized exchanges’ liquidity downside, by permitting the change to swap tokens with out counting on patrons and sellers creating that liquidity.
Beneath we discover how Uniswap works—and the way it grew to become one of many main decentralized exchanges constructed on Ethereum.
What’s Uniswap?
Uniswap is an Ethereum protocol that permits customers to swap tokens and not using a intermediary.
In different phrases, not like most exchanges, which match patrons and sellers to find out costs and execute trades, Uniswap makes use of a basic math equation and swimming pools of tokens referred to as liquidity swimming pools to do the identical job.
The DEX began on the Ethereum mainnet, however has since branched its choices to greater than a dozen EVM-compatible blockchains together with Avalanche and BNB Chain, plus in style Ethereum layer-2 networks like Base, Arbitrum, and Optimism.
How does Uniswap work?
Uniswap differentiates itself from main centralized exchanges like Coinbase and Binance by appearing as an automatic liquidity protocol or automated market maker (AMM).
In different phrases, the platform permits customers to swap out and in of tokens with out counting on third events, as a substitute utilizing liquidity swimming pools of tokens to make trades.
For instance, should you needed to make an change for an altcoin referred to as Durian Token, you would launch a brand new Uniswap sensible contract for Durian Token and create a liquidity pool with—for instance—$10 price of Durian Token and $10 price of ETH.
With this liquidity pool created, a brand new consumer may then come and swap in both route topic to the liquidity.
The place Uniswap differs is that as a substitute of connecting patrons and sellers to find out the value of a token, Uniswap makes use of a continuing equation: x * y = okay.
Within the equation, x and y characterize the amount of ETH and ERC-20 tokens obtainable in a liquidity pool and okay is a continuing worth. This equation makes use of the steadiness between the ETH and ERC-20 tokens—and provide and demand—to find out the value of a selected token. At any time when somebody buys Durian Token with ETH, the availability of Durian Token decreases whereas the availability of ETH will increase; as such, the value of Durian Token goes up.
Consequently, the value of tokens on Uniswap can solely change if trades happen. Primarily, what Uniswap is doing is balancing out the worth of tokens, and the swapping of them primarily based on how a lot individuals need to purchase and promote them.
Uniswap V2 and V3
Although Uniswap launched again in November 2018, it wasn’t till a few years later that the protocol started to see important traction.
The discharge of Uniswap V2 in Might 2020 introduced a serious improve, permitting for direct ERC-20 to ERC-20 token swaps, chopping Wrapped Ether (WETH) out of the equation the place doable. Uniswap V2 additionally added help for beforehand incompatible ERC-20 tokens like OmiseGo (OMG) and Tether (USDT), and added a bunch of technical enhancements that made it extra fascinating to make use of.
As liquidity mining and yield farming platforms dramatically elevated in reputation in 2020, Uniswap noticed a corresponding surge in curiosity.
This, together with the 0.3% change charges distributed to liquidity suppliers—and the platform’s reputation as a launchpad for in style DeFi undertaking tokens—helped Uniswap rise the ranks to develop into one of many main DeFi platforms by whole worth locked (TVL), a measure of the overall worth of crypto belongings locked up within the platform.
Uniswap V3 launched in Might 2021, including a lot of new options. These additions included concentrated liquidity, which permits liquidity suppliers to allocate liquidity inside a customized value vary, including better flexibility to the roles of liquidity offering.
V3 additionally added extra payment tiers for LPs and cheaper oracles to make sure the DEX’s value knowledge is consistently updated.
Uniswap V4 and hooks
After a number of years of V3, Uniswap underwent a considerable improve In January 2025 with the disclosing of Uniswap V4.
The most recent model of the Uniswap Protocol focuses on making liquidity swimming pools cheaper, in addition to unlocking new growth alternatives with the introduction of “hooks.”
Hooks are modular plugins that supply builders deeper customization choices, enabling them to customise liquidity swimming pools, charges, and extra.
For instance, the introduction of a dynamic payment hook permits for payment changes primarily based on market circumstances, whereas an auto-rebalancing hook can robotically rebalance a liquidity place for optimization.
Different Uniswap initiatives
Along with Uniswap V4, the protocol has overseen a lot of different main initiatives, together with the event of its personal blockchain and pockets merchandise.
Unichain
Shortly after the launch of Uniswap V4, in February 2025 Uniswap rolled out the mainnet for its personal blockchain, Unichain—an Ethereum layer-2 community constructed to scale DeFi transactions.
“We’re right here to make DeFi quicker, cheaper, extra decentralized, which is why we launched Unichain to be permissionless from day one,” mentioned Uniswap Labs founder Hayden Adams of the launch.
Though the chain is geared in direction of DeFi purposes, due to its deal with cross-chain compatibility, builders and purposes from different networks can simply deploy on Unichain as nicely, permitting for a extra sturdy ecosystem of purposes.
For instance, the Survivor-esque expertise Crypto: The Recreation, which was acquired by Uniswap Labs in June 2024, launched its newest season’s NFT entry passes on Unichain alongside greater than 80 different purposes.
Uniswap cell app and pockets
In April 2023, Uniswap’s cell software and self-custodial pockets launched on the Apple App Retailer, enabling iPhone customers to take advantage of its DeFi merchandise on the go. In October that 12 months, the protocol’s cell software additionally made its means into Android’s Google Play Retailer.
Since then, the appliance has been upgraded with a handful of options to enhance performance for onboarding and offboarding new crypto customers, comparable to permitting them to buy crypto through Venmo by way of a MoonPay integration and offramp from crypto to fiat in the identical method.
UNI token launch and airdrop
In September 2020, Uniswap launched UNI, the community’s governance token, airdropping 400 UNI tokens—practically $18,000 price on the token’s peak value—to each pockets tackle that had interacted with the Uniswap protocol earlier than September 1.
Although the token has fallen 86% from its peak as of April 2025, in response to CoinGecko knowledge, the airdrop represented an inflow of $6.43 billion price of UNI tokens on the prime, making it the biggest ever crypto airdrop.
As a governance token, UNI entitles holders to a vote in how the protocol is run, affording them rapid possession of Uniswap governance, the UNI neighborhood treasury, the protocol payment swap, the Uniswap Default Checklist (tokens.uniswap.eth) and SOCKS liquidity tokens.
Uniswap and the SEC
Like a lot of different crypto initiatives, Uniswap got here underneath scrutiny from the U.S. Securities and Trade Fee, with the regulator reportedly opening a probe into Uniswap Labs in 2021.
In April 2024, the SEC despatched a Wells discover to Uniswap Labs, notifying the agency that it might face a lawsuit over securities costs.
Nonetheless, in February 2025, Uniswap Labs revealed that the regulator had closed its investigation into the agency with out submitting costs—one in all a lot of crypto investigations shuttered by the SEC following the inauguration of Donald Trump.
The agency’s COO Mary-Catherine Lader revealed that Uniswap Labs had spent “tens of hundreds of thousands” in its authorized battle with the regulator, whereas Uniswap Labs CEO Hayden Adams accused the SEC of getting pursued its case “regardless of having no clear authorized foundation, as a part of a method of arbitrary enforcement to attempt to pressure DeFi right into a regulatory framework that doesn’t match—all whereas refusing to offer clear guidelines or a path to compliance.”
The way forward for Uniswap
Coming into 2025, the Uniswap Basis was optimistic in regards to the protocol’s potential to develop into “foundational infrastructure for digital worth switch.”
“The Uniswap neighborhood is coming into 2025 with the momentum of three constructive catalysts: a extra collaborative regulatory surroundings, the launch of Uniswap v4, and the debut of Unichain,” wrote the Basis’s Government Director Devin Walsh.
The neighborhood stood behind that optimism, voting overwhelmingly in favor of governance proposals in March 2025 which earmarked round $177 million to additional help the expansion of the protocol, with a main deal with propelling the success of its V4 launch and Unichain rollout.
Editor’s observe: This story was initially revealed on June 17, 2021 and final up to date with new particulars on April 1, 2025.
Further writing by Ki Chong Tran and Daniel Phillips
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