Uniswap

Uniswap is a decentralized exchange protocol built on the Ethereum blockchain that uses an automated market maker (AMM) model instead of traditional order books. Launched in 2018 by Hayden Adams, it allows users to swap ERC‑20 tokens directly through smart contracts, providing liquidity pools where participants deposit token pairs and receive liquidity provider tokens in return.

The protocol has evolved through several major releases. Uniswap V1 introduced the basic pool mechanism; V2 added support for flash swaps, fee-on-transfer tokens, and Ethereum Layer 2 integration. Uniswap V3, released in 2021, brought concentrated liquidity, allowing providers to set custom price ranges, and introduced multiple fee tiers to accommodate different volatility profiles. Each iteration added enhancements for capital efficiency and reduced gas costs.

Liquidity providers earn a portion of the swap fees proportional to their share of the pool. While this incentivizes participation, it also exposes providers to impermanent loss when token prices diverge. The protocol mitigates risk through its design but remains a factor for users considering liquidity provision.

Governance of Uniswap is conducted via the UNI token, first distributed in an airdrop. UNI holders vote on protocol upgrades, fee structures, and treasury allocations. Since its inception, Uniswap has become a cornerstone of the DeFi ecosystem, enabling composability with lending platforms, yield aggregators, and other financial primitives. Recent developments include Layer 2 deployments on Optimism and integration with cross‑chain bridges, expanding reach beyond Ethereum and improving transaction throughput.