Guide to Uniswap: Understanding & Using Largest DEX in DeFi

Uniswap is 1 of the astir utilized decentralized applications (dApp) among crypto traders and it has been starring the manufacture since years. This trading level has played a cardinal relation successful the improvement and maturation of the decentralized concern (DeFi) ecosystem. 

As of latest data, Uniswap is generating a monthly trading measurement of implicit $2.88 trillion and it has a full worth locked (TVL) of $3.24 billion, which erstwhile topped to $10 billion. This puts it among the largest dApps successful crypto space. While its precocious making a question of headlines, let’s person a further dive into it to find retired however it works, its indispensable parts and however it is used;

What is Uniswap 

Uniswap is simply a decentralized speech (DEX) that enables trading of crypto assets without going to exchanges, wherever users are required to springiness idiosyncratic accusation and implicit KYC successful bid to beryllium capable to trade. It allows to commercialized 1 cryptocurrency successful speech for different successful a secure, speedy and decentralized manner. On uniswap, trading is besides called swapping arsenic 1 plus is fundamentally swapped with different asset. 

How it works

While centralized crypto exchanges similar Binance oregon Coinbase usage orderbook to lucifer users’ trades, Uniswap employs a caller mechanics of Automated Market Makers (AMM). This method uses liquidity pools for executing orders wherever 2 oregon much assets are locked wrong a astute contact. When a trader places an bid (for illustration swapping 1 ETH into USDT), the AMM volition commercialized 1 ETH for USDT astatine modular marketplace complaint from the ETH-USDT liquidity pool. 

These liquidity pools perpetually relation to update the terms of assets everytime a commercialized is executed. For the liquidity pool, erstwhile ETH is sold, the magnitude of USDT volition summation hence decreasing ETH terms and if ETH is purchased, USDT magnitude volition decrease, fundamentally mounting a higher terms for ETH. 

Launch & History

Launched successful 2018, Uniswap rapidly became fashionable among crypto traders and it did not necessitate to spell done KYC oregon immoderate mandatory sign-ups processes. Users recovered it easier to commercialized successful Uniswap than crypto exchanges similar Coinbase oregon Binance astatine the time. It was developed by Hayden Adams and helium is presently CEO of the Uniswap Labs, the improvement limb looking aft Uniswap Protocol. 

Uniswap Timeline 

Here is the timeline of Uniswap, from its motorboat successful 2018 to February 2024;

2018: Launch of Uniswap

• November 2018: Uniswap V1 is launched connected Ethereum with introducing Automated Market Maker (AMM) model, allowing decentralized token swaps without relying connected bid books.

2020: Uniswap V2 & UNI Token Launch

• May 2020: Uniswap V2 is released, featuring nonstop ERC-20 to ERC-20 token swaps, improved terms oracles and flash swaps functionality. 
• September 2020: Launch of UNI token, the autochthonal token of Uniswap protocol. 

2021: Uniswap V3 Launch

• May 2021: Uniswap V3 launches with a concentrated liquidity mechanics wherever liquidity providers (LPs) tin allocate funds wrong circumstantial terms ranges. It besides introduced aggregate interest tiers, offering antithetic fees based connected volatility. Another important improvement was NFT-Based LP Positions, representing unsocial liquidity positions arsenic NFTs.
• July 2021: Expansion to Layer 2 solutions Optimism and Arbitrum, reducing transaction costs and improving speed.

2023: Uniswap V4 Announcement

• June 202: Announcement of Uniswap V4, proposing “Hooks” model that let customized AMM logic successful liquidity pools. Also introduced Singleton Contract, which aims to trim state costs. 

2024: Unichain Introduction

• October 2024: Uniswap Labs unveils Unichain, an Ethereum-based Layer 2 blockchain built connected the Optimism Superchain, designed to connection faster transactions and improved cross-chain liquidity. 

2025: Uniswap V4 and Unichain Mainnet Launch

• January 2025: v4 Launch: Uniswap V4 goes unrecorded with Hooks and Significant Gas Cost Reductions, making excavation instauration 99.99% cheaper and reducing costs for multi-hop swaps.
• February 2025: Unichain Mainnet launch: Near-instant transaction finality with artifact times optimized to 200-250 milliseconds. Enhanced Cross-Chain Interoperability: Facilitating seamless liquidity crossed aggregate chains. 

Key Developments from Uniswap 

UNI Token

UNI is the autochthonal token to Uniswap that is utilized for assorted tasks wrong the protocol’s ecosystem. It was launched successful 2020 arsenic an ERC-20 token connected Ethereum blockchain. Initially, the token was rewarded to liquidity providers but it is present disposable to acquisition crossed aggregate markets. UNI token present besides plays a important relation successful Uniswap governance which helps successful introducing caller developments and advancements to the platform. 

Unichain 

Unichain is the autochthonal blockchain for Uniswap. It is simply a furniture 2 network, solely focusing connected improving functionalities of the Uniswap decentralized speech platform. Unichain mainnet went unrecorded connected February 11 aft 1 twelvemonth of continuous development. 

One of the astir enticing features of Unichain is its 1-sec artifact clip and 95% reduced state fee. With its businesslike architecture, Unichain aims to thrust wide adoption by making decentralized trading much accessible and cost-effective for users worldwide.

Uniswap v4

Uniswap v4 is the recently launched iteration by the Uniswap protocol that introduces respective enhanced features and functionalities, compared to v3. As 1 of the cardinal developments, this mentation introduces “hooks” which are customizable astute contracts functions. It fundamentally helps successful employing precocious trading strategies, dynamic fees and onchain bounds orders. This mentation besides brings large changes to liquidity pools with it reducing fees by 92% for creating caller pools. 

Another important functionality Uniswap v4 brings is “singleton” pools architecture. This conception combines each liquidity pools successful a azygous astute declaration and makes token swap much affordable. With each these caller functions, v4 not lone upgrades Uniswap’s capabilities but besides enhances the wide idiosyncratic acquisition (UX) wrong the DeFi ecosystem. 

Difference: v3 Vs v4

Uniswap v3Uniswap v4

Liquidity Management	Uses a concentrated liquidity mechanics which allows liquidity providers to specify terms ranges.	Uses optimized concentrated liquidity mechanism, combining with singleton exemplary to trim gas.
Core Infrastructure	Each liquidity excavation has a abstracted astute contract.	All liquidity pools relation nether a communal astute contract.
Customization	No built-in customization for liquidity pools.	Introduction of “hooks” enables customization of liquidity pools.
Transactions	Each transaction requires aggregate calls, fundamentally expanding state consumption.	Flash Accounting diagnostic bundles each outer transactions and settles them astatine the end, reducing state consumption.
L2 Support	Supports Layer 2 networks with constricted optimization.	Fully optimizable adjacent connected Layer 2 networks.

How to usage Uniswap

Uniswap is utilized for assorted purposes too conscionable swapping crypto assets, specified arsenic output farming, launching liquidity pools, launching archetypal marketplace for tokens, etc.

How to swap tokens connected Uniswap (ETH to USDT)

To swap crypto assets connected Uniswap, 1 indispensable person a crypto wallet and funds successful the respective blockchain. Followings are the steps: 

Step 1: Open Uniswap dApp 

Go to Uniswap dApp and click connected “Trade” and opt for “Swap.” 

Step 2: Connect Your Wallet

Click connected the ‘Connect’ fastener connected the apical close country to link your wallet. 

Step 3: Choose Assets

Choose which plus you privation to swap from your wallet. To swap ETH successful USDT, prime ETH successful the archetypal input container and USDT successful second. 

Step 4: Enter Amount

Enter the magnitude of ETH you privation to swap to USDT and marque definite you person capable ETH successful equilibrium to screen state fees.

Step 5: Verify Details and Swap

Now verify each the details and click connected the ‘Swap’ button. 

Step 6: Confirm Transaction

Now it volition automatically pb to the Metamask wallet from wherever you volition request to corroborate and implicit the transaction. 

Once one, your ETH volition beryllium swapped into USDT and it tin beryllium seen successful Metamask wallet. 

How to adhd liquidity successful Uniswap LP

Adding liquidity successful Uniswap is rather a analyzable process but it’s not arsenic hard arsenic newcomers find. All you request is funds and committedness to a peculiar liquidity excavation successful which you privation to supply liquidity.

Why to adhd liquidity successful Uniswap?

There could beryllium assorted reasons for providing liquidity, specified arsenic for earning yields, creating liquidity markets oregon launching trading for caller tokens. By adding liquidity to caller oregon existing liquidity pools, you go Liquidity Provider (LP) and gain trading fees everytime idiosyncratic trades underlying assets connected Uniswap. 

Adding Liquidity to Uniswap Liquidity Pools

Step 1: Open Uniswap dApp & Go To Pools

Go to Uniswap dApp and click connected “Pool” and opt for “Create Position.” 

Make definite that your wallet is connected. If not, link via conscionable clicking connected the fastener ‘Connect’ astatine the apical close corner. 

Step 2: Enter Pool Details

Now participate each the indispensable details. 

1. Choose whether you privation to adhd liquidity to Uniswap v2, v3 oregon v4.
2. Choose connected which plus brace you privation to adhd liquidity. (For example; ETH and USDT)
3. Select ‘Fee Tier’ arsenic per your convenience and click connected ‘Continue’ button. 

Step 3: Set Price Range

You tin present acceptable either afloat terms scope oregon customized scope wherever your assets would beryllium utilized. Once set, click connected ‘Continue.’

Step 4: Deposit Funds 

Now is the clip to adhd existent funds. Make definite immoderate magnitude you are adding, it needs to beryllium equivalent. 

For example, adding 10 ETH would besides request to person 10 ETH worthy of USDT tokens. If ETH terms is $2,500, you indispensable person $25,000 of USDT tokens successful bid to beryllium capable to adhd funds successful the liquidity pool. 

Step 5: Add Liquidity

Now click connected the “Add Liquidity” fastener and implicit the transaction. 

And that’s it, your funds are present successfully added to liquidity pools. Now everytime idiosyncratic trades connected this pool, you volition get committee successful fees which tin beryllium claimed from dApp > Pool > Your Positions.

Final words

Uniswap is 1 of the champion decentralized trading platforms and it has been continuously processing to heighten users’ trading experience. While determination are present tens of competitors, Uniswap inactive stands arsenic a person among each contempt being 1 of the earliest DEX platforms. From swapping tokens to output farming, each these decentralized trading functionalities tin beryllium seamlessly accessed connected Uniswap. 

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