Overview
Uniswap is the leading decentralized exchange on Ethereum, which pioneered the automated market maker model for permissionless token swaps. Launched in November 2018 with the UNI token, it allows anyone to trade tokens or provide liquidity without an order book or intermediary. Uniswap's AMM design became the template for most of decentralized trading.
How It Works
Uniswap operates pools of two or more tokens where prices are set by a constant product formula. Traders swap against these pools and pay a fee, while liquidity providers earn a share of that fee for depositing tokens. The protocol is governed by UNI holders, and its newer versions added concentrated liquidity so providers can focus capital at specific price ranges.
Why It Matters
Uniswap established that decentralized exchanges could rival centralized ones in liquidity and usability, and its fee-generating model made it one of the most valuable protocols in crypto. It also set the standard for governance tokens and community-owned protocols. Its design directly determines the pricing and slippage dynamics that affect every trader and liquidity provider.
Related Concepts
Uniswap is an AMM powered by Liquidity Pools and is subject to Impermanent Loss. It is governed by UNI holders and is a core benchmark in the DeFi ecosystem alongside lending protocols like Aave.