Uniswap: what it is and what role it plays
Uniswap is a decentralized exchange protocol on Ethereum where people swap tokens from their own wallets. Its UNI token is used for governance.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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Uniswap runs as open-source smart contracts on a blockchain, so a company does not hold your funds when you trade. Its role is to give anyone a market for swapping tokens without a central operator.
How Uniswap works and what it does
Uniswap is an automated market maker, so it prices trades with a formula instead of an order book. Each trading pair sits in a liquidity pool, which is a smart contract holding balances of two tokens. The formula sets the price from those balances.
- Swap one token for another from your wallet.
- Add tokens to a liquidity pool to provide liquidity.
- Collect a share of the trading fees that swaps generate.
How is Uniswap different from other exchanges?
A centralized exchange holds your funds and matches orders on its own book. Uniswap does not take custody, so you keep your keys and sign each swap from your wallet. Other decentralized exchanges can use an order book.
Who created Uniswap and when?
Hayden Adams created Uniswap, and the protocol launched on Ethereum in 2018. The UNI token arrived in 2020. UNI is a governance token that does not represent equity in Uniswap Labs. Holders use it to vote on protocol changes and treasury decisions.
What legal issues has Uniswap faced?
Uniswap Labs has faced US regulatory scrutiny. In April 2024, the company said it received a Wells notice from the SEC. In September 2024, the CFTC ordered it to pay a civil penalty over leveraged tokens offered to US retail users.
Frequently asked questions
Yes. You connect a wallet you control and approve each swap with a signature. You also need the network's native token to pay gas fees.
Uniswap began on Ethereum and later expanded to other networks. The official app lists which networks are available, and each one has its own pools.
The core contracts are public software, so US users can interact with them directly. Uniswap Labs controls its own website and may restrict some features or regions.
Risks include bugs in the smart contracts, scam tokens, and losses for liquidity providers when prices move. A swap is final and recorded on a public blockchain.
