Uniswap Guide

Uniswap: world’s largest decentralized exchange

Uniswap is a decentralised exchange (DEX) that allows you to swap crypto tokens without relying on an intermediary. Originally deployed on Ethereum, it has since expanded to several other blockchains compatible with the Ethereum Virtual Machine (the software powering Ethereum), including Avalanche and BNB. It also launched its own Layer 2 (L2) network, Unichain.  

Key figures

• Launch date: 2018

• TVL: $3.96B (as of November 2025)

• Daily active users: 355K (as of November 2025)

Uniswap at a glance          

First-mover advantage: Uniswap was one of the pioneers of the decentralised exchange model which relies on an automated market maker (AMM) mechanism to process trades as opposed to an intermediary to match buyers and sellers (see below). 

Decentralised: Uniswap leaves you in control of your private keys, which you need to approve trades (similar to a password), so you manage your funds at all times. Centralised exchanges like Coinbase, on the other hand, take custody of your funds, leaving them vulnerable to exchange hacks or mismanagement (as happened with FTX).

Market leadership: According to DefiLlama, Uniswap is the largest DEX by total value locked, a metric used to measure the value of customer funds deposited on a protocol, and trading volume. Its TVL and volume over the previous 30 days were 55% and 17% higher than the next-biggest DEX, Pancakeswap (as of November 2025).

Network effects: Uniswap allows you to list tokens on the exchange for other users to trade, and it doesn’t charge listing fees. This feature has helped the protocol to attract and retain traders, which increases its value (social media platforms are famous beneficiaries of network effects).

What are Automated Market Makers (AMMs)?

Centralised exchanges, in both crypto and mainstream finance, rely on what’s known as an order book controlled by a single authority to process trades. This model ensures ‘liquidity’ (how easily assets change hands) by matching buyers and sellers who want to trade the same amount of an asset at the same price.

However, Uniswap is decentralised, meaning it operates without an intermediary. It uses an AMM rather than an order book, which relies on smart contracts- programmes that automatically execute when preconditions are met (comparable to a vending machine)- to price assets and provide liquidity. Users trade against ‘pools’ holding the assets on both sides of a transaction, a bit like swapping euros for dollars at a currency exchange kiosk at an airport.   

Uniswap use cases

Uniswap provides several decentralised finance (DeFi) services:

• The main one is swapping cryptos. All you need is a digital wallet that’s compatible with the protocol.  

• You can create markets. If you want to trade two assets that aren’t currently available, you can set up a new liquidity pool. 

• You can earn fees as a ‘liquidity provider’ (LP). LPs contribute tokens to liquidity pools and receive a share of the trading fees in return.  

Key figures

• Performance YTD: -54%

• Market cap: $3.89B (as of November 2025)

History         

Uniswap was founded by Hayden Adams, a former Siemens engineer, in 2018. He was inspired by Vitalik Buterin, the founder of Ethereum, who posed a question on Reddit in 2016 about how smart contracts could facilitate crypto trading. Hayden built Uniswap to prove the AMM mechanism could work.  

Key milestones

November 2018: Uniswap v1 launched at Devcon, Ethereum’s flagship conference.

August 2020: Uniswap V2 released, including new features and improvements, such as oracles (real-world data feeds) for crypto prices and flash swaps (which process the trade before ensuring the counterparties hold sufficient assets).

September 2020: UNI, Uniswap Protocol’s native token, went live.

May 2021: V3 launched, further expanding Uniswap’s DeFi services.

April 2023: Uniswap passed $1.5T in trading volume.

August 2023- Uniswap launched on its first L2 network, Base.

January 2025- V4 released, adding greater customisation, cheaper trading and a better user experience.

February 2025- Uniswap launched its own L2 network optimised for DeFi transactions.

Uniswap V4

Uniswap rolled out the latest version of its protocol (V4) in January 2025. One of the main upgrades was greater customisation of liquidity pools, for instance allowing you to enter limit orders and LPs to set dynamic fees that respond to market conditions (like Uber’s dynamic pricing). This flexibility increases liquidity, reduces trading fees and improves the user experience. Another notable update restored ether (ETH), Ethereum’s native token, as a currency for paying transaction fees. ETH transactions are up to 50% cheaper than tokens created using the widely adopted ERC-20 standard.  

Unichain launch

Hot on the heels of V4’s release, Uniswap launched its own L2 (a chain built on a base layer like Ethereum to enhance its capabilities) in February 2025. ‘Unichain’ was built on the OP Stack, making it compatible with the ‘Superchain’ network, including Coinbase’s Base and Kraken’s Ink. In addition to offering quicker and cheaper transactions than the base layer, Unichain is designed specifically for DeFi applications. One of its main features is the ability to protect sensitive data, allowing the protocol to process more complex trades and deliver faster transaction finality (when a trade becomes irreversible).

CoinShares’ analysis

Uniswap has established itself as the market leader in the DEX space, and the launch of V4 and Unichain may cement this position. However, it still faces an evolving regulatory environment and challenges from rivals.

Strengths

• Uniswap is the leading DEX by key metrics, including TVL and trading volume, and has a significant lead in terms of TVL over its main rival, Pancakeswap.

• Following the launch of V4 earlier this year, Uniswap has established its protocol as the most customisable DEX.

Weaknesses

• DEXs require users to manage their funds in wallets they set up themselves, which can put off traders unfamiliar with crypto.   

• While V4 offers greater customisation of liquidity pools, it also introduces complexity, which may deter retail investors.

Opportunities

• The customisation introduced by V4 and the launch of Unichain paves the way for innovation, potentially turning Uniswap into the ‘app store’ for crypto liquidity.   

• This innovation could help Uniswap gain an even bigger advantage over its immediate rivals.

Threats

• The US Securities and Exchange Commission closed its investigation into Uniswap Labs for operating an unlicensed exchange in February 2025, but a less crypto-friendly administration in the White House could reignite regulatory challenges.   

• Despite its competitive advantages, Uniswap still faces threats from rivals such as PancakeSwap, Curve and Raydium.