Uniswap pioneered the Automated Market Maker model, in which users supply Ethereum tokens to Uniswap “liquidity pools” and algorithms set market prices (as opposed to order books, which match bids and asks on a centralized exchange like Coinbase) .
You can connect your crypto wallet to Uniswap at https://app.uniswap.org/
By supplying tokens to Uniswap liquidity pools, users can earn rewards while enabling peer-to-peer trading.
Anyone, anywhere, can supply tokens to liquidity pools, trade tokens, or even create and list their own tokens (using Ethereum’s ERC-20 protocol).
There are currently hundreds of tokens available on Uniswap, and some of the most popular trading pairs are stablecoins like USDC and Wrapped Bitcoin (WBTC).
One issue users of Ethereum-based apps like Uniswap face are transaction fees (also called gas) that can vary widely in price and can make it expensive to use the network. Multiple solutions to this issue are in the works, from the long-planned transition to the ETH2 blockchain (scheduled for sometime in 2022) to the nearer-term rollout of a “Layer 2” scaling solution called Optimism later this year. Uniswap developers are confident that Optimism will allow for significantly cheaper Uniswap transactions.
In early May 2021, Uniswap v3 launched with the goal of making transactions faster and cheaper.
DEXs have a range of risks, so do your research. “Impermanent loss” can result from pairing a more volatile cryptocurrency with a less volatile one in a liquidity pool. Bugs in smart contracts can be exploited. And anyone can create a token, so watch out for “rug pulls.”