Uniswap is a protocol for automatic exchange of tokens on Ethereum. It is designed around ease of use, improved gas efficiency, resistance to censorship and zero rent withdrawal. Supports exchange between ETH (Ether) and other different tokens, as well as between tokens.< P > The biggest feature is that it does not need the order book system, it uses the design of Constant Product Market Maker, Automated Market Maker (AMM) is a variant of Automated Market Maker. < P >Uniswap is the most popular decentralized exchange on the Ethereum blockchain. In addition to trading cryptocurrencies, users can also participate in liquidity mining by betting on their holdings in a liquidity pool. Uniswap uses UNI tokens as its governance model and UNI token holders vote on governance decisions.
Uniswap allows any individual user to issue ERC20 tokens and create a pool of funds on Uniswap. When a pool of FUNDS for an ERC20 token (ETH and ERC20 trading pool or ERC20 and ERC20 trading pool) is created, the platform encourages all participants to trade and exchange within the same pool. The first liquidity provider to provide liquidity under this contract is given the right to set the exchange rate between this ERC20 token and ETH (or ERC20 token) and the liquidity provider is charged a full transaction fee (0.3% of the transaction volume). When the exchange rate in the capital pool is inconsistent with the broader market, there is arbitrage space. At this time, the arbitrage trader can smooth out these price differences by moving bricks, so that the exchange rate is consistent with the broader market. Thereafter, all liquidity providers will use the exchange rate at the time of recharge as the basis for calculating the equivalence.
Uniswap itself does not hold user funds; instead, funds are controlled entirely by smart contracts. These contracts handle each part of the transaction, Uniswap's factory contracts create separate contracts to handle each transaction pair, and peripheral contracts support the system in other ways. In practical terms, this means that money is deposited into the user's wallet immediately after each transaction. There is no central authority to seize user funds, which means users do not need to provide identity (KYC) information or create an account.
Starting with V2, Uniswap's development team can take 0.05 percent of the transaction fee as revenue, while other liquidity providers can take 0.3 percent of each transaction as revenue.< P >Uniswap V3 adds a converging liquidity function on top of the AMM curve, enabling liquidity providers to pool funds within their own price range to provide additional liquidity at the desired price.