What Is Uniswap And How Do Decentralized Exchanges Work?

What Is Uniswap?

Uniswap is a set of smart contracts, first deployed on Ethereum in November 2018 by developer Hayden Adams. It has gone through four versions:

Uniswap Labs, the company that built the protocol, also runs the Uniswap web app, a mobile wallet and Unichain, its own layer 2 network, which launched on Feb. 11, 2025. The protocol itself runs on Ethereum and about 20 other networks, including Arbitrum, Base, Optimism, Polygon and BNB Chain.

What Is The UNI Token?

UNI is Uniswap's governance token. Uniswap airdropped 400 UNI to every wallet that had used it before September 2020, which became one of the best-known token airdrops. UNI holders vote on changes to the protocol.

In the biggest change so far, holders passed the "UNIfication" proposal on Dec. 25, 2025, with about 99.9% support. It turned on protocol fees, starting with v2 pools and the busiest v3 pools on Ethereum, that are used to buy and burn UNI, burned 100 million UNI from the treasury and set Uniswap Labs' own app, wallet and API fees to zero, according to Uniswap's proposal. See the UNI price page for live supply and price data.

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How Do Decentralized Exchanges Work?

A centralized exchange like Coinbase holds your money and matches your order against other customers' orders. A decentralized exchange never holds your funds. You connect a wallet, approve the trade and the smart contract swaps tokens straight from your wallet. Our article on centralized vs. decentralized exchanges compares the two.

Liquidity Pools

Instead of an order book, Uniswap uses liquidity pools. Each pool holds two tokens, such as ETH and USDC. People called liquidity providers deposit both tokens and earn a cut of every trade's fee.

In Uniswap's original design, the pool keeps the product of its two balances constant, written as x × y = k. When you buy ETH from an ETH and USDC pool, you add USDC and remove ETH, so ETH gets pricier in that pool. Arbitrage traders then buy or sell until the pool's price matches other markets.

Bigger pools move less on each trade, which is why popular pairs are cheap to swap and small tokens aren't. Liquidity providers also face impermanent loss when prices move.

Fees On Uniswap

Each pool has a fee tier set when it's created, from 0.01% for stablecoin pairs up to 1% for volatile tokens. On v2 pools that have protocol fees turned on, the 0.30% fee is now split into 0.25% for liquidity providers and 0.05% for the UNI burn. You also pay network gas.

What A Uniswap Swap Costs Today

We priced $1,000 swaps on Uniswap's Ethereum pools on Nov. 1, 2026, and compared them with the cost of the same purchase on US exchanges at their lowest-tier taker fees. Cost is the total difference from our reference price, including pool fees, price impact and gas.

Source: Cult of Money market snapshot, Nov. 1, 2026.

Large tokens with big pools cost almost nothing to swap on Uniswap, and Ethereum gas is now cents, not dollars. Smaller tokens cost more because their pools are thinner. Cheaper exchanges such as Binance.US and global OKX charged about 0.06% to 0.10% for ETH in the same snapshot, and Crypto.com about 0.52%.

The catch is that you need crypto in a wallet first. To get dollars or euros into ETH, you still go through an exchange, card provider or bank on-ramp.

How To Swap On Uniswap

1. Set up a self-custody wallet such as MetaMask, the Uniswap wallet or Rainbow. Our best crypto wallets ranking compares options.
2. Fund it with ETH for gas, plus the token you want to trade. You can buy ETH on Coinbase or Kraken and withdraw it to your wallet.
3. Go to app.uniswap.org, type the address yourself and connect your wallet.
4. Choose the token you're selling and the one you're buying, then enter an amount.
5. Check the quote, the price impact and the slippage setting.
6. Approve the token if asked, then confirm the swap in your wallet. The new tokens land in your wallet when the transaction confirms.

Use the same network for every step. Our article on which network to use for crypto transfers explains why that matters.

Listing A Token On Uniswap

Anyone can create a pool for any token by depositing it alongside ETH or another asset. No one reviews it first. That openness lets new projects launch without an exchange's approval, and it's also why so many scam tokens trade on DEXs.

Risks Of Using Uniswap

• Fake tokens: scammers create tokens with the same name and logo as real ones. Always check the contract address against the project's official site. Our list of common crypto scams covers the tricks.
• Bad approvals and fake sites: phishing copies of the Uniswap app ask you to approve a contract that drains your wallet. Bookmark the real site and review your token approvals regularly.
• Front-running: bots can see pending trades and trade ahead of you, a practice called MEV. Tight slippage limits reduce the damage.
• Smart contract risk: Uniswap's core contracts have a long record, but v4 hooks are written by third parties and can contain bugs. See our crypto hacks tracker.
• No recourse: there's no support desk that can reverse a swap or recover a lost seed phrase.
• Regulation: Uniswap Labs said on Feb. 25, 2025, that the SEC closed its investigation without taking action. Some countries restrict DEX access.

FAQ

Is Uniswap Safe?

We found no case of users losing funds to a bug in Uniswap's core contracts since 2018. Most losses come from fake tokens, phishing sites and bad approvals, so the safety of a swap depends on checking what you're signing.

Do You Need To Verify Your Identity To Use Uniswap?

The Uniswap protocol doesn't ask for ID because you trade from your own wallet. The exchange or app you use to buy your first crypto will ask for ID in most countries.

What Does Uniswap Charge?

Each pool charges its fee tier, from 0.01% to 1%, and you pay network gas. After the December 2025 vote, Uniswap Labs set its own app and wallet fees to zero.

What Is The Difference Between Uniswap And UNI?

Uniswap is the exchange protocol. UNI is its governance token, which holders use to vote and which protocol fees now buy and burn.

Which Networks Does Uniswap Support?

Uniswap runs on Ethereum and many other networks, including Arbitrum, Base, Optimism, Polygon, BNB Chain, Avalanche and Unichain. Uniswap's developer docs list about 20 mainnet networks for v4. Each network has its own pools, so check you're on the right one before you swap.