Uniswap

Uniswap is a decentralized exchange protocol. Instead of placing orders on a centralized platform, users connect a wallet and swap tokens through smart contracts and liquidity pools.

What It Solves

Uniswap helps create on-chain markets where tokens can be exchanged without a traditional order book. It is one of the most common examples beginners encounter when learning about DeFi, AMMs, liquidity pools, and slippage.

Who It Is For

It is for users who already understand wallets, gas fees, token approvals, and the risk of interacting with smart contracts. It is also useful for developers and researchers studying decentralized market design.

Beginner Checklist

Always use the official entry point, verify token contract addresses, check price impact, review slippage, and start with small test amounts. A token being tradable does not mean it is safe or valuable.

How an AMM Prices a Swap

There is no order book and no counterparty waiting to take the other side. A pool holds a reserve of two tokens, and the price falls out of the ratio between them: buying one side removes it from the pool and makes the remainder more expensive. This is why the quoted rate depends on how much you are trading rather than being a single market price, and why a large trade in a small pool gets a visibly worse rate than a small one. The pool does not know or care what the token is worth anywhere else — arbitrageurs are what keep it roughly aligned with the wider market.

Price Impact and Slippage Tolerance Are Not the Same

These two numbers sit next to each other and get conflated constantly. Price impact is the cost your own trade imposes by moving the pool's ratio — it is known in advance and shown before you confirm. Slippage tolerance is a limit you set on how much worse than the quote you will still accept, because other trades may land between your submission and your execution. Raising tolerance does not reduce cost; it only widens the range of outcomes you will accept. Setting it very high is what allows a sandwich attack to extract the difference, and an unexplained requirement for an extreme tolerance is a common signature of a token with transfer restrictions.

The Approval Step Before Your First Swap

Swapping a token you already hold needs two transactions the first time: an approval letting the router move that token, then the swap itself. Only the token you are selling needs approving — selling ETH directly does not, because the native asset works differently. The approval screen is worth reading rather than clicking through, since it is where the choice between an exact amount and an unlimited allowance is made, and that choice persists long after the swap is done.

Why One Token Has Several Pools

The same token can be paired against different assets, exist at different fee tiers, and be deployed across several networks, each combination being its own pool with its own liquidity and its own price. The interface routes across them for you, but it means a contract address alone does not identify where you are trading. Two tokens sharing a name and symbol is trivially easy to arrange and extremely common; the contract address is the only identifier that distinguishes them, and checking it against an official source takes seconds.

Official Links

• Uniswap: https://uniswap.org/
• Developer docs: https://developers.uniswap.org/docs
• How Uniswap works: https://developers.uniswap.org/docs/get-started/concepts/how-uniswap-works