A Beginner’s Guide: What Is Uniswap & How Does It Work? (2022)

Uniswap is an Ethereum-based decentralized exchange (DEX) that facilitates the swapping of ERC-20 tokens between traders. As the decentralized finance (DeFi) continues to bloom, the hype for Uniswap’s protocol also continues to grow, but not without reason. When comparing Uniswap to any other DEXs, never before has it been so easy for anyone to add or list tokens to earn rewards. Plus, the convenience of peer-to-peer (P2P) transactions means any trades can be executed without intermediaries.

As the pioneer in DeFi, Uniswap strives to revolutionize the traditional DEX with its automated liquidity protocol. That means Uniswap can facilitate the exchange of tokens without relying on the conventional architecture of an order book method and to curb liquidity issues simultaneously. In this guide, you’ll understand what Uniswap is, how it works, and the pros and cons it possesses.

What Is Uniswap?

Uniswap refers to an open-source protocol built on top of the Ethereum blockchain. It represents an exquisite solution to simplify the process of  ERC-20 token swaps without any centralized third-parties. That means users have the autonomy to manage their funds without depending on any centralized resources.