Frequently Asked Questions about Uniswap
What is Uniswap and how does it work?
Uniswap is a decentralized exchange protocol built on Ethereum that enables automated, permissionless token swaps using liquidity pools instead of traditional order books. It works through smart contracts that maintain reserves of token pairs, with prices determined algorithmically based on the ratio of tokens in each pool. Users can trade directly from their wallets without intermediaries, and anyone can provide liquidity to earn fees from trades.
How do I use the Uniswap app to swap tokens?
To use the Uniswap app for token swaps:
- Connect your Ethereum wallet (MetaMask, WalletConnect, etc.)
- Select the token you want to swap from and the token you want to receive
- Enter the amount you wish to trade
- Review the quoted rate, slippage, and gas fees
- Approve the token allowance if trading for the first time
- Confirm the swap transaction in your wallet
- Wait for the transaction to be confirmed on the blockchain
What's the difference between Uniswap V2 and Uniswap V3?
The main differences between Uniswap V2 and V3 include:
- V3 introduced concentrated liquidity, allowing LPs to provide capital within specific price ranges for greater efficiency
- V3 offers multiple fee tiers (0.05%, 0.3%, 1%) versus V2's fixed 0.3% fee
- V3 liquidity positions are represented as NFTs rather than fungible LP tokens
- V3 provides enhanced price oracles with time-weighted average prices
- V3 offers improved gas efficiency for most operations
Is the Uniswap wallet safe to use?
The Uniswap wallet is designed with security as a priority, offering:
- Non-custodial control (only you hold your private keys)
- Open-source code for transparency and community review
- Regular security audits by respected firms
- Optional security features like biometric authentication
- Spending limits and approval controls
How can I provide liquidity on Uniswap exchange and what are the risks?
To provide liquidity on Uniswap:
- Navigate to the "Pool" section of the Uniswap app
- Connect your wallet and select "Add Liquidity"
- Choose the token pair you wish to provide
- In V3, select your desired price range
- Deposit equal values of both tokens
- Confirm the transaction in your wallet
- Impermanent loss if token prices change significantly relative to each other
- Smart contract vulnerabilities (though Uniswap's contracts are thoroughly audited)
- Gas costs potentially affecting profitability for smaller positions
- In V3, the risk of positions moving out of range and ceasing to earn fees