Uniswap is a decentralized exchange that enables peer-to-peer trading without the need for centralized authority or third parties. Uniswap is a unique exchange that operates without traditional order books to match buyers and sellers.
Instead, the exchange utilizes Automated Market Maker (AMM) for peer-to-peer transactions. This enables automated and trustless trading through smart contract systems, making it one of the most vital cornerstones of the DeFi movement.
Moreover, the exchange enables users to swap their assets in liquidity pools. These pools utilize smart contracts, enabling seamless token swaps and trades on the platform.
The Uniswap blockchain, which functions like an electronic ledger, is continually updated to reflect the trading activity occurring among Uniswap users.
When users swap tokens on Uniswap, they aren’t trading directly with another person. Instead, they trade with the pool. Traders input one type of token and receive another. The prices of these tokens are based on the amount of each token in the pool.
The rewards for LPs (liquidity providers) vary across liquidity pools based on the volatility of the asset pools and are funded by traders.