Uniswap is the largest and most popular decentralized exchange (or DEX)on the Ethereum blockchain, It enables users to exchange cryptocurrency without the use of a middleman from anywhere on the planet. Users send Ethereum tokens to Uniswap’s “liquidity pools,” and algorithms will set market prices based on supply and demand, unlike a controlled exchange like Coinbase. Users can earn rewards while allowing peer-to-peer trading by supplying tokens to Uniswap liquidity pools. Anyone, anywhere, can contribute tokens to liquidity pools, trade tokens, or even develop and list their own (using Ethereum’s ERC-20 protocol).
Uniswap is open source, which implies that anybody could take the code and then use it to build their own decentralized exchange. Users can even list their own tokens in the exchange at no cost. The “Exchange” contract and the “Factory” contract are the two smart contracts that run Uniswap. These are computer programs that run automatically when certain circumstances are satisfied. The factory smart contract is used to create new tokens to the platform, while the exchange contract handles all token swaps or “trades.” The improved Uniswap v.2 platform allows users to swap any ERC20-based coin for another.