What is Uniswap v4? How the most popular DEFI exchange works.

What is Uniswap?

Uniswap is a service where you can swap one token for another without an exchange being involved. All you need is a wallet and an internet connection.
The main difference from regular centralized exchanges (CEXs) is that here there’s no registration, no KYC, and no intermediaries — all operations are performed by smart contracts on the blockchain.

Uniswap launched back in 2018 on Ethereum, and today it operates across many networks: Ethereum, BNB Chain, Polygon, Arbitrum, and others. Thanks to its simplicity and transparency, it has become one of the most popular platforms in the DeFi world.

Advantages of Uniswap

Compared to traditional exchanges, Uniswap offers several important advantages:

• You can swap tokens anonymously, without KYC.
• Private keys and tokens always stay with you, not on exchange accounts.
• The entire protocol activity is visible on the blockchain.
• The platform is integrated into many wallets (Ledger Live, SafePal, Trust Wallet, etc.), so swaps can be done directly from the app.

How prices are formed on Uniswap vs. on a centralized exchange

Why is the price sometimes different on a DEX and a CEX?
Let’s take a look at how it works.

Centralized exchange (CEX)

• The price is formed based on orders.
• When a trader places a buy/sell order, the exchange matches it with a corresponding order from the other side.
• The larger the trading volume, the more stable the price and the smaller its fluctuations.

Example:
On Binance, the ETH/USDT rate is $2,500. If someone buys $1,000 worth of ETH, the price will barely change because there’s plenty of liquidity.

Uniswap (DEX)

• The price is determined by a smart contract using the liquidity pool formula: the fewer tokens remain in the pool, the more expensive they become.
• Any transaction changes the rate instantly.
• The larger the trade relative to the pool, the higher the slippage.

Example:
In the USDT/ETH pool, the initial rate is 1 ETH = 2,500 USDT.
If a user buys $50,000 worth of ETH, the amount of ETH in the pool decreases, and the price rises — for example, to 2,550 USDT.

In highly liquid pools (such as ETH/USDT), the price behaves almost as stably as on a CEX. Noticeable differences can only be seen in small pools.

What to do if Uniswap isn’t working

Sometimes the website may freeze or fail to load tokens for swapping.
Most often, the problem can be solved easily:

• Turn on a VPN
• Check that the correct network is selected in MetaMask
• Clear your browser cache.

Swapping via a hardware wallet

Connecting to MetaMask.

1. Download the MetaMask extension for your browser.

2. Select “Create a new wallet”.

3. Here you can pick an option. In my case, I’m selecting “Use Secret Recovery Phrase”.

4. Create a password.

4. Next, you’ll be prompted to secure your wallet using a recovery phrase. In this case, I’m skipping this step, because we’ll be connecting a Ledger wallet to MetaMask, so I’m not interested in creating a “secure” hot wallet.

5. Agree to MetaMask’s terms of use.

6. In the MetaMask interface, select our account.

7. Connect the Ledger wallet.

At this point, the Ethereum app must be open on your Ledger device.

8. We have successfully connected Ledger to MetaMask.

Connecting to Uniswap.

1. Go to the Uniswap website and connect MetaMask.

2. We’ve successfully connected the wallet and can now swap the coins we need. To do this, click the “Select token” button.
You can also choose the network by clicking the gear icon in the top right corner.

3. In my case, I’m swapping USDC(BNB) for USDC(BNB). Click “Review”, then “Swap”.

4. Sign the transaction in MetaMask and confirm it on the Ledger. Sometimes you need to enable Blind Signing in the Ethereum app settings.

5. Click “Confirm”, then review the transaction on the Ledger wallet itself by pressing the right button. At the end, press both buttons to approve the transaction.

5. The transaction is successful — we have swapped USDT for USDC on the Binance Smart Chain network.

Liquidity Pools

Liquidity pools are at the core of how the Uniswap protocol works. Each smart contract manages a pool consisting of two tokens.

Any user can become a Liquidity Provider: to do this, you need to deposit equal values of two tokens into the pool. In return, you receive special pool tokens that represent your share of the pool. These tokens can be redeemed back for the underlying assets at any time.

How does it work?

The x * y = k formula

Uniswap pools work as automated market makers. Their job is to always be ready to swap one token for another while maintaining balance according to the formula x * y = k.

• x and y are the amounts of each token in the pool.
• k is a constant that should not change after a trade.

Under this formula, the rate inside the pool depends on the ratio of tokens. If someone makes a small swap, the balance barely shifts and the price stays close to the market rate. But if the swap is large, it removes too much of one token from the pool, and the price gets progressively worse for the next portion of the trade.

Fees and income for providers

Every swap on Uniswap is charged a 0.3% fee, which is automatically added to the pool. This effectively increases the overall balance and works as a reward for liquidity providers (namely, for us). We can withdraw our earnings at any time — simply by burning our pool tokens and getting back our assets along with the share of fees we earned.

Full Range / Custom Range

Uniswap v3 introduced the ability to choose the price range in which you provide liquidity.

Full range — when your tokens work across the entire possible price range. Essentially, your liquidity is always active, but it’s spread across the whole scale, so fee income is lower.

Custom range — when you set the price boundaries within which you want to operate.
For example, for the ETH/USDT pair, you can choose a range of $1,800–$2,200. In this case, liquidity is concentrated exactly where the price trades, which lets you earn more fees with smaller deposits. The risk is that if the price moves outside your range, your liquidity stops working and you’ll end up holding only one of the two tokens.

Choosing a range is a balance between safety and yield.
Full range is safer but earns less.
Custom range can be more profitable but requires careful market analysis.

How to add liquidity to a pool via a hardware wallet

1. Go to the “Pool” tab and click “Explore Pools”.

2. Here you can see all available pools.

3. Click the “Add Liquidity” button; in my case, I’m choosing USDT-USDC. Here you can also check the Fee Tier — in other words, the percentage you can potentially earn from this pool. Click “Continue”.

4. Proceed further by clicking the “Review” button. Here you can also set the Price Range I mentioned above. In this case, I’m adding liquidity to the pool on Full Range.

5. Create our position in the pool by clicking “Create”.

6. Next, confirm the transaction in the MetaMask pop-up window, and then on the Ledger wallet itself.
Don’t forget that to add liquidity to a pool, you need to hold tokens on the network where the transaction takes place. In my case, I needed BNB.

7. We’ve successfully added liquidity to the pool. Our position is now shown in the “Pool” tab.

Disadvantages of Uniswap

As with anything, Uniswap has its downsides:

• If you make a mistake in a transaction, there’s no way to get the funds back.
• The smaller the pool and the larger the trade, the more the price changes.
• When adding liquidity, your return can be lower if the price of one of the tokens shifts significantly.
• Anyone can create a token and add it to Uniswap, so always verify the token’s contract — for example, on CoinGecko.
• You can’t swap a token on Ethereum directly for a token on BNB Chain without using a bridge.

Conclusion

Today, Uniswap is more than just a token swap service — it’s a full-fledged ecosystem with liquidity pools, earning tools, and support for multiple networks.

For the regular user, it’s a fast and convenient way to swap tokens without registration and unnecessary barriers.
For more experienced users, it’s an opportunity to earn fees and become part of the liquidity market.

Uniswap still stands as an example that DeFi can operate in a decentralized, transparent way, without third-party control.