Uniswap V3 is the third iteration of the Uniswap decentralized cryptocurrency exchange (DEX). The upgrade has introduced a new method for liquidity allocations. The Uniswap platform supports peer-to-peer (P2P) ERC-20 token swaps.
The Uniswap V3 crypto exchange was developed as an open-source liquidity protocol. Its services run on the Ethereum blockchain. Alternatively, users can access V3 on Polygon, Arbitrum, or Optimism. The platform is restricted in countries that are subject to US sanctions, including Iran, Syria, and Belarus.
Although the Uniswap V3 crypto exchange was built as an update to the previous versions, it’s not the only available swap. Due to the blockchain structure, users can still trade on both Uniswap V2.
Uniswap V3 introduced the concept of Concentrated Liquidity. It’s a mechanic that improves the efficiency of providing liquidity. This iteration also makes it easier for certain listed assets to gain exposure.
Liquidity providers are able to see and determine where and how they allocate their funds according to the Uniswap V3 crypto price range. Oracles used by V3 are faster and provide a broader range of historical market data than the previous iterations.
The development of Uniswap V3 also allowed the service to expand to other blockchains as a layer-1 or layer-2 solution. The platform aims to offer better scalability, thus improving transaction speeds without negatively impacting the Uniswap V3 crypto price.
Unlike centralized cryptocurrency exchanges (CEX), DEX platforms do not offer conventional spot or derivatives markets. Instead, the Swap is the equivalent of a Uniswap V3 spot exchange. Services like leverage or margin trading are not available.
Like most blockchain-based financial services, the Uniswap V3 cryptocurrency exchange has its own native token, known as UNI. It can be used for network utility, such as paying Uniswap V3 crypto fees. It also serves as a governance token that grants voting rights to the holders.
Since there is no central regulatory authority, any user is able to list new tokens on the exchange for free, as long as it has sufficient liquidity. The only required Uniswap V3 crypto price for listing a new asset is charged per trade.
Due to the simplicity of the token listing process, the number of available assets can change frequently. Overall, there are over 500 listed coins that can be used for over 1,100 Uniswap V3 trading pairs.
While many centralized cryptocurrency exchanges use the maker-taker model to charge for transactions, Uniswap has fixed rates for using the service. The Uniswap V3 volume does not impact the costs, as each trade is charged individually, applying one of the rates accordingly.
The Uniswap V3 exchange fees are used to inject more funds into the liquidity pools. The three fee levels are 0.05%, 0.30%, and 1%. Using the multi-tier system, liquidity providers are compensated for the risk level of their investment.
The charged fee rate is based on the trading pair volatility. Non-correlated pairs are riskier. Therefore, 0.30% or 1% Uniswap V3 crypto fees may apply. As members of the Uniswap decentralized autonomous organization (DAO), UNI token holders can propose additional fee levels.
About the Company
Uniswap initially launched as an automated market maker (AMM) platform in November 2018. This model is an alternative to order books used by centralized exchanges. In May 2020, the platform released its Version 2 upgrade, with the Uniswap V3 crypto exchange following a year later.
The company behind the decentralized exchange is Uniswap Labs, founded by Hayden Adams. Uniswap headquarters are located in New York, NY. The company received funds from a series of investments, as well as an Ethereum Foundation grant.
Prior to launching the protocol, Uniswap Labs held a six-week bug bounty program. Its goal was to find any significant system vulnerabilities in the new DeFi protocol. According to the team report, there were no major findings.
Users were given an opportunity to migrate their liquidity from Uniswap V2 to V3, but this wasn’t mandatory because V2 has remained active. The platform provides alerts if a certain Uniswap V3 trading pair has better options on V2.
In May 2021, when the Uniswap V3 cryptocurrency exchange was launched, the V2 trade volume was recorded at $21 billion, while V3 gathered $3 billion during the first month. However, by September 2021, the performance of V2 fell behind.
In May 2022, the combined V1, V2, and Uniswap V3 trade volume exceeded $1 trillion. In August of the same year, the platform announced that it would provide support for Ethereum’s transition to a Proof-of-Stake (PoS) consensus mechanism, also known as The Merge.
Hayden Adams, the CEO of Uniswap, started working on the project after reading an article by one of the founders of Ethereum, Vitalik Buterin. At the time, Adams worked as an engineer at Siemens.