Glossary
Uniswap & DeFi Glossary
Plain-English definitions of the terms you'll meet while swapping, providing liquidity and exploring DeFi on Uniswap.
- AMM (Automated Market Maker)
- A smart-contract model that prices and settles trades against a liquidity pool instead of an order book. Uniswap pioneered the AMM design for tokens.
- DEX (Decentralized Exchange)
- An exchange that runs entirely on smart contracts, letting you trade directly from a self-custody wallet without an intermediary holding your funds.
- Liquidity pool
- A pair of token reserves locked in a smart contract that traders swap against. Liquidity providers deposit both tokens and earn a share of swap fees.
- Liquidity provider (LP)
- Anyone who deposits tokens into a pool to earn trading fees. On Uniswap v3, LPs can concentrate liquidity in a chosen price range.
- Concentrated liquidity
- A Uniswap v3 feature that lets LPs allocate capital to a specific price range for far greater capital efficiency.
- Slippage
- The difference between the quoted price and the executed price of a swap. You set a slippage tolerance to control how much movement you accept.
- Price impact
- How much your own trade moves the pool price. Large swaps on thin pools have higher price impact.
- Gas
- The network fee paid to process a transaction on-chain. It is paid to the blockchain, not to Uniswap, and is much lower on Layer 2s.
- Self-custody wallet
- A wallet where you alone hold the private keys (e.g. Uniswap Wallet, MetaMask). Uniswap never takes custody of your funds.
- ERC-20
- The Ethereum token standard that most tradable tokens follow, making them compatible with Uniswap pools.
- UNI
- Uniswap's governance token. Holders can delegate votes and shape the protocol through Uniswap Governance.
- UniswapX
- An intent-based routing protocol that aggregates liquidity for better prices, gas-free swaps and built-in MEV protection.
- Hooks
- Uniswap v4 plugins that run custom logic at key points in a pool's lifecycle, enabling features like custom fees or limit orders.
- Singleton
- Uniswap v4's architecture that holds all pools in a single contract, cutting gas costs for swaps and pool creation.
- Impermanent loss
- The temporary loss LPs can experience when the price of pooled tokens diverges compared with simply holding them.
- MEV (Maximal Extractable Value)
- Value extracted by reordering or inserting transactions. UniswapX and private routing help protect swaps from harmful MEV.
- Layer 2 (L2)
- A network built on top of Ethereum (e.g. Base, Arbitrum, Optimism, Unichain) that offers much cheaper and faster transactions.
- Unichain
- A Layer 2 built by Uniswap and optimized for DeFi, offering fast, low-cost swaps.
- WETH
- Wrapped ETH — an ERC-20 version of ETH so it can be traded in pools like any other token.
- Governance
- The on-chain process where UNI holders propose and vote on changes to the Uniswap Protocol.