📘 INTRODUCTION TO UNISWAP & AMMs

1. What is Uniswap?

• Uniswap is a Decentralized Exchange (DEX) built on Ethereum.
• It uses an Automated Market Maker (AMM) model instead of traditional order books.
• No central authority or matching engine — liquidity is provided by users.

✅ DEX = Decentralized Exchange

✅ AMM = Automated Market Maker → Subset of DEX

2. What is an AMM?

An Automated Market Maker (AMM) is a type of decentralized exchange protocol that relies on mathematical formulas to price assets, instead of order books.

Key Components:

• Liquidity Pools – Reservoirs of tokens locked in smart contracts.
• Liquidity Providers (LPs) – Users who deposit tokens into pools and earn fees.
• Traders – Users who swap tokens using the pool.
• LP Tokens – Represent ownership/share in the pool.

3. Why Study V1 First?

Even though Uniswap V1 is obsolete, studying it is essential because:

• It lays the foundation for understanding V2, V3, V4.
• You learn the original problems (slippage, impermanent loss, fee structure).