UniSwap (CRYPTO: UNI) platform was launched in 2018, it’s a decentralized (not owned/operated by any entity) exchange platform for Automated market makers (AMMs) – This helps anyone to pool assets into shared market-making strategies – Market makers sell the shares from its own listing to complete the orders and this increases the liquidity.

How does UniSwap V1 and v2 works

Uniswap version v1 runs on Ethereum (CRYPTO: ETH) blockchain which was primarily designed for token conversion in a faster and efficient exchange. UniSwap created a series of ETH-ERC20 exchange contracts, so basically per exchange contract for each ERC20 token. Traders can exchange between the two (ETH-ERC20) in either direction.

UniSwap launched the second protocol V2 in May 2020 with new features which showed significant growth in the crypto exchange world.

Apart from technical advancement, the major difference between the two versions is that in Uniswap V1 you can only swap between ETH and a single ERC20 token, however, V2 allows you to pool any ERC20 token directly with any other ERC20 token. UniSwap  V3 and its features

In march 2021 Uniswap successfully launched its latest protocol version that includes more features such as concentrated liquidity, flexible fee rates, and easier and cheaper integrations with the Oracle system.  The new interface will alert when a better exchange rate is available.

Concentrated Liquidity is a concept of aggregating prices together in a single pool forming a combined curve for LPs to trade. This gives users control over price ranges which helps them provide a significant amount of liquidity at desired prices.

Flexible Fees:  In UniSwap V3 a flexible fee model is introduced allowing LPs to be appropriately compensated for taking risks in varying degrees. The exchange fee has changed and it's no longer fixed at 0.30%. Uni governance declared that the default fee tier worked well for most tokens. However, this new version introduces multiple pools for pairs of tokens. The initially supported fees are 0.05%, 0.30%, and 1%. However, UNI governance could add additional fee tiers.

Improved Price Oracle: There are important updates related to the time-weighted average prices (TWAP). First, this new version simplifies the process and oracle users will not need to track previous values of the accumulator. Second, this version tracks the sum of log prices and third, it adds a liquidity indicator that can be used for contracts that want to implement liquidity mining.

Pros. UNI V3:

• It is a decentralized exchange platform – You have full custody of your funds as no middleman/entity is involved.
• All tokens can acquire liquidity.
• Low-cost and flexible fee trades compared to other exchanges.
• Liquidity providers can benefit from consolidating their liquidity by “bounding" it within an arbitrary price range.
• A new innovative exchange model that runs on Ethereum blockchain, the second-largest cryptocurrency by market capitalization.

Cons. Uni V3

• New in the crypto market.
• More than 50% of the tokens belong to the UNI community.
• It still relies on arbitrage trading to remove market imbalances. However, any natural market sees arbitrage trading occur to remove imbalances quickly.
• Can add any coin to UNiswaps increasing the scammers and fake coins on the exchange high volume of trades being an expensive activity. 

Conclusion

Decentralized Finance (Defi) is a fast-growing sector in the Crypto world as it allows users to have complete control over their assets as there is no intervention from any other third-party institute like Banks. And UniSwap is the biggest decentralized exchange platform that allows users to swap and pool their token in a fast and efficient way.