Uniswap v2 Crypto Exchange Review: How It Changed DeFi and Why It Still Matters

Before Uniswap v2, swapping one crypto token for another on a decentralized exchange meant jumping through hoops. If you wanted to trade DAI for USDC, you had to first swap DAI for ETH, then ETH for USDC. Two transactions. Two sets of gas fees. Two chances for something to go wrong. Then, in May 2020, Uniswap v2 dropped-and everything changed.

What Uniswap v2 Actually Did

Uniswap v2 wasn’t just an upgrade. It was a reset. The biggest change? Direct ERC-20 to ERC-20 swaps. No more ETH as middleman. That single feature cut trading steps in half for most token pairs. It also slashed costs. A swap that used to cost $5 in gas fees dropped to around $3. That might not sound like much, but for users trading small amounts daily, it added up fast.

The protocol didn’t just make swaps cheaper. It made them possible for tokens nobody else would list. If a developer created a new token and wanted people to trade it, they could deploy a liquidity pool on Uniswap v2 with just a few clicks. No permission. No application. No gatekeepers. That’s why, by 2021, over 148,000 unique token pairs were live on v2. Most of them were obscure, low-volume projects-but they existed. And that’s what made Uniswap v2 the launchpad for the entire DeFi summer.

How It Worked (Without the Jargon)

At its core, Uniswap v2 used a simple math rule: x * y = k. For every token pair-say, ETH and DAI-there’s a pool. The pool holds a certain amount of ETH and a certain amount of DAI. The product of those two numbers always stays the same. When you buy DAI, you add ETH to the pool. That pushes the DAI price up slightly. When you sell DAI, you take ETH out. The price drops. No order book. No buyers or sellers waiting. Just math.

Behind the scenes, the system used something called WETH (Wrapped ETH) to handle ETH transactions smoothly. Users didn’t need to wrap or unwrap ETH manually. The interface did it for them. That made the experience feel like using a regular app, not a blockchain terminal.

The 0.3% trading fee became the industry standard. Every swap paid that fee, and it got distributed to liquidity providers-people who deposited tokens into the pools. That’s how people made money on Uniswap v2: by supplying liquidity and earning a cut of every trade.

Why People Loved It

Users didn’t care about the math. They cared about what it let them do.

• No KYC. You didn’t need to submit ID. You didn’t need to wait. You just connected your wallet-usually MetaMask-and traded.
• Thousands of tokens. If a token was on Ethereum, you could trade it. Even if it had no website, no team, no whitepaper.
• Simple interface. Swap, approve, confirm. Done. First-time users could complete their first trade in under 10 minutes.

Reddit threads from 2020 and 2021 are full of posts like: “Switching from v1 to v2 felt like upgrading from dial-up to broadband.” That’s how big the difference felt. For people tired of centralized exchanges freezing accounts or delisting tokens, Uniswap v2 was freedom.

The Downsides You Couldn’t Ignore

But it wasn’t perfect.

Gas fees spiked. During the 2021 NFT boom, Ethereum got clogged. Swaps that normally cost $1.50 jumped to $50. People watched their transactions fail over and over. Gas estimation tools like GasNow became essential. Even then, you had to guess the right fee. Too low? Your transaction sat forever. Too high? You wasted money.

Impermanent loss. If you provided liquidity in a volatile pair-say, ETH and a meme coin-you could lose money even if the token price went up. That’s because Uniswap v2 kept your pool balanced at 50/50. If one token surged, you ended up with more of the stable one. Many new liquidity providers didn’t understand this until they lost money.

Scam tokens. With no review process, anyone could list a token. One in every 200 pairs on v2 turned out to be a rug pull or honeypot. Users had to check token contracts themselves or rely on tools like CertiK. A single click could drain your wallet.

How It Compared to v1 and v3

Compared to Uniswap v1, v2 was a massive leap. v1 only allowed ETH-to-token trades. v2 let any token trade directly with any other. That cut swap costs by about 35% and opened up the entire ERC-20 ecosystem.

Uniswap v3, launched in May 2021, changed the game again. Instead of spreading liquidity across the whole price range, v3 let providers concentrate it in a narrow band. That made capital 4,000x more efficient for stablecoin pairs. A $10,000 position in v3 could outperform a $40 million position in v2. That’s why liquidity started draining from v2 to v3.

By Q1 2025, v2’s daily trading volume had dropped from $1.2 billion in 2020 to $150 million. Its total value locked fell from $7.2 billion to $1.8 billion. v3 now handles 70% of Uniswap’s volume. v2 is no longer the main attraction.

Who Still Uses Uniswap v2 Today?

Even with v3 and layer-2 solutions like Arbitrum and Optimism, v2 isn’t dead. It’s a backup. A fallback. A lifeline.

Here’s who still uses it:

• Traders of obscure tokens. If a token doesn’t have enough volume to support v3’s concentrated liquidity pools, it stays on v2.
• Developers testing new tokens. Deploying on v2 is faster and cheaper than setting up a v3 pool.
• Users on slow networks. Some wallets and browsers still struggle with v3’s complexity. v2’s simplicity wins here.

As of early 2025, v2 still has 350,000 monthly active users. That’s down from 1.2 million in 2022, but it’s not zero. And in DeFi, even a small, steady user base can keep a protocol alive for years.

The Legacy That Won’t Fade

Uniswap v2 didn’t just change how people traded crypto. It changed how people thought about exchanges.

Its code was forked over 40 times. Sushiswap, PancakeSwap, QuickSwap-all started as copies of v2. The constant product formula (x * y = k) became the default for every new DEX. Even centralized exchanges now use AMM models for their crypto trading pairs.

Vitalik Buterin called v2’s direct pairing mechanism a “critical UX bottleneck” solved. Academic studies showed it reduced slippage by nearly 2% for mid-cap tokens. That’s not just technical progress. That’s real, measurable improvement in user experience.

Today, Uniswap Labs is focused on Unichain-a new Layer 2 built for DeFi with 250ms block times and cross-chain support. v2 is officially legacy. But legacy doesn’t mean useless. It means foundational.

Should You Use Uniswap v2 in 2025?

Here’s the simple answer:

• Yes, if: You’re trading a token that isn’t on v3 or a layer-2. You need a quick, simple swap. You’re on a slow device or wallet that struggles with v3.
• No, if: You’re trading ETH, USDC, or any major token. Use v3 or a layer-2 like Arbitrum. Your fees will be 10x lower. Your slippage will be tighter. Your experience will be smoother.

Always check the token contract before swapping. Use a scanner like CertiK or DeFiLlama’s safety rating. Never trust a token just because it’s on Uniswap.

And always keep enough ETH for gas. Even in 2025, you need ETH to pay for transactions on v2. No ETH? No swaps.

Final Thoughts

Uniswap v2 is like a Model T. It’s not the fastest car on the road. It doesn’t have air conditioning or GPS. But it started the revolution. It proved that decentralized exchanges could work. That you didn’t need a company to hold your money. That anyone could build a market.

Today, you won’t use v2 for your main trading. But you’ll still need to understand it. Because every major DeFi tool you use today-every fork, every new DEX, every liquidity pool-carries a piece of v2’s DNA.

It’s not the future. But it’s the reason the future exists.