Differences between Uniswap versions

Uniswap has 3 versions:

• Launched as a proof of concept for Automated Market Makers (AMMs)
• Traders pay 0.3% of each trade to compensate liquidity providers (LPs)
• Tokens can be swapped only via ETH. No direct token exchange. For example, to swap DOGE ↔ SHIBA, need to do DOGE ↔ ETH, and then SHIBA ↔ ETH.

This version had a lot of new concepts:

• No more ETH bridge. Direct token swaps (DOGE ↔ SHIBA) are now possible. This cut the trading fee in half.
• Introduced the protocol fee: 0.05% of each trade goes to Uniswap for maintaining the service. (This is how Uniswap makes money). The fee is taken from LPs’ share — traders still pay only 0.3%.
• Added a price oracle — allows other contracts in the Ethereum ecosystem to estimate the price of one token relative to another.

Essentially the same functionality as v2 but on steroids.

• Improved price oracle that can now tell historic prices too (within the last 9 days).
• Multiple options for LP compensation — the idea is that higher risk pools will get more compensation.
• Fragmentation of x*y=k curve — this allows for more capital efficiency.
• Varying protocol fee that can be changed by the creators on a per-pool basis. (The fee is always between 10% to 25% of LP compensation).

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