This last factor is most important to understand the way to get a greater sense of the best way Uniswap routes tokens between liquidity swimming pools. "In Uniswap V1, all liquidity pools are between ETH and a single ERC20 token. Or, uniswap return their ETH equal to the ETH liquidity pool. Uniswap tackles this downside in a unique means by way of automated liquidity provisioning. How do customers profit form liquidity provisioning on Uniswap? What this means is that Uniswap V1 always executes two trades. Currently, excessive gas costs because of the high quantity of trades make trading utilizing Uniswap nonetheless a costlier activity. Low-value trades compared to a DEX or centralized trade. In other phrases, the router contract is conscious of each swapping contract that implements the Uniswap V2 protocol. In other phrases, it’s a quite simple pricing algorithm the place the price fee moves along a graph. Now, let’s have a look at the above graph.