Uniswap, Aave and Lido explained in plain English
Three of the best-known DeFi apps, explained simply: Uniswap for swaps, Aave for lending and borrowing, Lido for liquid staking. What they do and their risks.
- Checked against the rules: Oct 2026
- Sources cited · No buy or sell calls
Uniswap: swapping without an order book
Instead of matching buyers and sellers, Uniswap holds pools of two tokens. When you swap, you add one token to the pool and take out the other, and the price adjusts automatically. People who add tokens to pools earn a share of the trading fees.
Watch for: fake tokens with copied names, high price impact on small pools, and phishing sites. Your first DEX swap.
Aave: lending and borrowing
You deposit tokens into Aave and earn interest paid by borrowers. Borrowers must deposit more value than they borrow. If their collateral falls too far, it's liquidated: sold to repay the loan, with a penalty.
Watch for: liquidation if prices drop, changing interest rates, and smart-contract risk.
Lido: liquid staking
Staking ETH helps secure Ethereum and earns rewards, but staked ETH is locked. Lido stakes it for you and gives you stETH, a token that grows with rewards and can be traded or used in other apps.
Watch for: stETH can trade slightly below ETH in stressed markets, and you rely on Lido's contracts and node operators.
How they fit together
Someone might stake ETH on Lido, use stETH as collateral on Aave, and swap on Uniswap. Each extra step adds another layer of risk. DeFi risks checklist.
Tax in India
Swaps are taxable transfers. Interest and staking rewards are generally income. The treatment of liquid staking tokens isn't settled. Wrapping, bridging and liquid staking tax.
Sources
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