Uniswap Labs, the team behind the leading decentralized exchange by trading volume, has released the draft code for the next iteration of Uniswap, dubbed v4.
Users can customize Uniswap v4’s liquidity pools to target the protocol’s technical features and keep fees associated with simpler transactions down. The protocol also introduces several new features, including on-chain limit orders, automatic compounding of liquidity provider (LP) rewards, and dynamic fees.
“Uniswap v3 took a powerful, idiosyncratic approach to liquidity delivery, balancing an incredibly complex trade-off space,” said Hayden Adams, founder of Uniswap. “New features come with higher fees and code complexity… Our vision with Uniswap v4 is to give everyone the power to make these trade-off decisions.”
The protocol’s UNI governance token is recovering since a teaser was released yesterday.
Uniswap releases draft code for upcoming V4 iteration
As of 0030 ET, UNI is up more than 7% over the past 24 hours, making it the ninth best-performing asset among the 100 largest DeFi tokens.
Uniswap releases draft code for upcoming V4 iteration
Uniswap Labs plans to spend months refining the protocol based on community feedback and urges developers to review the code.
Business Source License
The release comes less than three months after the two-year Business Source License (BSL) for Uniswap v3 expired on April 1, and allows anyone to fork and reproduce the exchange’s code in a commercial or production environment.
A four-year BSL applies to Uniswap v4. However, the Uniswap Governance may make exceptions and authorize third party deployments of the code. In March, UNI owners strategically gave the green light to v3 deployments on Avalanche and BNB Chain to top-rank competitors planning to fork the code after its BSL expires.
According to CoinGecko, Uniswap v3 is the top decentralized exchange by trading volume. In the last 24 hours, more than $800 million worth of transactions have been executed on its Arbitrum and Ethereum stakes — more than four times that of its closest competitors.
The story goes on
Uniswap is also the 5th largest DeFi protocol with a combined value of $3.9 billion.
Improvements to Uniswap v3
Launched in April 2021, Uniswap v3 greatly improved the efficiency of DEX-based trading by introducing concentrated liquidity.
This feature allows LPs to set specific price ranges within which their assets will be mobilized to transact trades and earn fees. Concentrated liquidity improves capital efficiency and can minimize divergence losses while boosting LP returns by increasing capital circulation.
Uniswap v4 builds on concentrated liquidity by introducing hooks. Hooks would allow users to deposit out-of-bounds liquidity into DeFi lending protocols, thus generating returns for LPs even when their assets are not being used by the protocol.
V4 pools can also act as a time-weighted average market maker (TWAMM), allowing traders to incrementally fill large orders over a period of time.
Balancing low fees with rich functionality
Uniswap v4 introduces “Hooks”, customizable smart contract “plugins” that allow users to decide how swaps, pools, fees and LP positions are executed and interact on the exchange.
When developing version 4, Uniswap’s developers made a point of minimizing gas fees whenever possible. The new iteration will store all liquidity pools in a single contract, reducing the transaction costs associated with creating new pools and executing trades across multiple pools.
V4 also introduces “Flash Accounting” to reduce fees, which means internal transfers are processed using the net balance instead of moving assets on each swap. Uniswap said it expects more gas savings as EIP-1153 goes live alongside Dencun, Ethereum’s next major upgrade.
Uniswap v4 can also support trading native ETH instead of its wrapped ERC-20 counterpart, further reducing fees for ether traders.
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