Version 4 of the decentralized exchange will introduce customizable liquidity, improved architecture and gas savings.
Photo by Alexander Gray on Unsplash
Posted June 13, 2023 at 8:08 am EST.
Two years after the release of V3, Uniswap presented its vision for V4 of the protocol along with an open-source early version of its draft code.
Similar to V3, the code is released under a Business Source 1.1 license that limits its commercial use to up to four years, meaning no other protocol will be able to fork.
Uniswap V4 allows users to make trade-off decisions between integrating advanced features at the expense of increased costs by introducing smart contracts called “hooks”.
These hooks are plugins that customize how liquidity pools, swaps, fees, and liquidity provider (LP) positions interact. Developers can also build on the protocol’s liquidity and security to create custom AMM pools via the hooks built into V4’s smart contracts.
These potential innovations include dynamic fees based on volatility and other inputs, bespoke on-chain oracles, automatically compounded LP fees back into their positions, and the distribution of internalized MEV profits back to LPs.
“But actually there are no limits. With each pool now being defined by more than just the tokens and fee tier, we will see pools of all colors, shapes and sizes,” Uniswap said in a press release shared with Unchained.
The protocol also introduces a “singleton” smart contract that hosts all pools, resulting in significant gas savings as swaps do not require token transfers between pools in different contracts.
A new “flash accounting system” allows transfers only on net balances, unlike V3 which provides for transfers in and out of pools at the end of each swap. Thanks to the efficiency of singleton and flash accounting, there is no longer a need to cap fee levels.
“Pool builders can set them to the level that makes them most competitive or customize them with a dynamic fee hook. V4 also brings back support for native ETH, allowing for additional gas savings,” the Uniswap team explained.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.