Uniswap v4 development plan announced, expected to significantly improve capital efficiency and gas efficiency

Vision of Uniswap V4

Uniswap, the largest decentralized exchange (DEX), announced on the 13th the development plan for the next upgraded version “v4”. The new version will introduce highly customizable features and is expected to improve the capital efficiency and gas efficiency of the protocol compared to its predecessor (v3).

A major feature of Uniswap v4 is a function called “Hook”. Hooks are plugins that allow users to customize various aspects of creating liquidity pools (LPs). With this new function, it is possible to dynamically change commissions according to market conditions, and to distribute buy orders with a certain sense like dollar cost averaging (DCA).

In addition, interoperability (composability) with other DeFi (decentralized finance) applications will be enhanced. Additional returns can be obtained by depositing part of the liquidity of the pool with other protocols, such as lending protocols. For example, there is a method of turning some ETH in the ETH pool into liquid staking.

And the Uniswap v4 also delivers a significant improvement in gas efficiency. This is due to the introduction of the new feature “Singleton”. Singletons allow all liquidity pools to be stored within a single smart contract and routed through a single contract, significantly reducing gas consumption. It is expected to reduce the cost of deploying new pools by as much as 99%.

These improvements will attract more liquidity and more experienced traders to Uniswap. Uniswap claims:

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What is Uniswap

Uniswap v4 will be released under a BLS (Business Source License) and its availability will be restricted to commercial or production use for the first four years. During that time, use of the protocol is restricted to governance-approved entities. Once the BLS expires, the restrictions are lifted.

In a podcast interview, Uniswap founder Hayden Adams said v4’s code is not yet complete and no security audits have been conducted yet, so it will be some time before the new protocol is available to the public. said he would. A technical whitepaper has been published to allow the community to add their own elements and develop it, soliciting feedback from the project.

The DEX to CEX trading volume ratio hit a record high in May as regulatory pressure on centralized exchanges (CEX) such as Binance and Coinbase has increased recently.

Uniswap continues to be the largest DEX, accounting for about 57.4% of on-chain trading volume at the time of writing. According to DefiLlama data, the “Total Value Locked (TVL)”, which indicates the total amount deposited in the Uniswap protocol, is 541.8 billion yen, proving that it is the top decentralized exchange in the market.

The Uniswap platform will release its current version (v3) in 2021, adding new features such as centralized liquidity, multiple fee tiers, and a real-time on-chain price oracle to the public eye. The BLS license for v3 had expired in April 2023.

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