Uniswap V4: The new features that will revolutionize trading on decentralized exchanges

Uniswap V4: The new features that will revolutionize trading on decentralized exchanges

Uniswap V4: New features and improvements for decentralized crypto exchanges

When it comes to decentralized crypto exchanges, Uniswap is the clear frontrunner. The protocol has established itself as a leading platform in just 5 years and accounts for around three quarters of the total volume of all decentralized exchanges. In comparison, the Dex aggregator 1inch only has a market share of 6%.

This success is by no means undeserved. The team behind Uniswap is known for driving the industry forward with innovative approaches. With the launch of Uniswap V2, the protocol has taken a significant step forward. And now Uniswap V4 is in the starting blocks and promises many exciting new features that will once again revolutionize token trading in a decentralized way.

One of the big changes in Uniswap V4 is the use of native Ether (ETH). This eliminates the need for Wrapped Ether (WETH) as other ERC-20 tokens can be directly paired with ETH. This means less effort and costs for users.

Another improvement concerns the cost structure on Uniswap. Flash Accounting allows users to perform multiple operations within a pool without each individual operation being billed separately. Instead, only the net amount is billed. This also means savings for liquidity providers, as creating a pool through singleton contracts becomes 99% cheaper.

The combination of singleton contracts and flash accounting will significantly improve the user experience on Uniswap. Complex swaps with minimal gas consumption will be possible, bringing Uniswap closer to the user experience on centralized crypto exchanges.

One of the most exciting innovations in Uniswap V4 is the so-called hook. Each Uniswap liquidity pool goes through a lifecycle during which various actions take place. Hooks give developers the ability to build custom code for specific lifecycle events. This makes it possible to create individual AMM pools that enable various interactions between swaps, fees and LP positions.

Using hooks opens up many possibilities and innovations. For example, time-weighted market makers (TWAMM), dynamic fees based on volatility or other factors, limit orders on the blockchain, customized onchain oracles, auto-compounding of LP fees and payout of internalized MEV profits can be realized.

When it comes to fees, Uniswap V4 is based on the V3 model. There are separate fee mechanisms for exchange fees and withdrawal fees. Governance can retain a portion of the exchange fees for a pool and optionally also charge a withdrawal fee. However, unlike in V3, governance no longer controls fee levels or tick intervals.

Finally, it is worth mentioning that Uniswap V4, like its predecessor V3, is licensed under the Business Source License (BSL). This means that the V4 protocol source code is commercially and productively restricted for up to four years. Other developers are not allowed to fork the code without explicit permission or after the deadline.

Uniswap V4 promises many exciting new features and improvements for decentralized crypto exchanges. With the use of native Ether, more efficient cost structures and the introduction of hooks, trading on Uniswap will become even easier, cheaper and more innovative. It remains to be seen how the community will react to these innovations and how they will affect the crypto market.

Source: Uniswap Blog