Uniswap Labs released a code draft for Uniswap v4, announcing the move in a June 13 blog post by Uniswap founder Hayden Adams. The new code features "hooks" or plugins that allow developers to create custom liquidity pools.
Uniswap is the largest decentralized cryptocurrency exchange by trading volume. Its latest version, v3, was deployed on May 4, 2021. According to the post, v4's “hooking” feature will allow future developers to create on-chain cap orders, automatic deposits to Lending protocols, automatic compounding of liquidity provider (LP) fees, and many other innovations to exchanges once implemented.
Publishing the source code is the first step in launching a new version of Uniswap. The team now plans to talk to members of the Uniswap community and iterate on this base code over time. V4 will be deployed once sufficient consensus has been established around the final version, but previous versions will also remain available.
According to Adams' post, the purpose of Uniswap v4 is to “create a way for pool deployers to introduce code that performs specified actions at key points throughout the pool's lifecycle such as before or after a swap, or before LP positions change. or af the ter " For example, deployers will be able to create time-weighted average market makers that allow users to sell large amounts of cryptocurrency in small batches over time. This may help traders avoid getting front-runned by EVM bots or suffering adverse price swings. On -chain limit orders will also be possible, as pools will be able to incorporate logic that allows them to only fulfill orders when tokens reach a certain price.
Some other examples of "hooks" include code that can redeposit fees into LP pools or lend inventory when a particular pool is not being used.
Uniswap Labs engineer Sara Reynolds stated that the new version will allow automated market maker (AMM) exchanges like Uniswap to grow faster than ever before, thanks to the inherent reliability it allows. Customization:
"In v4, what we're really starting to see is this kind of 'raw' for custom logic. It's really exciting because I think it's going to really start to evolve AMM innovation very quickly .” Bridget Frey, director of communications at Uniswap Labs, echoed this sentiment, saying, “Right now, other people have to build new AMMs to do a lot of this work. Use hook contracts to build your projects on the Internet, hopefully making it faster and easier to innovate for a variety of projects."
Decentralized exchanges have recently seen an influx of new users. Trading volumes on the top three DEXs surged 444% after the SEC sued their centralized rivals Binance and Coinbase for alleged violations of securities regulations. This surge happened despite the SEC also trying to change the definition of “exchange” to include decentralized exchanges. Crypto venture capital firm Paradigm believes that decentralized exchanges do not meet the definition of an "exchange" under securities laws.
