- Uniswap Labs revealed the draft code for its new Uniswap V4, incorporating ‘hooks’ or plugins enabling developers to establish customized liquidity pools.
- The Uniswap V4’s deployment will occur after gaining substantial consensus from the community. This new version promises a faster evolution of Automated Market Maker (AMM) exchanges.
On June 13, Uniswap Labs unveiled the draft code for Uniswap V4, igniting anticipation for more tailored liquidity pools within the decentralized finance (DeFi) space. This announcement was made by Hayden Adams, Uniswap’s founder, emphasizing the ‘hooks’ feature that empowers developers to produce bespoke liquidity pools.
Uniswap holds the global lead as the largest decentralized cryptocurrency exchange by volume. Its most recent version, V3, was launched on May 4, 2021. The introduction of V4’s ‘hooks’ function could bring a new wave of innovations like on-chain limit orders, automatic deposits to lending protocols, and auto-compounded liquidity provider (LP) fees.
The release of this source code is merely the beginning of launching the next version of Uniswap. The team now plans to engage with the Uniswap community, refining the code based on the feedback received over time. Deployment of V4 will commence once a broad consensus is built around a finalized version, but preceding versions will remain accessible.
Uniswap V4 is envisaged as a conduit for pool deployers to introduce code, which triggers specific actions at critical junctures throughout the pool’s lifecycle, such as before or after a swap or changes to an LP position.
This new version brings an opportunity for deployers to establish time-weighted average market makers (TWAMMs), which enables users to sell large crypto quantities in small batches over time. This practice could shield traders from being frontrun by EVM bots or experiencing adverse price movements. The new ‘hooks’ function could also allow for on-chain limit orders, as pools can integrate logic to fulfill orders once a token reaches a particular price point.
Speaking with Cointelegraph, Uniswap Labs Engineer Sara Reynolds and Head of Comms Bridget Frey lauded the prospects of V4 for accelerating the development of AMM exchanges. They recognized the novel feature of customized logic as a significant enhancement in AMM innovation.
These developments occur in the wake of a 444% surge in volume for top decentralized exchanges, after the SEC’s lawsuits against their centralized counterparts, Binance and Coinbase. This surge, interestingly, took place despite the SEC’s attempt to include decentralized exchanges in the ‘exchange’ definition, a move that has been contested by crypto venture capital firm Paradigm.
