- Yesterday, the leading DEX, Uniswap, deployed Uniswap protocol version 3.0 to the Ethereum mainnet
- Uniswap v3 will assist users by offering more control over liquidity and feature more upside for riskier trades
- Peter Johnson, a partner at Jump Capital, believes Uniswap v3 will make trading on Uniswap more efficient for traders
With the ceaselessly evolving decentralized finance (DeFi) sector instituting new and revised products and features every week, how can the leading decentralized exchange (DEX) ever relax?
Uniswap, the pre-eminent Ethereum-based DEX operating at the very center of a sector worth over $140 billion, has finally released the anticipated, most powerful version of its Uniswap protocol. Uniswap Version 3.0 is now live!
Uniswap Protocol V1 & V2
Uniswap Protocol, the namesake of its creator firm, was first launched in November 2018 as a proof of concept for automated market makers (AMMs). An AMM is a type of exchange where users can pool assets into shared market-making strategies. Meaning AMMs, like Uniswap, rely on algorithms to price assets instead of buying and selling orders.
The success of Uniswap v1 led to the May 2020 launch of v2 that introduced new features and optimizations. The v2 not only set the stage for exponential growth in AMM adoption but, over less than a year, also facilitated over $135 billion in trading volume. Thanks to these developments, Uniswap is ranked as one of the largest cryptocurrency spot exchanges in the world. According to DeFi Pulse rankings, Uniswap is the fourth-largest DeFi application on the blockchain, with $7 billion in assets staked. Based on its stats, v2 has accrued a total of $1.6 billion in trade volume over the last 24 hours.
Uniswap V3: Features, Goals, and Upgrades
The latest Uniswap v3 upgrade aims to be “the most flexible and efficient AMM ever designed.” V3 promises to assist users with more control over the liquidity provided and feature more upside for riskier trades. The v3 offers three prominent features:
- Concentrated liquidity: paying attention to “individual expectations of future price activity,” liquidity providers (LPs) now get granular control over their capital and its price range allocation. Moreover, individual positions are aggregated into a single pool to form one combined curve for users to trade against.
- Multiple Fee Tiers: LPs can determine their risk level when trading volatile assets and get to be appropriately compensated for taking on varying degrees of risk.
- Easier and Cheaper Oracles: to make sure the price is up to date and reduce the risk of getting burned by bad data. V3 oracles provide on-demand time-weighted average prices (TWAPs) at a gas price cheaper than v2.
These are some advanced trading features and probably won’t make much sense to newbies. But, according to Uniswap, these can lead to higher returns for seasoned DeFi traders.
A Big Step Forward
Peter Johnson, partner at the venture capital firm Jump Capital, wrote to Coindesk that “Uniswap v3 is a big step forward for the protocol.” Providing “market makers” with “increased flexibility” on “how they provide liquidity into the protocol,” v3 makes liquidity provisioning “more attractive.” Johnson believes this upgrade will render “trading on Uniswap more efficient for traders.”
The wait isn’t exactly over yet, though. As mentioned in Uniswap’s march release, Uniswap v3 deployment is a two-phase process. The first phase (L1) was “Ethereum mainnet launch” scheduled on “May 5,” and the second (L2) is “deployment on Optimism,” which is “set to follow shortly.”
DEX To Centralized Exchanges
According to CoinMarketCap, Uniswap (UNI) exhibited a 24-hour trading volume of around $1.9 billion. While it isn’t much compared to that of centralized exchanges, like Binance or Huobi with $68.8 billion and $20.7 billion, respectively, as Uniswap wrote, it’s still a “critical infrastructure for decentralized finance.” And in this intensely competitive sector, that is a good thing.
Crowded DeFi: Cutthroat Competition
As reported earlier, Kyber Network, another Ethereum-based DEX, is also planning a version 3.0 with some similar goals. Then, Uniswap-clone SushiSwap was also experimenting with interoperability with other DeFi protocols to attract more liquidity.
Even powerful centralized exchanges have joined the race. Last year, Binance introduced Binance Smart Chain (BSC) to support DeFi applications, including DEXs. And BSC-based PancakeSwap took a significant chunk out of Uniswap’s market share.
Amid this cutthroat competition, a Uniswap v4 seems closer than ever.
|Join The Coin Republic’s Telegram Channel for more information related to CRYPTOCURRENCY NEWS and predication.|
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.