Uniswap releases version 4 code, allowing for new types of liquidity pools

Uniswap Labs has unveiled a draft of the code for Uniswap V4, as per a blog post from Uniswap’s founder Hayden Adams on June 13th. This new code includes “hooks” or plugins that enable developers to construct personalised liquidity pools.

Uniswap is the most voluminous decentralized crypto exchange globally. Its most recent version, V3, was released on May 4, 2021.

The post states that once V4’s “hooks” feature is put into effect, it will open up a variety of possibilities for developers, such as the creation of on-chain limit orders, automatic deposits to lending protocols, and auto-compounded LP fees. Additionally, it will enable many other innovations to the exchange.

Releasing the source code is the opening move for the launch of a new Uniswap version. The team now intends to talk with members of the Uniswap community and gradually improve this base code. V4 will be deployed when a consensus is reached on the final version, but earlier versions will still be accessible.

Adams’ post states that Uniswap V4 is designed to provide a method for pool deployers to incorporate code that carries out a specific action at various stages of the pool’s existence, such as prior to or after a swap or before or after an LP position is altered.

Deployers will be able to set up Time-Weighted Average Market Makers (TWAMMs) to enable users to sell substantial amounts of cryptocurrency in small increments over a period of time. This could help traders to evade being overtaken by EVM bots or to dodge unfavorable price changes. Additionally, pools will be able to integrate logic that allows them to fill orders only when a token reaches a specific cost, thus making on-chain limit orders feasible.

Other examples of “hooks” include code that can return fees to an LP’s pool or loan out inventory when a particular pool is not being utilized.

In an interview with Cointelegraph, Sara Reynolds of Uniswap Labs Engineering stated that the new version will enable AMM exchanges such as Uniswap to progress more quickly than ever before due to the customization capabilities it offers.

Bridget Frey, Head of Comms at Uniswap Labs, echoed this thought, saying, “At this moment, other people have to create fresh AMMs to carry out a lot of this work. Now, what you’ll be able to do is to construct your project with a hook contract on top of Uniswap’s security and liquidity which should make the innovation faster and simpler to do for various projects.”

Recently, decentralized exchanges have seen a large influx of new users. After the US Securities and Exchange Commission took legal action against centralized competitors Binance and Coinbase for allegedly violating securities regulations, the top three DEXs experienced a 444% surge in volume. This occurred despite the SEC’s attempt to redefine the term “exchange” to include decentralized ones. Crypto venture capital firm Paradigm has argued that decentralized exchanges do not meet the definition of an “exchange” as stated in securities laws.

This article was revised on June 13 to make the deployment process clearer.

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