Posted 1 month ago | by Catoshi Nakamoto
The Uniswap team has announced the much-anticipated launch of the third version of its protocol.
The Uniswap team said the protocol’s goal is to make “the most flexible and efficient [automated market maker] ever designed.” Uniswap promises “up to [4,000 times] capital efficiency relative to Uniswap v2.”
They aim to achieve this by the following new features.
- LPs can provide liquidity with up to 4000x capital efficiency relative to Uniswap v2, earning higher returns on their capital
- Capital efficiency paves the way for low-slippage trade execution that can surpass both centralized exchanges and stablecoin-focused AMMs
- LPs can significantly increase their exposure to preferred assets and reduce their downside risk
- LPs can sell one asset for another by adding liquidity to a price range entirely above or below the market price, approximating a fee-earning limit order that executes along a smooth curve
In a previous whitepaper outling the coming changes the Uniswap team explained:
“In this paper, we present Uniswap v3, a novel AMM that gives liquidity providers more control over the price ranges in which their capital is used, with limited effect on liquidity fragmentation and gas inefficiency,” Uniswap wrote.
A migration guide for v3 has previously been added to GitHub.
The long-awaited third iteration of the decentralized exchange (DEX) protocol that arguably started the DEFI trend, Uniswap brings with it several new features like concentrated liquidity, better oracles, and the removal of native ERC-20 tokens to represent LP positions.
They also added to their pool interface which now supports the creation of Uniswap v3 positions with multiple fee tiers and concentrated liquidity limits. If that’s not enough, Uniswap is cashing in on the NFT craze as well. According to their blog, each position is represented as an NFT and comes with a unique piece of on-chain generative art.
Until version 3, all trades in all Uniswap v2 pools have had a 0.03% fee for trading. With Uniswapv3 this all changes.
Uniswapv3 aims to make the on-network exchange protocol more capital-efficient. They aim to achieve this through what is called concentrated liquidity a process in which liquidity providers (LPs) can set minimum and maximum prices on their share of any given pool. This will provide greater amounts of liquidity at desired prices.
“While this fee historically seems to have worked well enough for many tokens, it is likely too high for some pools (such as pools between two stablecoins), and likely too low for others (such as pools that include highly volatile or rarely traded tokens),” the white paper stated.
The team ended its launch message by saying that “Developers can begin building on Uniswap v3 immediately!” Uniswap accounts for 7.50 billion of the total volume locked out of $79.55B according to Defi Pulse.
Uniswap is currently trading at [FIAT: $40.45] DOWN -4.5% in the last 24 hours according to Coingecko at the time of this report.