On June 13, Uniswap, which is the biggest decentralized exchange (dex) in terms of global trade volume, released a summary of Version 4 of the dex platform and an early version of the code. Uniswap says that the dex version will have a lot of new features, such as a way to change the way liquidity pools work called “hooks.”
Uniswap v4 Emphasizes Customization
Uniswap has shared an update on the project’s upcoming Version 4 (v4) dex iteration and a blog post about the team’s strategy for the new version and early code. The team said on Tuesday, “We see Uniswap as a key piece of financial infrastructure, and we think it should be built in public, with space for community feedback and contributions.” While v4 will bring a number of changes, customizable liquidity is the one that stands out the most.
In a blog post about the topic, Uniswap says, “Enter hooks, which are add-ons that let you change how pools, swaps, fees, and LP positions work together.” “Developers can build on the liquidity and security of the Uniswap Protocol to create customized AMM pools using hooks that integrate with v4’s smart contracts.”
A time-weighted average market maker (TWAMM), fees that change based on volatility, onchain limit orders, out-of-range liquidity deposits to lenders, and custom onchain oracles are all examples of changes that have been suggested. Other possible features include LP fees that are automatically added back to LP positions and MEV gains that are kept in-house and can be given back to LPs. Uniswap thinks that these ideas are just the beginning of what coders can do with hooks to change and improve things. Uniswap says:
“Really, the sky’s the limit. Because each pool is now defined by more than just the tokens and fee tier, we’ll see pools of all colors, shapes, and sizes. Uniswap v4’s core logic, like v3, is non-upgradeable. While each pool can use its own hook smart contract, hooks can be limited to only specific permissions determined at pool creation.”
Uniswap has decided that the release of the code will be governed by a Business Source License 1.1. This license limits how the v4 source code can be used in a business or production setting for a maximum of four years. After this time, the license will change to a GPL license, which will stay in place forever. The team has come to the conclusion that, just like with v3, Uniswap Governance and Uniswap Labs still have the power to make exceptions to this license.