In a bid to continue dominating, as well as to remain relevant in the decentralized finance (DeFi) space, popular decentralized exchange (DEX) Uniswap has unveiled a detailed overview of its upcoming v3 update.
Uniswap disclosed that it is unveiling its third iteration, and it will focus on ensuring the decentralized exchange is the most flexible and efficient automated market maker (AMM) ever created. Uniswap v3 is slated to launch on mainnet on May 5.
🦄 Today we are thrilled to present a detailed overview of Uniswap v3, the most flexible and capital efficient AMM ever designed!
🏃 Mainnet launch is scheduled for May 5, with a scalable Optimism L2 deployment set to follow soon afterhttps://t.co/NTekDxWVA8
— Uniswap Labs 🦄 (@Uniswap) March 23, 2021
The vastly anticipated update has generated a lot of buzz as the DeFi space has seen explosive growth over the last year. The platform noted that Uniswap v2 launched in May 2020 and generated $135 billion in trading volume since then.
As for v3 of the platform, the Level 1 Ethereum mainnet launch is slated for May 5. This will be followed a short time later by the Level 2 deployment on Optimism.
— Uniswap Labs 🦄 (@Uniswap) March 22, 2021
Uniswap v3 will introduce concentrated liquidity, which means giving control to liquidity providers in choosing what price ranges their capital is allocated to. Liquidity providers can combine different concentrated positions within a single pool An example of this is an LP allocating $100 to the $1,000-$2,000 price range and an extra $50 to the $1,500-$1,750 price range in an ETH/DAI pool. This allows LPs to approximate the shape of any order book or AMM. Trading is done against the liquidity combined of all the individual curves, and there is no increase in gas cost per LP.
“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,” the DEX noted in its announcement.
Hayden Adams, Uniswap’s founder, also expressed his delight with the upcoming update. He attributed the launch of the decentralized exchange to Dan Robinson’s research and other Uniswap team members and the growth of the platform to the users.
“Uniswap v3 would not exist without the rest of the team at Uniswap Labs. And it would not exist without our advisors, investors, contributors, and an incredible community of users and developers. I’m so grateful to be surrounded by so many amazing and talented people,” he tweeted.
💜 Uniswap v3 would not exist without the the rest of the team at Uniswap Labs
💜 And it would not exist without our advisors, investors, contributors, and incredible community of users and developers
I'm so grateful to be surrounded by so many amazing and talented people
— Hayden Adams 🦄 (@haydenzadams) March 23, 2021
Uniswap Fee Layout and Other Features
Uniswap’s third iteration will also be unveiling a new feature that allows unique pools to be created with different fees. Previously, all transactions in all Uniswap pools have had a 0.03% fee for trading.
“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 Uniswap whitepaper noted.
Uniswap v3 features multiple fee tiers, which enable liquidity providers to be properly compensated for engaging different degrees of risk. There will be three separate tiers per trading pair: 0.05%, 0.30%, and 1.00%. The result is that liquidity providers can use expected pair volatility to tailor their margins. Non-correlated trading pairs will feature high risk while correlated trading pairs will feature minimal risk.
Addressing the issue of LP capital efficiency, the exchange noted that v3 will possess the same liquidity depth as v2 within specified price ranges but will instead have far less capital at risk.
“Instead of providing equivalent liquidity depth as a v2 LPs with less capital, v3 LPs can choose to provide greater depth with the same amount of capital as their v2 counterparts,” Uniswap added.
Other features of Uniswap v3 include customizable range orders, NFTs representing LP positions, and by giving TWAP oracles a significant upgrade.
UNI price has dropped by 11.7% in the last 24 hours. At the time of press, the token was $30.39. Currently, UNI has a market cap of $15,803,059,093and a 24-hour trading volume of $1,900,246,629.
Notably, UNI currently has a circulating supply of 519.8 million coins and a max supply of one billion coins. Also, the token achieved a new all-time high of $35.88 earlier today.
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