The Uniswap Version 3 will introduce major changes in terms of giving better control to LPs over their money as well as setting up a dynamic fee structure for different pools.
On Tuesday, March 23, popular decentralized exchange (DEX) Uniswap finally announced the launch of its much-awaited Version 3. With the DeFi craze over the last few months, Uniswap (UNI) has emerged as the largest DEX platform in the crypto world. Besides, its native UNI DeFi token is now the eighth-largest crypto in the world.
In its announcement on Tuesday, Uniswap noted that the platform aims to become “the most flexible and efficient [automated market maker] ever designed”. The Uniswap Version 3 will launch its mainnet a month later on May 5, 2021. “We are targeting an L1 Ethereum mainnet launch on May 5, with an L2 deployment on Optimism set to follow shortly after,” notes Uniswap.
Uniswap Version 3
With Uniswap V3, liquidity providers (LPs) will get better control over the price range of their capital allocation. Besides, multiple fee tiers will ensure better compensation to LPs for taking diverse risks. The new v3 version promises 4000x better capital efficiency over its predecessor.
Along with introducing “concentrated liquidity”, the Uniswap v3 aims to offer a “limited effect on liquidity fragmentation and gas inefficiency”. Writing about the improvement to the Uniswap oracles, the blog post notes:
“Uniswap’s oracles are now far easier and cheaper to integrate. V3 oracles are capable of providing time-weighted average prices (TWAPs) on demand for any period within the last ~9 days. This removes the need for integrators to checkpoint historical values”.
Interestingly, the V3 version introduces a dynamic fee structure for different pools. So far, the Uniswap pools have a standard charge of 0.03% fee for trading. Another important change with the upgrade is the removal of the native ERC-20 tokens for representing the LP positions.
Introducing Business Source License to Ward Off Competitors
While Uniswap still has the lion’s share in the DEX market, competitors like SushiSwap have emerged by literally copying its model. To take care of this, the Uniswap v3 will introduce a “business source license”.
This license introduces a time-delay for the commercial use of its code for “up to two years”. After this, the code will remain as an open-source GPL license allowing other projects to build upon it. The announcement notes:
“With this in mind, Uniswap v3 Core will launch under the Business Source License 1.1 – effectively a time-delayed GPL-2.0-or-later license. The license limits use of the v3 source code in a commercial or production setting for up to two years, at which point it will convert to a GPL license into perpetuity.”
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
