- A year since the launch of the V2 protocol on Uniswap, the project has once again upgraded to V3.
- The new protocol comes with new features and improvements to make the project the superior DeFi project on Ethereum.
Uniswap has confirmed that V3 has successfully been deployed on the Ethereum blockchain. This becomes the most powerful protocol from the project so far. With a host of new features and improvements, the protocol is set to change the face of DeFi. The team is clear that the V2 protocol will remain active for as long as Ethereum is running, but expect to be gradually pushed out by V3 which should ultimately offer better features, liquidity and higher trading volume.
— Uniswap Labs 🦄 (@Uniswap) May 5, 2021
Since its launch in 2018, Uniswap has been robust in DeFi and has quickly become a superior platform in the industry. Since its V2 launch a year ago, the platform has recorded over $135 billion in trading volume. In an aim to empower traders, developers, liquidity providers and remain the superior DeFi protocol on the Ethereum blockchain, it has continued to be innovative. Now, it’s with the launch of Uniswap V3.
What’s new with Uniswap V3?
The V2 protocol set the stage for the automated market maker (AMM) and the V3 upgrade is set to extend this. Liquid providers (LPs) will see concentrated liquidity and multiple fee tiers. With concentrated liquidity, individual LPs can choose what price ranges their capital is allocated, with the individual positions being aggregated into pools. Multiple fee tiers mean LPs will be fairly compensated for taking varying risk positions. Furthermore, with widened exposure to preferred assets and capital efficiency introduced in V3, LPs stand to earn higher returns on their capital.
The new protocol is also set to offer flexible fees to LPs. With three separate fee tiers per pair, LPs can tailor their margins according to expected pair volatility.
LPs take on more risk in non-correlated pairs like ETH/DAI and, conversely, take on minimal risk in correlated pairs like USDC/DAI.
On top of this, unlike V2 which has a flat 5 basis point (16.66% of LP fees) fee, V3 will be more flexible. Fees can be set between 10 percent and 25 percent by governance on a per-pool basis.
The project has also capitalized on the current NFT trend in that LP positions on V3 will not be represented as ERC20 tokens. Instead, they will be non-fungible tokens (NFTs).
Additionally, the new protocol introduces advanced oracles built upon the time-weighted average price (TWAP) oracles introduced with V2. These have already proven successful after integration into Compound, Reflexer and other notable projects.
Uniswap v3 offers significant improvements to the TWAP oracle, making it possible to calculate any recent TWAP within the past ~9 days in a single on-chain call. This is achieved by storing an array of cumulative sums instead of just one.
Upgrade falls short of expectations
Although the project has lauded the upgrade as a success, there have been reports that some of these much-anticipated upgrades have failed. Users are pointing out that transaction fees are high, primarily driven by Ethereum, with V3 offering no solutions. Additionally, some have experienced technical difficulties on the platform.
Looks like Uniswap v3 is more gas expensive than v2, roughly as expected.https://t.co/yFPAm8Wew2
WETH => Dai is 167K gas. Routing another pair is 220K+.
Curious what this does to Sushi & Uniswap v2 order routing…
— Haseeb Qureshi (@hosseeb) May 6, 2021
In terms of investors’ reaction, Uniswap native token UNI is down by 3% in the last 24 hours. In anticipation of the launch, the digital asset earlier in the week hit its ATH of $45 but has since been correcting.