Despite the industry’s continued optimism towards DEX, it still faces multiple issues such as MEV, lack of price advantage, high GAS fees, and inability for LPs to make profits. Cryptocurrency researcher Yuzhong Kuang analyzed how Uniswap v4 solves these problems from the perspective of DEX bottlenecks, and offered his own predictions for the future development of v4.
What story did Uni v4 tell? Customizability (Hooks) and extreme cost reduction (The Singleton and accounting). The Hook feature allows anyone to deploy liquidity pools using custom contracts. The Singleton sets all LP contracts as a single contract to reduce Gas fees for creating LPs and multi-hop trades. Additionally, v4’s accounting feature introduces market makers to the DEX space while reducing frequent trading costs.
What problems does v4 solve for DEX? 1. MEV: v4’s liquidity providers’ internal MEV allocation mechanism may help alleviate the current MEV problem. 2. Price: The introduction of market makers and limit orders will mitigate this issue. 3. Gas fees: This is a problem that v4 advocates solving, and if taken to Layer2, this cost will be even lower. 4. LP income: v4 is committed to solving the problem of insufficient DEX product power, and reducing Gas fees is also a major issue that v4 is addressing. Impermanent loss needs to be addressed through order book market making, and in the future, developers may build a limit order exchange based on Uniswap v4.
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What else do we need to pay attention to? In my opinion, Uniswap’s ambition is huge. While allowing developers to build on v4, the official team may also build new products through Hooks, such as lending protocols and stablecoin protocols. Additionally, Uniswap v4 brings native ETH back into trading pairs. This is also an effort to reduce user Gas fees.
Reference: https://sleepintherain.substack.com/p/uniswap-v4flip-cex
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