Uniswap Unveils Game-Changing Version 4 With Customizable Liquidity Pools
Uniswap, the largest decentralized exchange by trade volume, has released details about its upcoming Version 4. The new version introduces “hooks,” enabling users to customize liquidity pools. This update is expected to bring enhanced functionality and flexibility to the Uniswap ecosystem, providing users with more control over their trading experience.
By Anna B Kiwanuka
“We see Uniswap as core financial infrastructure and think it should be built in public with space for community feedback and contribution,” the team noted.
While v4 will bring several changes, the most prominent feature mentioned is customizable liquidity.
“Enter hooks, which are plugins to customize how pools, swaps, fees, and LP positions interact. Developers can innovate on top of the Uniswap Protocol’s liquidity and security to create customized AMM pools through hooks that integrate with v4’s smart contracts,” Uniswap stated further in the blog post.
Example adjustments mentioned include a time-weighted average market maker (TWAMM), dynamic fees based on volatility, on-chain limit orders, out-of-range liquidity depositing to lenders, and custom on-chain oracles.
Other potential features could involve auto-compounded LP fees back into LP positions and internalized MEV profits with the ability to distribute them back to LPs. Uniswap believes that these ideas merely scratch the surface of what developers can customize and achieve with hooks.
Uniswap said “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 concludes that the release of the code will be governed by a Business Source License 1.1, which imposes restrictions on the utilization of the v4 source code in a commercial or production environment for a maximum duration of four years.
After this period, the license will transition to a GPL license, remaining in effect indefinitely. The team concludes that similar to v3, Uniswap Governance, and Uniswap Labs retain the authority to grant exemptions to this license.