Uniswap Announces V4 Upgrade and Launch But Its ‘Hooks’ Raise Questions 


In a post on X on Feb. 15, the Uniswap Foundation provided the release window “now that the launch of Dencun [Ethereum upgrade] on Mainnet has been scheduled for March 2024.”

The Q3 rollout of Uniswap v4 will occur after Ethereum’s Dencun upgrade, which will enable EIP-1153 for transient storage. EIP-1153 will allow Uniswap v4 to optimize gas fees through “flash accounting.”

Additionally, Uniswap v4 will introduce “hooks” that allow for dynamic adjustments and diverse use cases, potentially resulting in lower fees for users.

Uniswap Hooks Raise Eyebrows

The Foundation said that v4’s code will be the most rigorously audited ever to ensure a smooth launch. The code is currently frozen and undergoing security improvements, testing, and comprehensive internal and community audits before launch.

However, it was the introduction of “hooks” that raised flags for DeFi researchers. Following the announcement, DeFi researcher “Ignas” said, “It’s not just an upgrade, it’s a transformation from protocol to platform.”

Hooks convert Uniswap v4 into a platform, he said before adding, “Think of them as “plugins” or “extensions” that allow for the execution of customized code during key events within a pool.”

These “hooks” enable things like on-chain limit orders, time-weighted average market making, depositing out-of-range liquidity into lending protocols, auto-compounding liquidity provider fees, and KYC (know your customer).

He compared it to Apple’s and its App Store, which opened the door to third-party developers so the company didn’t have to make its own apps but could take a hefty cut from them.

Protocols face liquidity issues when launching a new one, but with “hooks,” developers can experiment and launch their own while using Uniswap as liquidity, he explained.

Hurting DEX Competition

This risks making Uniswap a dominant, concentrated liquidity layer for all of DeFi. With so much liquidity concentrated in Uniswap, it may hurt competing DEXes.

While hooks may be great for users due to increased liquidity, it raises concerns about stifling competition in DeFi trading and lending.

There are parallels to Apple’s App Store – innovation benefits but at the cost of high fees and strong centralized control.

Meanwhile, Uniswap’s native token, UNI, has jumped 10% on the day to reach $7.65 at the time of writing.

UNI has been slow to react during the 2024 rally, gaining just 10% since the same time last year. Furthermore, it is still down a whopping 83% from its May 2021 all-time high of just under $45.

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