Home Crypto ExchangesTechnology Uniswap v3 With Improved Capital Efficiency and Fine-Tuned Control to Liquidity Providers

Uniswap v3 With Improved Capital Efficiency and Fine-Tuned Control to Liquidity Providers

Uniswap V3

Uniswap V3 is the most flexible and capital efficient AMM.  The Mainnet launch is scheduled for May 5, 2021.  There is a scalable optimism L2 deployment is set to follow soon.

Those who need a detailed technical overview should look in to Uniswap v3 Core White paper by Hayden Adams, Noah Zinsmeister, Moody Salem, River Keefer and Dan Robinson.

The abstract of the White paper reads thus:  Uniswap v3 is a noncustodial automated market maker implemented for the Ethereum Virtual Machine. In comparison to earlier versions of the protocol, Uniswap v3 provides increased capital efficiency and fine-tuned control to liquidity providers, improves the accuracy and convenience of the price oracle, and has a more flexible fee structure.

Of note, The Uniswap v2 core contracts are non-upgradeable by de-sign.  Thus, Uniswap v3 is implemented as an entirely new set of contract.  Also, the Uniswap v3 core contracts are non-upgradeable. 

Some of the parameters, which are controlled by governance are clearly described in the White Paper. It clearly mentions that the UNI token holders do not have the ability to control any of the core contracts. The UniSwap V3 Protocol fee is turned on by the UNI governance. Also, the governance can add fee tiers.  Once the fee tier is added, it cannot be removed. Thus, the UNI governance has the power to transfer ownership to another address.

To know more about the difference between v2 and v3 users need to refer to the information on significant new features like concentrated liquidity, flexible fees, protocol fee governance, improved price oracle, and liquidity oracle.

Another important feature to make note of is the range orders.  As published in the White Paper, “Positions on very small ranges act similarly to limit orders—if the range is crossed, the position flips from being composed entirely of one asset, to being composed entirely of the other asset (plus accrued fees)”

Several architectural changes are also made to V3, some of which are independent improvements and some others are by the inclusion of concentrated liquidity.

There are also three significant changes to the time-weighted average price (TWAP) oracle.  The need for users of the oracle to track previous values of the accumulator externally is now done away with.  

Elaborate details are available in the White paper.  The White paper reflects the current opinions of the authors and is not made on behalf of Uniswap Labs, Paradigm, or their affiliates though.

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Steven Anderson

Steven is an explorer by heart – both in the physical and the digital realm. A traveler, Steven continues to visit new places throughout the year in the physical world, while in the digital realm has been instrumental in a number of Kickstarter projects. Technology attracts Steven and through his business acumen has gained financial profits as well as fame in his business niche. Send a tip to: 0x200294f120Cd883DE8f565a5D0C9a1EE4FB1b4E9

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