Can Uniswap V4 help DEX surpass CEX?

The emergence of Uniswap V4 raises a question: Can DEX surpass CEX? This is no longer an unattainable imagination.

Different from Uniswap's previous optimization efforts in improving liquidity and asset efficiency, Uniswap V4 tries to become a platform, a real basic platform for encrypted finance.

There are two most important aspects of this iteration: one is Hooks and the other is Singleton.

*Hooks

Through Hooks, various interactions with liquidity pools, transactions, fees, and LP positions can be customized. The essence of Hooks is to realize a customizable liquidity pool. Developers can implement DEX that meets their own needs by deploying Hooks, and the bottom layer is to use the large liquidity pool of Uniswap V4.

In other words, Uniswap V4 has become a basic platform. Based on V4, developers can develop various new functions, such as price limit orders (previously a feature of CEX compared to DEX), dynamic procedures based on volatility or other conditions Fees (unlocks higher incentive possibilities), TWAMM (time-weighted average market maker, enabling smoother transactions for larger assets), depositing out-of-scope liquidity into lending protocols, custom on-chain oracles , LP fees are automatically compounded to LP positions, etc. As developers get to know more, they will develop more hook cases according to their own and community needs.

(From Uniswap official website)

Uniswap can be customized based on its own needs, which can inspire developers to launch new types of liquidity pools to meet various trading scenarios, and make liquidity more closely bound to the community and the development of the project itself. This alone is beyond the reach of CEX.

Based on Uniswap V4, developers can paint freely, which will greatly stimulate the imagination and creativity of developers and the community, and will reach a new height in terms of liquidity efficiency and deep binding of the project itself. At the same time, it is also foreseeable that the incentives for liquidity providers will reach a higher level.

With more hooks and new functions, Uniswap has the opportunity to become the underlying liquidity infrastructure. Uniswap V4 will be embedded into more DeFi ecosystems, thereby greatly increasing its network effect, and eventually becoming the underlying infrastructure of the entire def.

*Singleton

It was originally a factoy/pool model, with one contract for each liquidity pool, which belongs to the multi-token and multi-contract structure. Now a large contract structure (singleton, "singleton" contract) is introduced, and all liquidity pools are in single-case smart contracts .

(From Uniswap official website)

The original architecture is costly when creating liquidity pools and performing multi-pool exchanges. The singleton contract architecture in V4 reduces gas costs and does not need to be transferred between different contracts in different pools. According to the estimates of the Uniswap team, this architecture can reduce the gas cost of creating a liquidity pool by 99%.

In addition, the "flash accounting" system is also introduced into the single-case structure. Unlike V3, which transfers assets out/in after each exchange, V4 transfers assets based on the net balance. In addition, the "transient storage" of EIP-1153 in the Cancun upgrade also benefits the system and helps further cost optimization.

Finally, in V4, the native ETH reappears in the transaction pair (it was removed in V2), which will also bring some gas cost reduction.

Conclusion

Judging from the current Uniswap V4 gameplay, it not only wants to become the largest DEX, but also a DEX platform, allowing more developers and project parties to build various custom gameplay on its liquidity platform. The architecture brings greater possibilities.

As more developers deploy Hooks, more new functions come out, and more composability cases come out, the network effect and irreplaceability of Uniswap are gradually enhanced. From the perspective of Blue Fox Notes, these efforts will promote the continued increase of Uniswap's liquidity, making it one of the most influential underlying facilities.

The emergence of Uniswap V4 has accelerated the pace of DEX catching up with CEX. Uniswap has the opportunity to become the real infrastructure of encrypted DeFi, and even has the opportunity to reach and exceed the market share of CEX in the next five to ten years.