Uniswap v1 was launched in November 2018 as a proof of concept for automated market makers (AMMs), a type of exchange where anyone can pool assets into shared market making strategies.
In May 2020, Uniswap v2 introduced new features and optimizations, setting the stage for exponential growth in AMM adoption. Less than one year since its launch, v2 has facilitated over $135bn in trading volume, ranking as one of the largest cryptocurrency spot exchanges in the world.
Uniswap now serves as critical infrastructure for decentralized finance, empowering developers, traders, and liquidity providers to participate in a secure and robust financial marketplace.
Today, we are excited to present an overview of Uniswap v3. We are targeting an L1 Ethereum mainnet launch on May 5, with an L2 deployment on Optimism set to follow shortly after.
Uniswap v3 introduces:
- Concentrated liquidity, giving individual LPs granular control over what price ranges their capital is allocated to. Individual positions are aggregated together into a single pool, forming one combined curve for users to trade against
- Multiple fee tiers, allowing LPs to be appropriately compensated for taking on varying degrees of risk
These features make Uniswap v3 the most flexible and efficient AMM ever designed:
- LPs can provide liquidity with up to 4000x capital efficiency relative to Uniswap v2, earning higher returns on their capital
- Capital efficiency paves the way for low-slippage trade execution that can surpass both centralized exchanges and stablecoin-focused AMMs
- LPs can significantly increase their exposure to preferred assets and reduce their downside risk
- LPs can sell one asset for another by adding liquidity to a price range entirely above or below the market price, approximating a fee-earning limit order that executes along a smooth curve
Uniswap's oracles are now far easier and cheaper to integrate. V3 oracles are capable of providing time-weighted average prices (TWAPs) on demand for any period within the last ~9 days. This removes the need for integrators to checkpoint historical values.