Uniswap V3 is Here

Uniswap V3 is Here

Let’s do a quick run-through of what new features are in Uni v3.

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 mar

One of the most interesting new features is that now, an NFT will represent each liquidity position. Each NFT will be a uniquely generated art with the properties of the position, and there’s a chance of getting RarE SpArKleS...sounds exciting. 

One of the biggest complaints about the Uni v3 is the lack of a solid solution for high gas fees. Although Uniswap did say there will be a launch on L2 Optimism to reduce gas fees slightly, this solution does not satisfy the critics of Uni v3. The biggest limitation with any project on the Ethereum blockchain is the high gas fees, which will likely stay this way until ETH 2.0.

Uni v3 has come out with a hot start. According to Uniswap’s founder, Hayden Adams, v3 has seen more volume than the first month of v2. He also noted in his tweet that v3 was a lot more efficient. On its first day, v3 saw 150 million in volume and $300 million in TVL for a 50% efficiency ratio. In v2’s first day, it saw $1.1 billion in volume and $8.1 billion in TVL for a 13% efficiency ratio.

While v3 was a significant step for liquidity providers by allowing more customization to the liquidity providers, it did not add much for the traders. Right now there are low to no liquidity pools for a lot of coins. Until these fill up we will see most traders stay on v2.

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