The launch of the version 4 of the Uniswap protocol is looming. This major upgrade, which is highly dependent on the implementation of Ethereum’s Cancun update, promises to shake up the landscape of decentralized exchanges.
Uniswap v4: a major evolution
Uniswap v4 is shaping up to be a major breakthrough in the decentralized finance ecosystem, bringing a series of innovations that promise to transform the way tokens are traded on-chain.
One of the most striking innovations is the introduction of “hooks”smart contracts that run at different points in the lifecycle of a pool action.
These “hooks” allow a unprecedented customization of liquidity pools, giving users the ability to make trade-off decisions similar to version 3, or add new features. For example, pools will now be able to natively support dynamic fees, add on-chain limit orders, or act as a time-weighted average market maker (TWAMM) to spread large orders over time.
Uniswap v4 also introduces an innovative “flash accounting” system.
Unlike version 3, where assets were transferred in and out of pools at the end of each trade, this new system will only transfer net balances. This approach promises to reduce fees for liquidity providers and improve transaction efficiency.
The Crucial Role of Ethereum’s Cancun Update
The Cancun Upgrade from Ethereum instrumental in launching Uniswap v4. This upgrade, which includes the integration of the EIP-1153 proposalis essential for the functioning of the “flash accounting” system of Uniswap v4.
EIP-1153 is a proposed Ethereum enhancement that enables “transient storage.” This mechanism allows transfers to be made only on net balances, which should lead to significant gas savings. Indeed, swaps will no longer need to transfer tokens between pools hosted in different contracts, which should reduce pool creation costs by 99%.
The Cancun upgrade is therefore a crucial step for the launch of Uniswap v4. Without this upgrade, the flash accounting system could not become operational, and the benefits in terms of cost reduction and transaction efficiency could not be realized.
The security audit process
After the Cancun upgrade, a security audit remains a crucial step in the process. This audit, far from being a simple formality, is a evaluation that guarantees the security of the new protocol. According to Erin Koen, head of governance at the Uniswap Foundation, such an audit can take up to four months. The Uniswap Foundation is committed to taking the time necessary for this audit in order to preserve the security and integrity of the Uniswap ecosystem.
Implications for the crypto community
While the different versions of the protocol count a daily trading volume of more than one billion dollars, the launch of its v4 is a watershed moment for the DeFi space. Besides, the Uniswap v4 upgrade could also have a significant impact on the price of the UNI token, the governance token of Uniswap. With major innovations such as “hooks” and the “flash accounting” system, Uniswap v4 promises to fundamentally transform decentralized exchanges.
Source : Uniswap