IOI
In Brief:
-A new fee tier, improved oracles, and more concentrated liquidity are included in version 3.
-For users, SushiSwap and PancakeSwap compete with the decentralized exchange.
The top decentralized exchange in the world can’t afford to remain complacent when new products and features are released weekly in the nascent decentralized finance (DeFi) industry.
On May 31, Uniswap upgraded its protocol to version 2, allowing users to control how much liquidity they provide and get a higher payout on riskier trades.
By using DeFi, one can get loans, earn interest on holdings, swap tokens, and bet on token value via automated code built upon a blockchain network. Over $391 billion of Ethereum has been invested in Ethereum-based DeFi protocols, which illustrates how crucial the sector is to blockchain’s growth (and likely its price).
Decentralized exchanges, such as Uniswap, enable people to swap tokens on the Ethereum network. Uniswap itself is an automated market maker (AMM), which means it relies on algorithms instead of buying and selling orders to price assets. The platform’s users provide liquidity by locking up tokens they own; others can borrow the tokens and pay interest to the liquidity providers.
There are many “ERC20” tokens on the exchange, including stablecoins like Tether and USDC, along with government tokens, like Maker and Aave.
CoinMarketCap estimates that Unsiwap had a trading volume of nearly $1.9 billion last day, making it a “critical infrastructure for decentralized finance,” as the company said in a March 23 blog post.
The goal of Uniswap 3 is to become “the most efficient and flexible AMM ever developed.”
The New Features of the DEX are Highlighted Below:
Uniswap wrote in a March press release that automated market makers require that all liquidity providers use identical strategies and deposit capital across the entire price curve. By not accounting for individual expectations of future price activity, they have failed to account for the result that traders can obtain results with less capital.
In addition, Uniswap is adding more fee tiers so traders can decide their risk level when trading volatile assets. These assets are susceptible to price fluctuations between the time a trade is triggered and the time it is executed.
The company also devised “easier and cheaper” oracles-which ensure prices are accurate, preventing bad data from ruining the business.
Uniswap says these features can lead to increased returns for seasoned DeFi traders but are not much use to beginners.
It will need that as competition from other DEXs intensifies. Earlier this year, Kyber released plans for version 3.0 of its permissionless exchange. This release was also intended to reduce risk for traders dealing in volatile assets. The UniSwap-clone SushiSwap also announced plans last winter to increase liquidity via interoperability with other DeFi protocols and to launch its own lending platform.
A Binance-based PancakeSwap exchange has cut into Uniswap’s market share. Binance’s Smart Chain supports DEX’s, including the Binance Smart Chain.
Once you’re familiar with Uniswap’s new features, version 4 is likely to arrive soon.
