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Can Uniswap V4 help DEX surpass CEX?

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Uniswap V4 has accelerated the pace of DEX catching up with CEX. Uniswap has the opportunity to become the true infrastructure of crypto DeFi, and even has the chance to reach and surpass the market share of CEX in the next five to ten years.

Original Title: "Can Uniswap V4 surpass CEX? "

Original Source: Blue Fox Notes

Uniswap V4 has raised a question: Can DEX surpass CEX? This is no longer an unattainable imagination.

Unlike Uniswap's previous optimization efforts to improve liquidity and asset efficiency, Uniswap V4 aims to become a platform, a true foundation platform for cryptocurrency finance.

This iteration has two most important aspects: 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 achieve customizable liquidity pools. Developers can deploy Hooks to achieve DEX scenarios that meet their own needs, with the underlying utilization of Uniswap V4's large liquidity pool.

That is to say, Uniswap V4 has become a basic platform, and developers can develop various new functions based on V4, such as limit orders (previously a feature of CEX compared to DEX), dynamic transaction fees based on volatility or other conditions (unlocking higher incentive possibilities), TWAMM (time-weighted average market maker, which can achieve smoother trading of larger assets), depositing liquidity beyond the range into lending protocols, customizing on-chain oracles, and automatically compounding LP fees into LP positions, etc. As developers deepen their understanding, they will develop more hook cases based on their own and community needs.

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Uniswap is customizable 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 deeply bound to the community and the project's own development. This alone is something that CEX cannot achieve.

Based on Uniswap V4, developers can freely paint, which will greatly stimulate the imagination and creativity of developers and the community. It will reach new heights in liquidity efficiency and deep binding with the project. At the same time, it can also be foreseen that the incentive for liquidity providers will reach higher heights.

With the increase of hooks and new features, Uniswap has the opportunity to become the underlying liquidity infrastructure. Uniswap V4 will be embedded in more DeFi ecosystems, greatly increasing its network effects, and ultimately becoming the underlying infrastructure of the entire DeFi industry.

*Singleton

The original architecture was based on the factory/pool pattern, where each liquidity pool had its own contract, belonging to a multi-token and multi-contract architecture. Now, a singleton contract architecture has been introduced, where all liquidity pools are located within a singleton smart contract.

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The original architecture had high costs when creating liquidity pools and conducting multi-pool exchanges. The singleton contract architecture in V4 reduces gas costs and eliminates the need to transfer between different contracts in different pools. According to the Uniswap team's estimates, this architecture can reduce the gas cost of creating liquidity pools by 99%.

In addition, the "flash accounting" system has been introduced in the singleton architecture. Unlike V3, which transfers assets out/in after each exchange, V4 transfers based on net balance. Furthermore, the "transient storage" in the EIP-1153 upgrade in KanKun is also beneficial to the system and helps to further achieve cost optimization.

Finally, in V4, native ETH reappears in trading pairs (which was removed in V2), which will also bring some reduction in gas costs.

Conclusion

From the current gameplay of Uniswap V4, it is not only aiming to become the largest DEX, but also a DEX platform that allows more developers and projects to build various custom gameplay on its liquidity platform. This open architecture brings greater possibilities.

Uniswap V4 has accelerated the pace of DEX catching up with CEX in the cryptocurrency industry. Uniswap has the opportunity to become the true infrastructure of the crypto DeFi space, and even has the potential to reach and surpass the market share of CEX in the next five to ten years.

Risk Warning: All the above analysis is only a partial observation of technology and market, which may not be accurate. Please make your own judgment and do risk control.