Uniswap V4 Explained: Hooks, Release Date & More

What is Uniswap V4?

Uniswap V4 is the next highly anticipated upgrade of the Uniswap protocol. It builds on the capital efficiency of V3, introducing new features that increase flexibility and significantly lower gas costs. Below is a breakdown of the key upgrades driving this release.

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Hooks

Hooks are Uniswap V4's standout feature, allowing developers to attach custom logic to pools for dynamic fee strategies and tailored liquidity management during key events like swaps and liquidity changes. Each pool can have one hook, reusable across multiple pools, offering flexibility without additional complexity.

This feature unlocks zero to one innovations like onchain limit orders, yield farming, custom pricing, and advanced liquidity management, making Uniswap V4 a true game-changer for DeFi.

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Singleton Design

Uniswap V4 introduces the Singleton design, centralizing all pool operations within a single PoolManager contract. This eliminates the need to deploy separate contracts for each liquidity pool, reducing gas costs for pool creation and multi-hop swaps.

By managing pools as state updates within the PoolManager, Uniswap V4 refines operations, making them more gas-efficient and scalable.

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Dynamic Fees

Dynamic fees in V4 let pools adjust in real time based on market conditions, unlike V3’s fixed fee tiers. This flexibility allows pools to optimize liquidity provision, increasing fees during high volatility or lowering them in more stable periods to attract volume.

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Flash Accounting

Flash accounting in Uniswap V4, powered by EIP-1153, slashes gas costs by netting out balance changes during operations like swaps and liquidity adjustments. Instead of transferring tokens at every step, V4 tracks deltas (net balance changes) and only settles them in the final transaction.

This drastically cuts gas costs for multi-hop swaps and complex liquidity operations, requiring only the final token transfers, streamlining the entire process.

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Uniswap V4 Release Date

Uniswap V4 has missed its projected Q3 2024 release, and the Uniswap Foundation has not provided a formal update. However, the community is now considering a potential Q4 launch.

The platform is currently undergoing final security audits, and a bug bounty program offering up to $2.35 million has been announced to incentivize bug discovery.

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Uniswap V4 vs V3

Uniswap V4 improves on V3 by introducing new features that improve flexibility and significantly reduce gas costs, while maintaining the concentrated liquidity model both versions share.

Key differences between Uniswap V4 and V3:

• Singleton Design: V4 uses a single PoolManager contract to manage all pools, cutting gas costs for pool creation and multi-hop swaps. In V3, each pool is a separate contract, making new pools more expensive to deploy.
• Flash Accounting: V4 leverages flash accounting with EIP-1153 to optimize token transfers, reducing gas usage. V3 requires individual token transfers after each pool interaction, increasing costs.
• Dynamic Fees: V4 allows pools to adjust fees dynamically based on market conditions. In contrast, V3 uses fixed fee tiers (0.05%, 0.30%, 1.00%).
• Native ETH Support: V4 supports native ETH without the need to wrap it, lowering transaction fees. V3 requires wrapping ETH into WETH, adding extra gas costs.
• Liquidity Position Management: V4 introduces a “salt” parameter for better tracking of unique liquidity positions, whereas V3 shares state for positions in the same range, complicating fee management.
• Subscribers: V4 allows liquidity providers to receive notifications about their positions without transferring ownership, while V3 requires full transfer of the ERC-721 token for staking, adding risk.

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What is ERC-7683?

ERC-7683 is a new token standard from Uniswap Labs and Across Protocol designed to improve cross-chain interoperability. It establishes a universal filler network for cross-chain intents with layer 2 networks, reducing relayer fragmentation and cutting costs for both fillers and users.

This standard is expected to be part of the Uniswap V4 release, streamlining cross-chain transactions and boosting efficiency. UniswapX will be the first platform to adopt it for cross-chain swaps.

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Uniswap V4 License

Uniswap V4 is governed by the Business Source License 1.1 (BSL 1.1), restricting commercial use for up to four years. After this period, it shifts to the GPL, making the code fully open-source. 

Uniswap Governance and Uniswap Labs can grant exceptions, offering flexibility for specific use cases while maintaining control over commercial deployments.

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About Uniswap

Uniswap is the leading decentralized exchange in crypto, handling over $2 trillion in trading volume. Running on Ethereum and Layer 2s like Arbitrum and Base, it uses an Automated Market Maker (AMM) system to enable easy, peer-to-pool swaps.

Its permissionless design lets anyone trade or provide liquidity without restrictions, making it a cornerstone of DeFi. With non-upgradable smart contracts, Uniswap ensures secure and autonomous operation, solidifying its position as the top onchain marketplace.

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Bottom Line

Uniswap V4 promises major upgrades with features like Hooks, dynamic fees, and flash accounting, all aimed at boosting flexibility and cutting gas costs. The integration of ERC-7683 enhances cross-chain interoperability, while the Singleton design simplifies onchain operations for greater capital efficiency. 

Anticipated for Q4, V4 is expected to set a new standard in DeFi, providing developers and liquidity providers with a more powerful, adaptable platform that improves performance and user experience.