Do you really understand Uniswap v4?

6.13 uniswap labs released the draft version of uniswap V4. Of course, first of all, the commercial copyright of V3 is about to expire, and it can be used directly without authorizing other projects. This time, the commercial copyright of V4 is 4 years, and V3 is 2 years. Secondly, the release of V4 is indeed an innovation point worthy of attention in the entire crypto bear market. Explain the innovation of V4 in the most easy-to-understand way.

Innovation

1. HOOKS (the core of this innovation)

• In uni V3, each pool corresponds to a contract, and WETH is used as a transaction pair, which greatly increases transaction transaction and creation costs, while in V4, all pools are placed in a single contract through hooks, and Start the ETH transaction pair instead of WETH, the official is expected to reduce the creation gas by 99%. Efficient transactions can be made through singleton contracts.
• The singleton contract architecture will also be complemented by a flash calculation system enabled by eip-1153, based on net balance transfers only - meaning a more efficient system could provide additional gas savings in Uniswap v4.
• With the efficiency of singleton and flash bookkeeping, there is no need to limit the fee level. Pool creators can set them at the level that makes them most competitive, or customize them with dynamic fee pegs. v4 also brings back support for native ETH, which provides additional gas savings.

2. Customized diversity

Based on hooks, developers can "customize" tokens. According to the official information, it includes:

• Time Weighted Average Market Maker (TWAMM)

It works by decomposing a large order into an infinite number of infinitely small orders and executing them smoothly in a certain period of time through an AMM embedded with a constant product.

For example: Suppose A wants to buy $50 million in ETH, but one or more large orders are very vulnerable to clamping. Then the TWAMM mechanism can split his large order into countless small orders, reducing the impact of trap attacks. The disadvantage is that the gas cost on a relatively large single chain is relatively high.

• Dynamic fees based on volatility or other inputs

Simply put, the transaction fee will vary according to the volatility of the token

• Chain limit price list

It is possible to place orders on the chain and realize the function of cex.

For example, A wants to sell ETH at a certain price, but it may be affected by the price and transaction frequency. For example, he sees the price of 1900, but when he clicks to sell, the price has dropped, which leads to the transaction failure and wasted gas. If you choose to increase the slippage, although the transaction is successful, but you will be attacked by the clip, the selling price may be lower than the current price.

This also solves the pain point of the current dex trading active tokens that cannot be accurately traded, and there is no need to keep an eye on the active tokens

• Deposit out-of-range liquidity into the lending agreement

Liquidity providers can now explore opportunities to generate additional yield by depositing tokens into lending protocols outside of predefined price ranges. Assuming that A chooses that the predetermined price of ETH liquidity is 1500–1700, then once this range is exceeded, the remaining tokens will be automatically reinvested into the lending agreement to earn additional interest.

• Customized on-chain oracles, such as geomean oracles
• Automatically compound LP fees back to LP positions

Part of the handling fee generated by the transaction will flow back to the LP pool, allowing liquidity providers to have additional income

• Internalized MEV profit distribution back to LP

Developers can customize the internal MEV robot, and the profits generated will be distributed to LP providers, similar to some meme projects on the BSC chain, 2% of the 5% transaction tax will be distributed to LP providers

Simply put, both limit price pending orders in cex and pending orders within the set time can be implemented on hooks. According to the official github, it is possible to set a price limit before starting the transaction. If the conditions are met during the transaction, the transaction will be completed, and if it is not satisfied, it will be cancelled. For large orders, batch pending orders can be set for a period of time, which is equivalent to the band operation of buying low and selling high on cex pending orders.

Based on the above innovations, at present, for the project side, the chain can provide transaction volume through mev to increase popularity, and for some deflationary methods, part of it can return to lp, not just to earn profits from handling fees. The above is a very big breakthrough for meme projects, and many games on the bsc chain can be used on the eth chain. It is only a draft at present, you can pay more attention to the functions of the official version and the meme projects based on these functions.