PEOPLE

AMM giant Uniswap v3 is about to debut, what impact will it have? Various experts predict: Curve is dead

share
AMM giant Uniswap v3 is about to debut, what impact will it have? Various experts predict: Curve is dead

Uniswap has released details of its v3 version, introducing optimizations such as custom liquidity and limit order features, despite the lackluster performance of the UNI token price. The innovations have impressed many, with Deribit researcher Hasu even stating, "Uniswap v3 has basically dealt a fatal blow to Curve."

Various perspectives on Uniswap v3 have been compiled, for more details on the optimized features, please refer to the related reading.

Founder Hayden Adams

Uniswap founder Hayden Adams seemed unable to contain his joy over the v3 update, ultimately releasing the details of the v3 version more than a month early. He stated today:

I can't believe it's all ready.

Adams expressed his gratitude to crypto investment firm Paradigm researcher Dan Robinson for his assistance, mentioning that Robinson had been researching how to improve the capital efficiency of AMM platforms as early as 18 months ago, without whom v3 would not have been possible.

Paradigm Researcher Dan Robinson

Robinson stated that the idea for v3 originated back in September 2019 during a conversation with Gnosis CEO Martin Köppelmann. He mentioned:

Köppelmann pointed out how much liquidity was wasted in v1. Since then, Adams and I have been obsessed with solving this problem without sacrificing Uniswap's advantages.

Additionally, Robinson pointed out that Uniswap's use of the "constant product market maker algorithm": x * y = k was proposed by Ethereum founder Vitalik, whose inspiration also came from Köppelmann.

After months of development, Robinson believes that the v3 version is the best-designed decentralized exchange in the world.

Kyber Network Co-founder Loi Luu

Luu pointed out that the centralized liquidity concentration of the v3 update is quite similar to Kyber's upgrade in February, almost identical, but he emphasized that these are the results of development of two separate protocols.

He also believed that Uniswap was very cautious this time in preventing vampire attacks, including changing "LP tokens to NFT attributes" and the "BSL commercial source code license" from the past two years, all in preparation for this.

Deribit Researcher Hasu

Hasu bluntly stated, "Uniswap v3 has basically dealt a fatal blow to Curve."

Research Director Larry Cermak agreed, having heard many such statements and found them to be entirely accurate.

Uniswap founder Hayden Adams also commented in the article:

The main motivation is to optimize the capital efficiency of all trading pairs and provide customizable liquidity ranges; this will result in projects that optimize capital efficiency for specific trading pairs, in short: "We have almost defeated this type of protocol."

The Block Research Director Larry Cermak

Back in September of last year, when Uniswap had just released its governance token, with the token price hovering around $5, Larry pointed out that UNI rising to $11 was reasonable, indicating that Paradigm's investment in Uniswap would be worth $1 billion, with some mocking Paradigm for this investment.

Looking back at that tweet now, Larry believes that Paradigm may have completed one of the greatest investments in history, yet it is rarely discussed.

Larry also revealed that he had previously spoken with someone familiar with the v3 details and had been promoting the idea that v3 would be a masterpiece since then.

Uniswap v3's introduction of custom liquidity, limit order functionality, and other optimizations will significantly enhance capital efficiency. After the successful deployment of the Optimism Layer 2 solution in the future, Uniswap will no longer be out of reach for retail investors and small capital holders, and its position as the AMM king is expected to further improve. However, it is conceivable that in order to be a liquidity provider in v3, the gameplay will be more diverse and require more strategic thinking to maximize benefits.

Potential Impact of Uniswap v3

In-depth DeFi investor and researcher Joey Wong shared her views on v3:

She believes that the core of v3 is concentrated liquidity, as it improves capital efficiency and addresses high slippage issues, with the most significant impact likely to be on Dodo and Curve. V3 also sets three levels of transaction fees according to different application scenarios, such as setting a low 0.05% fee for stablecoin liquidity pools. As a result, Uniswap v3 will only differ from platforms focused on stablecoin exchange in terms of liquidity mining.

Joey Wong also mentioned that less discussed is that v3 will no longer use homogenous ERC-20 tokens as liquidity proof for LP Tokens, but will instead use non-fungible tokens (NFTs). She believes that this may affect the composability between DeFi platforms, and as a result, other platforms looking to integrate with Uniswap will need to make adjustments. Additionally, transaction fees will no longer be automatically reinvested into the pool, eliminating the compounding effect.

With her experience in providing liquidity, Joey Wong illustrated a scenario possible in v3. She stated that if she wants to sell ETH at a high price, she can set the ideal price range and unilaterally provide liquidity to the pool. This way, she can earn transaction fees while selling ETH, which will be more advantageous than grid trading. It's a bit like setting a limit order and still earning fees.

She believes that Uniswap v3 will be a platform with lower slippage and greater liquidity than now, leading to increased trading volume in the future.

Furthermore, possibly due to Uniswap's fatigue with being copied, v3 will be issued through a "Business Source License" (BSL) to establish a moat for the protocol for two years before transitioning to a General Public License (GPL).

Joey Wong believes that this will make it difficult for other "non-anonymous" teams to copy and result in more projects from "anonymous" teams.