Uniswap V4: A new era for DeFi ?

Context on Uniswap

Uniswap is the first decentralized exchange (DEX) in the decentralized finance (DeFi) sector. Initially suggested by Vitalik Buterin in 2016 before launching in 2018, Uniswap quickly established itself as a cornerstone of the Ethereum ecosystem.

One of Uniswap’s most significant innovations was the introduction of the Automated Market Maker (AMM) concept, a mechanism that revolutionized how users exchange assets on the blockchain. Instead of relying on a centralized intermediary or a counterparty, users swap cryptocurrencies using liquidity stored in smart contracts (liquidity pools), which are maintained by users themselves.

Since its launch in 2018, Uniswap has undergone significant evolution:

• Uniswap V1: The first version of the protocol enabled users to swap ERC-20 tokens for ETH using a constant product mechanism (xy=k*).

If a pool has 10 ETH and 10,000 USDC, then k = xy* = 10 * 10,000 = 100,000. If a user buys 1 ETH, the pool will now have 9 ETH. To maintain a constant product (k = xy* = 100,000*), more USDC must be added to the pool. This mechanism ensures that the more an asset is bought, the higher its price rises through an automatic balance of supply and demand.

However, this version was limited to ETH-indexed pairs, leading to liquidity fragmentation.

• Uniswap V2: This update introduced the ability to create pairs between any ERC-20 tokens, removing the need to swap via ETH. For instance, users could directly exchange USDT for DOGE.

This update also introduced more advanced features, such as improved asset price accuracy and flash swaps, allowing users to borrow tokens instantly without collateral as long as repayment occurs within the same transaction.

• Uniswap V3: The key innovation in this version was concentrated liquidity. This allowed liquidity providers (LPs) to select specific price ranges to provide their funds, optimizing capital efficiency and increasing returns.

These successive advancements propelled Uniswap to the forefront of the DEX sector, with over $1.6 trillion in trading volume since launch. However, Uniswap’s pursuit of innovation did not stop there, and in June 2023, the protocol announced the development of V4, which finally launched in early 2025.

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Uniswap V4: What You Need to Know

Launched on January 30, 2025, after more than a year of development, Uniswap V4 marks a pivotal moment in the protocol’s history and the future of the entire DeFi sector. The level of customization and efficiency is unprecedented for both developers and users. So what are the key aspects and innovations of Uniswap V4, and how could this update revolutionize the DEX landscape?

Hooks

Hooks are modules that developers can add to fully customize how liquidity pools operate. Previously, Uniswap had a rigid structure with limited customization options. Now, developers can implement advanced customization such as:

• Limit orders (buy/sell at a specific price).
• Custom oracles (for improved price management).
• Dynamic fees (adjusting fees based on volatility or demand).
• Automated liquidity management.

In other words, there is no longer a need to fork Uniswap to add new features. Now, developers can simply attach a hook—similar to WordPress plugins, but for DeFi.

Singleton Contract

The goal behind this innovation is to reduce the cost of creating a liquidity pool within the protocol. With V4, instead of deploying new smart contracts for each pool, Uniswap uses a single contract for all pools. This reduces deployment costs by 99.99% while simplifying pool management.

Flash Accounting

Flash Accounting enables the use of the EIP-1153 standard within Uniswap to optimize token management in transactions. More concretely, V4 allows multiple actions to be nested within a single transaction.

This innovation offers two key advantages:

• Lower gas fees (fewer intermediate transfers).
• Ability to batch multiple actions into a single transaction without extra costs.

Native ETH Support (No More WETH)

Users can now directly trade native ETH for ERC-20 tokens. Surprisingly, it was previously necessary to wrap ETH into WETH to swap it. This change is expected to reduce ETH-related swap fees by approximately 15%.

A Comprehensive Dashboard

Another particularly interesting feature is the integration of an official dashboard managed by the Uniswap team. The goal is to showcase V4 adoption, including metrics such as total value locked (TVL), trading volume, swap counts, and the percentage of transactions using the new Hooked pools.

Here’s the link to view the official Uniswap V4 dashboard

Other Major Advantages

• Dynamic Fees and Customized Pool Management

V4 introduces a dynamic fee system for transactions. Fees can be automatically adjusted based on several factors, including market volatility, liquidity levels, and other customizable parameters.

This unlocks new possibilities, such as algorithmic fee optimization to maximize liquidity efficiency and the implementation of incentive mechanisms based on user behavior.

• Custom Accounting

Custom Accounting allows developers to personalize token accounting mechanisms within liquidity pools. This feature provides unprecedented flexibility in asset management.

Additionally, it enables alternative pricing curves beyond traditional concentrated liquidity models and introduces specific fee mechanisms, such as withdrawal fees.

• Multiple Audits and a Large Bug Bounty Program

Uniswap V4 underwent nine independent audits and the largest bug bounty program in history, with a $15.5 million reward for identifying vulnerabilities. The code is entirely open-source and has been thoroughly reviewed by the community.

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What Projects Are Building on Uniswap V4?

The launch of Uniswap V4 opens new opportunities for the DeFi ecosystem, particularly with hooks enabling advanced customization of liquidity pools. Several projects have rapidly adopted this innovation to develop optimized solutions for trading, yield farming, and risk management.

Bunni

Bunni is an infrastructure designed to maximize liquidity providers' (LPs) capital efficiency by introducing advanced management and optimization mechanisms. The protocol leverages Uniswap V4 to offer several enhancements:

• Adjustable liquidity density: Dynamically adjusts liquidity distribution based on market conditions.
• Automatic rebalancing: Positions are continuously adjusted, and collected fees are automatically reinvested.
• Swap cost optimization: Transactions benefit from reduced gas fees regardless of the number of "ticks" crossed.
• Asset rehypothecation: Idle funds can be lent to other protocols for additional yield generation.

Bunni aims to improve liquidity management on Uniswap V4 while ensuring LPs achieve higher capital efficiency.

Flaunch

Flaunch is a launchpad specialized in memecoins, optimized for Uniswap V4. It incorporates several mechanisms to ensure fair and sustainable token distribution:

• Full revenue redistribution to developers, who can reinvest them into their projects.
• Automatic token buyback: As soon as 0.1 ETH in fees is generated, a buyback is triggered, creating continuous buying pressure.
• Price lock mechanism: At launch, the token price is stabilized for a maximum of 30 minutes to ensure a more balanced market entry.

With these innovations, Flaunch aims to professionalize and structure the memecoin market while leveraging V4’s new features.

Angstrom by Sorella Labs

Sorella Labs focuses on MEV (Maximal Extractable Value) protection for users and liquidity providers, with an explorer to analyze MEV activity on Ethereum. Their flagship project, Angstrom, is a DEX integrating innovative mechanisms to mitigate the negative effects of MEV:

• App-Specific Sequencing (ASS): This system allows the DEX to control transaction ordering, reducing front-running and sandwich attacks.
• Transaction auction redistribution: Arbitrageurs must bid to execute transactions without MEV fees. These auctions are redistributed to LPs, enhancing economic incentives.

This approach minimizes MEV impact while ensuring better revenue distribution among protocol participants.

Note: ASS is a mechanism that allows a decentralized application, like a DEX, to control transaction order rather than leaving it to blockchain validators. Unlike traditional blockchains where validators can reorder transactions to maximize MEV profits (which can harm users with slippage, front-running, etc.), ASS enables the DEX to control transaction sequencing, limiting exploitation strategies and creating a fairer environment for users.

Cork Protocol

Cork Protocol is an infrastructure introducing a hedging market against stablecoin, LRT, and LST depeg risks. It utilizes Uniswap V4 to create a structured risk trading market via three primary products:

1. Cork Markets: Each market pairs an indexed asset (e.g., stETH) with a redemption asset (e.g., ETH).
2. Depeg Swap: Allows users to exchange a depegged asset for a reference asset.
3. Cover Token: Offers a fixed yield as long as the indexed asset maintains its peg.

The system operates through a Peg Stability Module, where users deposit assets. This module generates Depeg Swaps and Cover Tokens, which are distributed based on market fluctuations.

Cork Protocol introduces a new way to hedge against depeg risks or speculate on market events, providing a novel financial instrument within DeFi.

Other Notable Projects

Many other protocols are experimenting with Uniswap V4 hooks to develop innovative solutions:

• @OpenZeppelin: Developing a library of hooks to facilitate the integration of new functionalities.
• @SemanticLayer: Using hooks to create advanced MEV protection tools and non-fungible options.
• @ArrakisFinance: A decentralized market-making protocol that helps LPs optimize their yield while protecting against MEV.
• @A51_Fi: An intent-based AMM where LPs can dynamically adjust their liquidity based on market conditions.
• Doppler (by @whetstonedotcc): A platform enabling liquidity bootstrapping through auction mechanisms integrated with Uniswap V4 hooks.

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Conclusion

The Uniswap V4 update marks a turning point in the evolution of decentralized exchanges. The protocol is not just keeping pace with DeFi’s evolution; it is actively driving innovation. V4 opens a new chapter where flexibility and customization are central to Uniswap’s offering.

With hooks, the protocol becomes a fully customizable framework that developers can tailor to their needs, creating unique features for liquidity management, fees, and more.

The newly introduced mechanisms—singleton contract, flash accounting, and native ETH support—significantly enhance protocol efficiency and scalability, reducing costs and creating new opportunities for traders, developers, and liquidity providers.

With growing adoption and projects like Bunni, Angstrom, and Cork Protocol leveraging V4’s capabilities, Uniswap strengthens its position as the leading DEX and could redefine how DeFi operates in the coming years.