Just to track the news in the Defi world is a full-time job. Every week is like a year – many new products and features dropping. On top of that, the best decentralized exchange can’t afford to relax.
Tomorrow Uniswap will release v3 of its protocol. The last update was made last May. The new version will give more users more control over the liquidity they provide and feature more upside for riskier trades.
Decentralized finance (DeFi) is an industry that replaces traditional financial institutions such as banks and brokerage firms. In doing so DeFi uses smart contacts built atop the blockchain. By using DeFi you can get loans, earn interest on holdings, swap tokens, and place bets on tokens’ future values.
DeFi is already a multi-billion industry. Over $77B from all $391B Ethereum’s market capitalization are invested in Ethereum-based DeFi protocols. The sector has an important position among the crypto community.
Uniswap is the most popular DEX (decentralized exchange) based on Ethereum. The platform is an automated market maker (AMM) meaning it relies on algorithms to price assets instead of buying and sell orders.
For the last 24 hours, Unsiwap reported a trading volume of nearly $1.9 billion, according to CoinMarketCap. Even if this is a little piece compared to the centralized spot exchanges Binance or Huobi the platform is “critical infrastructure for decentralized finance,”.
What will be changed?
The first is concentrated liquidity. “Automated market makers have historically required all [liquidity providers] to share identical strategies and deposit capital across the entire price curve from 0 to infinity,” Uniswap wrote in a March press release. In doing so, they have failed to account for individual expectations of future price activity. The traders will not be needed to put in as much capital to achieve profits.
Uniswap is adding more fee tiers so traders can determine their risk level when trading volatile assets. These assets are prone to changing prices in between when a trade is initiated and executed.
Lastly, Uniswap will make a change to be sure the price is up to date and therefore reduce the risk of getting burned by bad data.
Many other DeFi projects try to collect attention and liquidity by announcing their plans for upgrades. Earlier this year Kyber announced plans to launch v3. SushiSwap also shared ideas for some changes.
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