Uniswap Seeks to Change DEX Game Again With v4’s “Hooks”

Uniswap Labs’s v4 version of the decentralized exchange, Uniswap, aims to improve flexibility and efficiency by introducing hooks and flash accounting.

The highlight of v4, announced in a post on Friday, is the introduction of "hooks," modular plugins that empower developers to implement custom logic for pools, swaps, fees, and liquidity provider positions. This innovation enables features such as dynamic fees and automated liquidity management, aiming to deepen liquidity and increase swap activity.

Uniswap hopes that the increased customization available will transform the protocol into a "developer platform” as hooks unlock “unlimited new features.”

"[Uniswap] v4 is a great advancement on v3 because it allows developers to have custom logic for pools, which wasn’t possible earlier,” said Sameep Singhania, Co-founder & Lead Developer at QuickSwap. “This basically opens up a vast amount of possibilities for various innovative and useful products.”

Uniswap v4 is now live across multiple networks, including Ethereum, Polygon, Arbitrum, OP Mainnet, Base, BNB Chain, Blast, World Chain, Avalanche, and Zora Network. Users can provide liquidity through the Uniswap web app, with swapping functionality rolling out as liquidity migrates to v4.

Flash Accounting

Uniswap v4 also introduces flash accounting, a mechanism designed to reduce gas costs associated with multi-pool transactions. In previous versions, each token transfer between pools incurred separate gas fees, making complex swaps costly. With flash accounting, balance changes are recorded internally during a transaction and netted out at the end, resulting in fewer token transfers and significant gas savings.

Uniswap’s new singleton architecture also contributes to reduced costs, as it consolidates all pools into a single contract, known as the PoolManager.

Uniswap revealed on X that pools on v4 are expected to be 99.99% cheaper to create, and users can expect to save more on multi-hop swaps.

Uniswap v4 builds on the success of v2 and v3, which have collectively processed over $2.75 trillion in trading volume without a single hack, according to a Uniswap blog post.

Unified Ethereum

The combined efforts of Uniswap v4 and Unichain, an Ethereum L2, will also bring a unified infrastructure across Ethereum mainnet and L2s so that “many difficult interoperability problems in DeFi are getting solved,” said Shumo Chu, Co-Founder of NEBRA.

Unichain, introduced by Uniswap Labs in October 2024, is a decentralized Superchain L2 that’s “built to be the home for DeFi and liquidity across chains,” according to Uniswap. Currently in its testnet phase, Unichain is expected to launch on the public mainnet in early 2025.

Uniswap Evolution

When Uniswap v1 launched in 2018 on the Ethereum blockchain, it revolutionized DeFi as one of the first automated market makers (AMMs). This eliminated the need for order books and enabled permissionless trading on large blockchains.

However, v1 had limitations, such as high gas fees and a lack of features like price oracles. It also required ETH as an intermediary for all trades.

Uniswap v2, released in 2020, revolutionized DeFi further by improving upon v1 and enabling direct token-to-token swaps, removing the need for intermediaries. These innovations would set the stage for v3’s concentrated liquidity and, now, v4’s gas-saving enhancements.

v4 is a transition for Uniswap from an application to infrastructure, Chun added.

“Due to the big market share Uniswap takes in the Ethereum DeFi, there are so many verticals and demands which the Uniswap team cannot possibly fulfill in every single front,” he said. “Now Uniswap V4 marks a milestone that Uniswap is building a vibrant ecosystem based on its branding and retail order flow.”