New Uniswap version promises higher returns

25. March 2021

New Uniswap version promises higher returns

Uniswap developers have revealed details of the upcoming upgrade. With an improved liquidity system, capital providers are set to benefit from higher returns.

In the wake of the decentralised finance (DeFi) hype, liquidity protocol Uniswap has beaten off competition to earn the spot as the largest decentralised exchange (DEX). More than 90 per cent of all DEX transactions are included in the overall ranking. Around 20 percent of all smart Bitcoin Profit contract transactions based on Ethereum can be traced back to Uniswap, which is thus largely responsible for Ethereum’s fee usury. It is no longer possible to imagine the crypto ecosystem without the exchange. The new version should equip the top dog for the future and enable higher returns for capital providers.

Uniswap facing change of scenery

On 23 March, the Uniswap developers published details of the new version. Specifically, the third version of Uniswap should improve the functions of the liquidity pool.

Up to now, capital providers have had little influence on the framework conditions. This is finally to change with the new version. In future, investors will be able to determine the conditions under which their capital is released and thus earn higher returns. Consequently, the developers speak of an “up to 4,000-fold capital efficiency” compared to the current version.

The concept behind this is called “Concentrated Liquidity”. In the future, capital providers can thus determine on Uniswap “in which price ranges their capital is allocated”. In this way, they will also earn more on the trading fees incurred:

Trading fees collected in a certain price range will be shared proportionally by LPs, in proportion to the amount of liquidity they have contributed to that range.