Does Uniswap’s latest addition give it the upper hand over its peers?

• Uniswap’s new addition to its upcoming v4 received funding from a firm.
• Protocol activity continued to decline as TVL and fees start to deplete.

Uniswap[UNI] has long been a dominant DEX in the DeFi sector. To maintain its dominance, the protocol has actively pursued future developments and secured financial backing for these initiatives.

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A paradigm shift

Paradigm, a technology investment firm, stated that it will be investing in Hooks on top of Uniswap v4. For context, hooks are contracts that execute at different stages of a pool action’s lifecycle in Uniswap v4.

Uniswap liquidity pools go through various stages during their lifecycle, involving actions such as pool creation with a default fee tier, liquidity adjustments, and token swapping. In Uniswap v3, these events are tightly linked and follow a strict sequence.

To enable more flexibility in Uniswap v4 and allow customizable liquidity, hooks were introduced. These hooks serve as plugins, empowering pool deployers to incorporate designated actions at key points in the pool’s lifecycle. They can be utilized before or after a swap, or before or after an LP position is modified.

These hooks will bring new functionalities to the protocol. For example, Uniswap is planning to introduce a time-weighted average market maker (TWAMM), which will help spread out large orders over time. Additionally, they are exploring the idea of implementing dynamic fees based on factors like market volatility. Onchain limit orders, another upcoming feature, will allow users to place orders directly on the blockchain.

Furthermore, they are considering allowing liquidity to be deposited outside the usual price range into lending protocols. These hooks will give developers more customization options and flexibility, enabling them to create unique AMM pools that integrate seamlessly with Uniswap’s smart contracts.

Realistic or not, here’s UNI’s market cap in BTC’s terms

Uniswap faces trouble

Despite these updates, the activity on the Uniswap protocol had started to decline. This was indicated by the falling TVL of Uniswap, which decreased by 6.4% over the last month. Subsequently, the fees collected on the protocol also took a hit. Since the last 30 days, the fees collected on Uniswap declined by 9.4% according to Token Terminal’s data.

Source: token terminal

In contrast to the state of the protocol, the UNI token observed significant growth. Santiment’s data indicated that UNI’s price surged over the last month. In tandem with its price, the number of UNI token holders also grew.

Source: Santiment