Decentralized Exchange Uniswap Launches V3, Fails To Impress Users As Price Slumps 14%

The largest decentralized exchange in the crypto space, Uniswap, has announced the launch of their V3 protocol update which is set to go live on the Ethereum mainnet on May 5.

What Happened: The widely anticipated launch was expected to bring with it some much-needed upgrades and improvements to the protocol, which was reflected in the price of the protocol’s governance token UNI.

@Uniswap's governance token $UNI reached a new high of $35.2 with a lot of excitement building around the upcoming v3.

In just 78 days of 2021, the protocol did $73.1b in traded volume and over $219m in fees.

As well, the Total Value Locked reached a new ATH of $5.23b pic.twitter.com/yeklzbFt8V

— IntoTheBlock (@intotheblock) March 20, 2021

https://twitter.com/intotheblock/status/1373405781903745031

Uniswap introduced a host of new features with V3, including concentrated liquidity and multiple fee tiers. Concentrated liquidity will give individual LPs or liquidity providers complete control over what price ranges they want to provide liquidity to, while the multiple fee tiers would adequately compensate them for taking on different layers of risk.

“LPs can provide liquidity with up to 4000x capital efficiency relative to Uniswap v2, earning higher returns on their capital”, stated Uniswap in a V3 overview on their website.

Why It Matters: Soon after Uniswap’s announcement, the price of UNI rallied to $36.41 before correcting down to $30.70. At the time of writing, UNI was trading at $31.19, down by 14.3% in the past 24-hours.

While the list of new features did impress users, some remained unconvinced that the new upgrade delivered on all fronts.

“Well, not quite what people were hoping for or expecting, but it's certainly an improvement on liquidity management,” said Jeff Kirdeikis, CEO of TrustSwap.

Another user claimed that the new features did not solve any of the existing “fundamental problems” like high gas fees, impermanent loss, bots, and front running.

What Else: Another feature introduced by the decentralized exchange was a “business source license” that limits the use of Uniswap’s codebase for up to two years, after which it will convert to a GPL license into perpetuity.

The community at large believed this was aimed at rival decentralized exchange (DEX) SushiSwap, which was created from a copy of Uniswap’s code.