Uniswap reinvents itself – Launched in November 2018, the decentralized exchange platform Uniswap revolutionized DeFi. In particular, it democratized the concept of liquidity pools and WMAs. Now, the protocol is reinventing itself, with the unveiling of UniswapX.
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UniswapX: the Uniswap revival
This week, the sixth edition of the ETHCC takes place in Paris. On this occasion, many protocols take advantage of the event to announce their upcoming evolutions.
Among them, the Uniswap platform has announced a new exchange platform called UniswapX. In conjunction with the announcement, the Uniswap teams published a whitepaper 6-page whitepaper, which explains in detail how UniswapX works and the innovations it brings.
UniswapX is a trading protocol based on non-depository Dutch auctions. In practice, UniswapX will aggregate liquidity from a variety of sources. In addition, the protocol brings a number of innovations.
Signed orders
UniswapX protocol uses smart contract Permit2. This token approval contract introduces signature-based approvals and transfers.
Therefore, to carry out an exchange, the user will sign an order specifying the input token, the output token, quantities for each token and a claim limit. In addition, this contract uses an authorization for the UniswapX core contract, which allows the protocol to spend the tokens.
This is different from the current version of Uniswap, where users interact directly with the contract to make exchanges.
Cross-chain orders
Because of its aggregator nature, UniswapX introduces the cross-chain trading. Thus, it will be possible to exchange assets held on a chain À for assets on a destination chain B.
Consequently, this feature combines two functionalities, namely the exchange as well as the transfer of funds via a bridge.
Dutch orders and order parameterization
As discussed above, UniswapX uses a type of order called Dutch order. In practice, this means that the price of a given asset decreases over time until a buyer is found.
A major difference with Uniswap, which uses an Automated Market Maker (AMM) model where the price is determined by a ratio between the reserves of the two assets in a pool.
Nevertheless, Dutch orders can be customized. The protocol does not impose a defined decay function. The user can customize the decay function to suit his or her needs.
Gas-free charges and exchange
Each exchange on UniswapX will be accompanied by a 0.05% fee.. These fees are subject to change at the discretion of the protocol’s governance.
In addition, UniswapX will offer an experience with extremely low gas costs. This is because orders are structured as off-chain signatures executable by the Permit2 contract. As a result, the protocol offers a gas-free trading experience.
« Swappers sign an offchain order, which is submitted onchain by fillers who pay the gas on behalf of the swappers to complete the transaction. Swappers don’t need a chain’s native token to swap and don’t have to pay for failed transactions. »
This is a significant improvement over Uniswap, where users have to pay a gas fee for each transaction.
MEV protection
Finally, UniswapX introduces a protection mechanism against SRM. As a result, DEXs are frequently the target of frontrunning attacks known as sandwich attacks.
UniswapX tackles this problem using an approach called « batch auctions ». In this system, all transactions are grouped into batches and processed simultaneously, rather than sequentially. This means that the order of transactions in a batch is irrelevant, eliminating the possibility of front-running.
Yet another project for Uniswap, which is also working on version 4. Nevertheless, it will only be deployed on Ethereum once the Cancún hard fork has been deployed and EIP-1153 has arrived..
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