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1 cool thing about the singleton design is it actually reduces current estimates, have it have it reducing the gas cost of pool deployment by about 99%. Wait, what? Sometimes people pay when gas costs are high, like north of a thousand dollars to deploy a pool, just a gas cost. And that same deployment would be something like $10. Thank you.

Station.

There's a big announcement for everyone in DeFi today. Uniswap version 4, it's coming out. We have Hayden Adams on the podcast to tell us more. We talked about a few things. What is Uniswap version 4, v4?

What does it do? When's it coming? How big of a deal is this from an order of magnitude size? Is this as big as v3? We also talk about hooks, this idea of a modular Uniswap.

What are hooks? What do they do? What is the future for liquidity on Ethereum? And finally, we talk about DeFi. Has DeFi slowed down?

Has it diminished? Does Hayden still think we're on track to eat traditional finance? All of these topics unpacked in the episode today. Guys, before we begin, though, I want to tell you about a prize-linked ETH denominated savings account from our friends and sponsors at Asymmetrix. David, what is this?

Asymmetrix. It is a way to make your ETH staking super exciting or super boring or super exciting. If you want that 4.5, 5% ETH stake to range anywhere between 0% or 1000%, asymmetrics may be for you. Okay, what the hell am I talking about? So asymmetrics, it's a little bit like pool together, Same kind of concept where everyone stakes their ether, but only the yield goes to 1 person who gets a lot of yield while everyone else gets 0 yield.

This is why Ryan called this a prize-linked savings account. So If someone just feels like a little bit extra lucky and they want to add some excitement to their ETH staking, they can go to banklist.cc slash H-symmetrics to get anywhere between 0 or 1000% stake on their yield. Ryan, diving into this episode, when I was learning about Uniswap v4, I really just got visions of a microcosm of Ethereum. So I'm calling this the hook-centric roadmap for Uniswap, whereas Ethereum has its roll-up-centric roadmap. Uniswap now has hooks, and it allows for Uniswap base to be extremely primitive but hooks to reintroduce complexity into the Uniswap AMM on an opt-in basis and I think this really gives a lot of power to builders who want to make their Uniswap pools very expressive.

Overall, it starts off as a very small update. V4 is a small update to V3, but the cool thing is that the size of how awesome and powerful Uniswap v4 is actually grows alongside the open source developer community around Uniswap. So I'm very bullish on this new update. Hayden's gonna unpack it for us in this episode. Small disclaimer, Uniswap Labs is a sponsor of Bankless.

They currently sponsor the Bankless podcast. But Uniswap V4 is an episode that we would never miss. And so we're having Hayden Adams, the inventor of the Uniswap protocol on to discuss all about Uniswap V4. So let's go and get right into the conversation with Hayden Adams. But first a moment to talk about these fantastic sponsors that make this episode possible, including and especially Kraken, our preferred crypto exchange for 2023.

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Build, play, and connect at Immutable.com. Bankless Nation, I would love to introduce you to Hayden Adams, the inventor of the Uniswap protocol and CEO of Uniswap Labs, a software company building on and around Uniswap. And today, Hayden is here to talk about the vision behind Uniswap v4 and what it could mean for liquidity on Ethereum. Hayden, welcome back to Bankless.

Thank you for having me. So excited to be here and to talk about Uniswap v4.

Yeah, Hayden, are we getting a new Uniswap?

Short answer is we are. Long answer is that the process of getting a new Uniswap is going to look a little bit different this time around.

I think

that a really important starting point is that we see Uniswap as very similar to Ethereum itself, where it's a core piece of infrastructure, public infrastructure on which thousands of teams are building, there's hundreds of thousands of liquidity providers. And it's really just this public infra for the entire space. It has about, at times it has over 90% market share for on-chain trading on Ethereum at least. And so, you know, similar to how Ethereum has this like public process for it being rolled out, And there's a lot of time for people to respond and react and give feedback and input. There's time for all the different projects building on top of it to begin preparing their infrastructure and build on top of it.

With this version of Uniswap, we really wanted to build it in public. And so what we're rolling out today is basically a vision for Uniswap v4, as well as a white paper and a draft of the code. So the code is, we have an initial code base and it works and it proves that it can work, but it's not final. And we don't expect it to be final for many months.

Okay, so the big new announcement is Uniswap v4! Jazz hands! Yay, we're getting new Uniswap! And also the way that Uniswap v2 and V3 were built was it was built and then I think within a month, both of them were live on mainnet. And this is not what is going to be happening with V4.

There is no release date, if I'm correct, and it's just a very long open period for public collaboration, community engagement, public conversation to tinker with Uniswap v4. Is that correct?

Yeah, I think that, you know, Uniswap v3 was kind of like a Beyonce Lemonade album drop where when we released it, it was this cool thing and it was entirely ready and it was a surprise. And I think this time around, and honestly 1 of the pieces of feedback we got at the time was, hey, this is really cool. This is going to take me like a month to understand, let alone build an entire integration on top of. And So that was 1 aspect of it. The other aspect of it is that there were even like, at the time that we announced it, the code base was basically frozen and already well underway of auditing.

And so there wasn't time to incorporate any pieces of public feedback. And there were like very, very minor things that people, I mean, it was like a very good code base. We did a really good job, but it was like, there was like minor pieces, uh, very minor improvements people found at the time and, you know, they weren't really able to be, uh, integrated. And so with Uniswap v4, there's going to be many, many months. Uh, there'll be time for people to, you know, open issues to, to submit, you know, submit PRs, there's contribution guidelines.

Uh, and there's a lot of time for people to start planning integrations and start building on top of it.

So what are we getting right now, Hayden, at the time this episode is released? What can people go get busy with and start digging into?

Yeah, so first we have the blog post, which just outlines a high-level overview of what it is, or at least what our vision for it is. Similar to Ethereum, you have a sense of where things are going, right? We had this sort of vision of proof of stake and then everyone started marching towards it. So we have this vision for what Uniswap v4 is. We have a white paper that gives a lot more background and technical information, you know, and supporting, you know, math, et cetera.

And then we have a code base. And the code base really just contains a full draft implementation. So it kind of proves it works. It's definitely not audited. It's not production ready.

And we aren't going to march straight towards audit or production ready. We're actually going to give space and time for people to contribute and to give feedback into it. And so, yeah, right now we have an initial implementation. We have a vision, excited to talk about what

that vision is. And yeah. Before we get into the vision of V4, I want to just maybe zoom out for a minute, because it's not often, Hayden, that we're able to get you on Bankless and have this kind of conversation. But let's zoom out all the way back to 2018. And I'm wondering if you could kind of like share how far Uniswap has come from that point in time.

I was reading the blog post a little bit earlier something like

1.5

million or sorry trillion with a T. My god million how quaint of me. Trillion in value flows through this platform. Give us some stats. Give us some of the numbers that you look at to understand Uniswap's progress and its impact.

Yeah, flex on us for a minute.

Yeah, I mean, it's been an absolutely insane journey. We have the previous Bankless episode we did where we really went through a lot of the early days. But since then, it's just been absolutely insane. I guess a few of the things that we look at that are pretty interesting, definitely like total all-time volume traded is north of 1.5 trillion at this point, which is pretty crazy. There's billions of dollars in daily trading, hundreds of thousands of liquidity pools created, hundreds of thousands of liquidity providers, millions of traders.

Even just the amount of the market share on Ethereum, it's north of 90% at times of on-chain trading on Ethereum. It happens through the Uniswap protocol. It trades off at different times, but it's been trading off with Coinbase in total trading volume. All sorts of things that we look at to just show like the amount of activity happening on top. Definitely.

I wish I had a number for the amount of projects building on top of it. My like intuition says tens of thousands, not just thousands, you know, just because of the number of, of, you know, tokens and projects that exist.

So, so given all this Hayden, 1 question in my mind is like, can Uniswap get even bigger? Like I mean, haven't we seen all the growth? Aren't the growth years already behind us? How can this thing possibly get any bigger?

I definitely think that Uniswap can get much bigger. There's a few ways for it to get bigger. Definitely like in terms of like market share on Ethereum, it's hard to get much bigger. There's very marginal gains to be had there, right? In the order of like 10 to 15%.

And so I'd say that where Uniswap grows bigger is about basically growing the entire space, about having, you know, more, enabling more, you know, things to be built on top of it, you know, basically growing the entire, growing the space around it and really, you know, taking innovation that currently happens external to Uniswap and having that innovation happen within Uniswap. I think that 1 pretty important nuance here is that Uniswap has this dominance in market share, but there is a lot of innovation today that does happen in the AMM space and a lot of experiments. And maybe a little bit of a spoiler alert for some of the stuff that's coming is that a big part of what we're trying to do with Uniswap v4 is make it easier for people to experiment and innovate, even on AMM design and functionality, but having that happen still within the swap ecosystem.

What's the goal here, Hayden? I mean, I remember at 1 point in time when DEXs were still in their infancy and we were just hoping to get a

5%

market share from centralized exchanges. So basically, all of the exchange volume happened with centralized exchanges. And wouldn't it be great if we could actually get this whole decentralized exchange thing off the ground and we could eke out maybe double digit percentage of volume? How do you think of the competitive landscape these days? Do you consider centralized exchanges as competitors or would you like draw those lines differently than maybe we did back in

2018, 2019? Yeah I think that it's you know a pretty interesting, I say that generally like decentralization offers some fundamental advantages And the way that we always think is how do we expose those advantages to more people? And so it's definitely possible. I think centralized exchanges are going to continue to exist. But I think that there are really strong advantages of decentralized exchanges.

And even things that are centralized exchanges today will start tapping into the liquidity from decentralized exchanges over time. In terms of where it actually ends, Really, I think that first it's DeFi growing bigger than CeFi, and then it's DeFi growing bigger than TradFi. That's the long term of it. And the purpose of that is not for its own sake, but because we think that that leads to a world with fairer, better financial system, more accessible financial system, just a better world in general.

These are what we call bankless values. We don't talk about them, maybe. Well, maybe we talk about them too much David. I'm not sure I'll let the listeners decide but it's it's definitely why we enjoy having Hayden on the podcast to kind of rearticulate it It's been baked into the DNA of Uniswap from from day 1 to provide a bankless exchange experience where user can retain custody of their private keys and their assets. And that is certainly, we don't talk about it as much now in 2023, right?

We're off chasing other things. But like, that is the core of this entire movement. I mean, that is why we're here.

Yeah, I think, you know, it's what you said, like a lot of the time, kind of people have been in the space for a really long time, like take it for granted. And instead of like, yeah, of course, we're doing all that stuff. Let's talk about what's new. But yeah, I agree. Like The values are super important and really important to guiding even day to day decisions.

So Hayden, I'll admit when Uniswap V3 came out and concentrated liquidity, added in just a whole entire layer of expression onto Uniswap V3, Uniswap in general, I was like, oh, that's the last Uniswap. That's the final completion of Uniswap. It's the logical conclusion that Uniswap v3 is now Uniswap. So clearly I was wrong about that. So what was incomplete about Uniswap v3 that we need Uniswap v4?

So let's start unpacking the Uniswap v4 box. What does v4 bring to the table that v3 still had left to complete?

Yeah, So, you know, Uniswap v3, I don't think we, I think it was a really, really good protocol, right? It's really proved itself. There's a reason it has such dominance today. It's really efficient, really flexible for liquidity providers relative to previous editions. I think that like what the, maybe the 1 thing, right, that we really wanted to tackle with v4 is Uniswap v3 was also extremely opinionated.

And what I mean by that is when you have these immutable smart contracts, The rules for it are kind of set in stone at creation. And the more you can modify and upgrade, in certain ways it compromises on certain security properties and compromises on other things as well. And so I think that, you know, with, as an example, right, in the process of designing Uniswap v3, there were like a million trade-offs that had to be made. And, you know, 1 example trade-off is the price oracles. So the price oracles were really just, you know, basically at the beginning of every swap, the contracts store the first swap of every block, it stores the price and adds it to these accumulators.

And with that, you can basically, other applications can extract really efficiently average prices across any period of time in the swap, in that swap pair. And that's a really, you know, it was a really good, almost like public good for the space. Many other projects have built on top of that feature. At the same time, running that logic for these price accumulators actually is a gas cost that is paid by swappers every swap. And so you can think of maybe something like 10%, don't quote me on it, of the gas of swaps is going to updating these price oracles.

And that amounts to a huge amount of money that swappers are paying over a period of time. And the thought process was basically like, well, if Uniswap can be used in more ways and in more places, then ultimately that will lead to more usage of the protocol, more liquidity in the protocol, and that will be better for swappers and offset the increased gas cost. Now, has that played out? Probably in certain situations. Some pools, the oracles do get used, and they're tightly integrated into important protocols.

And in some pools, maybe they don't get used at all. Probably the majority of pools, actually, they don't get used at all, and that's just like a tax on swappers paid over time. And the kind of opinionated way that v3 was implemented, that isn't a choice that you can make when you deploy a pool. So I'd say that the flagship feature of Uniswap, actually before I even, I'd say another area that is really interesting as it relates to the opinionated nature is fees and how fees are implemented. You know, most, like, there's a lot of different people who kind of experiment with, we're gonna build our own AMM.

And usually what they're doing is actually just like experimenting with the fee logic. Sometimes they're doing other things, but that's like the most common thing that people do. And there's like a few other changes.

People are building entirely new Uniswap forks, and what you're saying is like, and they're really just tinkering with the fee model. And so they're building out entirely new exchange just to tinker with fees.

Sometimes, and maybe sometimes they're doing other changes as well, but sort of no matter what, they're probably doing more work than they should have to, if all they're really trying to do is modify the functionality of a pool. And so I guess we'll get to the point of it, which is the flagship feature of Uniswap v4 is what we're calling hooks, which are essentially modules or customizations that you can make when you deploy a pool. And anyone can build a hook. Anyone can implement 1. And anyone who's creating a pool can choose what hooks their pool uses.

And these hooks are pretty expressive. And they allow you to add on new features, new functionality, modified parameters of the pool in really interesting and meaningful ways.

So hooks. Okay. So you started off this conversation with oracles and then also talked about fees and these are all things, opinions that you're saying Uniswap v3 had. If you wanted to start a new Uniswap v3 pool, you had embedded in it this Oracle feature, whether you asked for it or not, and then because of that feature, swappers who touch the logic of every single V3 contract every time they swap, pay for that complexity to be built into that V3 pool. So what you're saying is Uniswap V4 has these things called hooks that are generalizable things to insert into a v4 pool.

So I'm guessing a base v4 pool, a v4 Uniswap exchange, has almost 0 features built into it just like by default. And then the idea is you can opt into certain features like the Oracle, like fee structures, et cetera, after the fact, but the standard issue Uniswap v4 exchange is just like bare bones, primitive, reductive, maximally simple, maximally cheap, maximally efficient. Is it my, am I on the right track here?

Yeah, exactly. I think that the, you know, the funny enough, Uniswap v4 actually has like the base system has almost less features, right? Because the oracles have been taken out of the contract

And

now they can be implemented as a hook. And so, you know, in the process of building v4, we also built a whole bunch of example hooks to show how expressive it is and the types of things that you can do. You know, the simplest form actually has fewer features in a certain sense. So, Uniswap v4, I could just start going through some examples of what you can do with hooks. Maybe we'll make it more, make it more clear.

Um, okay. So, you know, 1 example is definitely dynamic fees. So right now, you know, Right now when you deploy a new pool, the pool creator gets to choose between a few fixed fee tiers. And actually the reason we chose... In Uniswap v3.

The reason... Yes. In v3 you choose between, you know, there's like 4 different fee tiers today and governance has the ability to add more. And the reason that there weren't like arbitrarily many is, you know, to encourage, you know, to kind of discourage liquidity from overly fragmenting and encourage people to consolidate around specific pools. With Uniswap v4, when you deploy a pool, you can choose any fee you want as a static fee, or you could attach a dynamic fee hook.

And the dynamic fee hook could actually customize the logic of your fee in any way you want. 1 example would be that you could do, you could basically try to do some sort of Oracle that tracks on-chain volatility and automatically adjusts the fee based on that. And that's an interesting experiment we've wanted to run for a long time, but we didn't want to hard code it into V3 because it was unclear if that was the optimal design. And so with Uniswap V4, people can experiment with a whole different world of fee implementations, volatility-based, you could imagine DAO-controlled, et cetera. And so that's 1 example.

I think that's a hook that will probably get a lot of usage. Other pretty major features that you can add onto a pool, we have an implementation of a limit order hook, which allows you to place limit orders at ticks. So right now, you can kind of simulate limit orders a little bit in Uniswap v3 by providing liquidity to very narrow ranges and withdrawing your liquidity after it's filled. But with Uniswap v4, you could actually just create straight up limit orders that execute at, you know, basically, maybe to step back quickly, hooks are basically code that run at certain points in like the life cycle of a pool and a transaction. So you could imagine there's a hook that runs at the beginning of every swap.

Before every swap, run this code. After every swap, run this code. At the moment of pool creation, run this code. Before adding liquidity, run this code. Before anyone removes liquidity, run this code.

And so the hook for a fee might be like code that runs before every swap or after every swap. Limit orders might be, would also be code that runs during the swap transaction. So maybe another kind of interesting hook that we designed is, there was this paper that Dan and Paradigm put out a while back called TWAM, which stood for a time weighted average market maker. Long kind of don't want to go way into the complexity and the weeds of it, but essentially when you think about a USOP pool and people who want to make very large orders, very large orders relative to the size of the pool, you're going to get a lot of price impact and you'll get a worse price. And so usually when you have to make a very large order, if you want to trade it over Uniswap, you would probably want to break that order up into many pieces.

And you'd have to submit a separate transaction, you know, spanned over multiple blocks. And that kind of reduces the sort of price impact of your trade. And, you know, TOM is this idea of essentially creating long-form orders on top of AMMs that would basically split up into little pieces and could execute over time. And you could have them happening in both directions. It's sort of reducing the price impact of a trade and spreading it out over a long period of time.

So you could imagine like, sell 1 million USDC over the next day, or over the next hour, or the next week. And this is a really interesting, cool feature. And to do it properly, you can build it externally, but to do it properly and have it really benefit from the liquidity within the protocol, then you actually do need to have it run at specific points. You need to sort of guarantee that it's going to run before swaps happen or before people add or remove liquidity to properly do the accounting. And so you can build this entirely as a hook.

And we think this can be really powerful for, 1 example is for like protocol treasury rebalancing, stuff like that, or just generally large orders. And The nice thing is that it executes your order over a very long period of time, but you only pay the gas costs at creation and closing of the order. Those are 2 examples. So the point is it spans from customization of pool parameters, like how fees work, which can be really interesting and meaningful and actually change the economics of a pool. You could try to have a pool that favors passive liquidity providers more than active liquidity providers, if that's what you want to do.

But it also ranges to like entirely new order types like TUM and limit orders. I have a few other ones I'd be excited to talk about as well.

I definitely want to unpack every single 1, but I really just want to double down on the emphasis that this new hook feature inside of v4 pools brings to the table with the with regards to developers, so just going back to the fees hook example where right now Uniswap v3 has you said 4 fee tiers I believe it started as 3 then Uniswap governance and voted in a fourth. And so these are 4 fee tiers that a Uniswap V3 pool could be created under. And like you said, the reason why only 4 is because we need to coalesce liquidity under shelling points, right? Just pick 4 of these. Don't like ten's too many.

1 or 2 is not enough. But we need to have convergence of liquidity upon specific pools in order to have any liquidity at all And you said that well we were interested in Uniswap labs or Uniswap in general was interested in making a more dynamic version of fees that would be more flexible to incorporate wider ranges of fees based on certain parameters. But y'all didn't want to create that because that was an opinion. And you didn't want to make that as a part of a core V3 contract. But now with hooks, we could have someone or some group of people create that logic for what is a flexible and adaptive fee structure for most types of Uniswap pools.

And that could become the new shelling point of the new standard. And so I'm assuming like over time certain hooks, certain apps, uni apps, uni widgets will be developed in public with many, many people and 1 or a few will emerge as like the leading hooks for generalized fee tiers for Uniswap v4 pools. Or this is the leading, most incorporated, most hooked in feature, most hooked in hook for on-chain limit orders. And this is now the on-chain limit order hook because this is now no longer being developed internally to the protocol. This is now developed externally as a part of like just building on permissionless open source rails.

And so like a lot of this complexity of how to make a flexible, adaptive Uniswap v4 pool is being pushed to the margins and allowing the shelling points of what are good hooks and what are good Uniswap features to be kind of determined by the free open source market. Am I on track here?

Yeah, exactly. I think, you know, we've definitely, I've definitely trended in my own, like thinking, you know, just seeing how it plays out towards just more expressiveness, more flexibility over like super constrained shelling points. I think shelling points are really valuable, but I think that the shelling points will happen over the best designs. I will mention that there is sort of this, there are like a few other features of v4 that blend really nicely with hooks that I just want to quickly mention that help, which is like, so the other kind of core feature is a bunch of architectural changes to the contract that we're calling singleton and flash accounting, which essentially are aimed at significantly reducing the cost of fragmentation across many pools and making it much more efficient to route across many pools. So we're entering a world of many more pools and pool designs, and what we're trying to do is say, for pools within the Uniswap ecosystem, can we significantly reduce the cost of fragmentation and make it easier to route across more pools more efficiently.

And so the singleton design essentially is saying it basically has all pools live in a single smart contract. And flash accounting is just a new way of doing some of the logic that basically makes it easier to... Right now, when you make a trade that executes across many pools, it's basically like sending tokens between pools, and it has a very opinionated order of operations. And the core idea of Flash, kind of like the way flash loans allow you to take whatever you want and then do everything you want and then as long as you've paid it back at the end. Uniswap v4 actually lets you basically do anything you want across any number of possible order transaction types within all Uniswap pools, As long as across all of it at the end, it's like, you know, it's sort of reconciled and solvent and then only transfers net balances in and out of the pool.

Or actually you don't even have to transfer it in or out of the pool, but that's another little feature that we can come back to. But the general point here is that like hooks introduce much more expressiveness, many more different pool types, and Singleton and Flash accounting basically just make it more efficient to route across more pools at once. And also, I think that the 1 other thing that I'll note there is that, today there's sort of a cost to fragmentation across AMMs that's imposed on the space. You can think about the more AMM pools exist in the more places, there's gas costs to constantly be arbed. There's like, Ethereum only has so much capacity to some degree, obviously.

And basically, there's a cost to constantly arbing across all the different AMM pools. And there's also a cost to splitting your order across more pools. And so 1 of the nice sort of things about Emspot v4 was like as a platform is that if you build your custom AMM logic within hooks instead of externally, you actually get to benefit from this shared contract pool model, which will mean that building your innovations within Uniswap will actually lead to more efficient routing across everyone else building within Uniswap. And there's a nice network effect and benefit to doing that.

I want to pull 2 things out of this, Hayden. The first is when we talk about Uniswap V4, we're talking about a specific set of features. 1 is hooks, which we're gonna spend even more time on, I think. Another is singleton, which you mentioned, and flash accounting. I wanted to go back and talk about this design philosophy where you're saying with Uniswap V4, you guys are trending towards more expressivity, which is very interesting because this is counter to the reason you picked those 3 different V tiers for Uniswap v3 pools.

Really the idea was so that you don't lose liquidity. So there's not thousands of different pools out there and you're spreading your liquidity too thin across all of those pools. I think what you're saying is because there are some incentives or benefits through Singleton and through Flash accounting, there's almost like a tax, not an explicit protocol tax, but like an efficiency loss type tax native to Uniswap that will still collapse towards a small, like more shared liquidity. I guess what I'm trying to ask is, why are you no longer concerned about like the thing that you were concerned about in Uniswap V3, which is like, well, if we're creating the opportunity and the white space for all of these different pools, we just lose the network effect. We lose all the liquidity and there will be no Shelling point in a specific set of pools.

Why is that no longer a concern? Is it because of Singleton Flash accounting and kind of still the inherent efficiency that you, that you gain here or like why the, why the change in a rationale here?

Uh, so I should quickly clarify that there's not a tax. There's actually a benefit. Basically, if you build your sort of custom AMM as a hook within the Uniswap singleton contract, then it is much more efficient to route it with other Uniswap pools than it is to route, say between like Uniswap and an external AMM. All right, so generally most people are trading, like right Today when you trade across multiple pools, there is sort of an inherent tax to trade across multiple pools. And what we're doing with Singleton and flash accounting is essentially reducing that tax significantly when you're trading within the Uniswap ecosystem.

So it's all carrot, no stick is the way you

say it. Yeah, no stick here. It's all carrots. We're basically saying, yeah, if you build an entirely separate AMM, then a trade that sort of splits across Uniswap and this external AMM will have a higher gas cost, similar to how it does today, right? There's no stick on that either.

But if you build your custom AMM within Uniswap as a hook, it actually is more efficient to route. And that happens because of essentially this like, all the pools are stored in the same contract and we have cool ways of doing some of the accounting logic and even transient storage, which is in the next Ethereum hard fork, kind of plays a little bit of a role here, where we're using transient storage to more efficiently update internal balances and save gas there as well. But no, it's really purely a benefit. In terms of liquidity fragmentation more broadly, I'd say that I still believe like shelling points will kind of will exist. And there's even like ways to helping encourage that through like interface and default and all of that.

But I think that what we're also starting to say is that, yes, shelling points will exist, but also this innovation is going to happen. Let's make it, let's have it happen as safely as possible. Let's have it happen, you know, within the Uniswap ecosystem. Let's, you know, let's speed up the rate of AMM innovation and allow shelling points to form around some of the best designs, as opposed to just around like Uniswap as a monolithic thing. I'd also mentioned that like some of the network effects are really just like, you know, infrastructure that we built, that us and other teams build around the protocol.

And I think that having more stuff built into Ubisoft V4, there'll still be this network effect of tooling and integrations. And to some degree, even the security and safety of it. A cool thing is that when you're building an entire custom AMM, that's a really complicated smart contract, you need to audit the entire thing from scratch. And with hooks, you need to audit the hook. Basically, the same way that Ethereum lets you build safe smart contracts, it doesn't prevent you from making unsafe smart contracts.

I think of a similar thing to hooks, where hooks make it possible to build very safe custom pools that have very limited functionality. A hook that changes how fees work is very different from an entire AMM that changes how fees work in terms of your starting point, and how easy it is to build, how fast you can build it, how easy it is to audit, etc. And so, all carrots here, we're trying to make it as safe and easy to innovate. And then the point being really just like, we're also trying to, you know, we do expect there to be some additional fragmentation, but we still expect showing points to happen and we still, And we basically take the cost of fragmentation is being significantly reduced, not increased.

So there are some really strong parallels between Uniswap v4 and the Ethereum roadmap. I see the parallels here. I'll call this like a hook-centric roadmap for Uniswap, whereas Ethereum has this like roll-up-centric roadmap. Uniswap has now a hook-centric roadmap. And I want to get to that conversation, but I think we need to start there with the Singleton contracts, the Singleton design.

Uniswap V3 and V2 and V1, I believe, all had this thing called a factory contract where Uniswap pools, Uniswap exchanges were spun out individually and they were all separate contracts. So if you made a new token and then you made a Uniswap pool to correspond with that new token. That is a brand new smart contract on Ethereum that is the same contract as like the USDC Ether Uniswap pool, but it's still a separate contract. And so a Singleton contract is something that's the opposite of that. Can you just unpack that a little bit more, Hayden?

What does it mean for everything to be under 1 contract?

Yeah. So what it means is that we're duplicating the same code across a million different smart contracts and that has a cost to everyone. And so 1 cool thing about the Singleton design is it actually reduces, current estimates have it reducing the gas cost of pool deployment by about 99%.

Wait, what? Um,

yes, it goes from like, uh, gas costs vary a lot, but you know, you could imagine some, sometimes people pay when gas costs are high, like north of a thousand dollars to deploy a pool, just in gas costs. And that same deployment would be something like $10. Because you were

just updating a pre-existing contract.

Yeah. Most of the code isn't being replicated. It's just like adding a little thing, making a little modification to an existing contract, it's not deploying an entirely new smart contract. So gas costs for deployments go down massively. That's sort of like 1 of the advantages.

There were designs that actually did reduce the gas cost for V3, but in ways that slightly increased gas costs for swappers. You know, that was sort of like this design a lot of people use where you like call out into like a library contract, but that's sort of like 1 of the benefits of Singleton. The other benefit is that when you can imagine like transactions that interact with multiple pools and have multiple interactions with multiple pools, a lot of what they're doing is they're updating like the same, you know, like, you can imagine like, let's say I'm doing like a multi hop swap, I'm going like ETH to DAI to USDC or something. That actually involves like, you know, routing ETH into the ETH DAI contract, then DAI is sent from the ETH DAI contract to the DAI-USDC contract, converted to USDC, and then USDC is sent back to the user. When you have everything stored in the same contract, those internal transfers don't actually need to happen.

They're sort of like ephemeral. And Ethereum already today has a method of basically, if you are updating it... So 1 thing is that there's basically like less, less transfers happening under the hoods when you have like multi, multi-step transactions or transactions that mount out between many pools. Ethereum has like a, this thing called a gas refund. It's super technical under the hood stuff, but might as well for, for, for those who understand this, mention it quickly.

Ethereum has a thing called a gas refund, which basically means that if you are updating something and then the same thing multiple times, it's cheaper than basically updating different things because that's easier on an Ethereum node, essentially. And we'll get out of the weeds in a second. But the refund has like a cap. So basically there's like a limit to like, if you update the same thing like a thousand times, like the refund sort of runs out and then you basically don't actually get any of the refund. So there's this new proposal called transient storage, which is slated for the next Ethereum hard fork.

And that provides additional benefits where you can actually, you know, save on gas for things that are updating the same contract multiple times, well beyond the refund, which was capped out at 20% of the gas provided to the transaction. So there's additional gas savings on the forefront of the next Ethereum upgrade, which is kind of exciting.

Am I misremembering that? Was there some controversy about this particular Ethereum upgrade at all? You guys refresh me on that.

I think that there was a desire. I think that it was a very obvious... I don't think there's any controversy around the proposal itself. It's technically very sound and there's no real controversy around it. I think that there was a strong push to have it happen in the previous hard fork, which didn't happen, in part because we thought it was an obvious win for developers.

There's many other projects that also want this and want to build on top of it and have come out in favor of it. And, but you know, it ultimately didn't make it into the previous Ethereum hard fork because there was, you know, that was the, the, there's a lot of other things happening in that hard fork. Um, But it was sort of very non-controversially added to the most recent 1 because it's very far along and it's not competing with the merge. And so it's, yeah, it was kind of a little bit of like a day of drama on Twitter, but it wasn't really like, at this point it doesn't feel controversial at all.

So I want to see if I can get Bankless Listener's heads wrapped around this pattern that I'm seeing with Uniswap. And this again goes back to the whole like hook-centric roadmap for Uniswap. So a while ago, a long time ago, Ethereum's long-term vision came to be defined as like this roll-up-centric roadmap, aka like roll-ups are going to be treated as a primary concern for Ethereum's design philosophy. The Ethereum researchers came to the conclusion that roll-ups are like the ultimate form of expressive apps for Ethereum in terms of scalability. And so the idea was that Ethereum would constrain the layer 1, push complexity to the edges using rollups.

And this became like the modular Ethereum design philosophy. The Ethereum layer 1 does not need to be concerned with doing it all. And that role can be pushed to the open source community building permissionlessly in the free market, which is why we have so many roll ups teams building different roll ups, scaling strategies, Polygon, Optimism, Arbitrum, ZK Sync, you know, all the scroll, Tyco, all these crazy things. And the only reason why all of these Ethereum microcosms exist is because of the primacy of the rollup-centric mode map for Ethereum. I see that same pattern playing out with Uniswap.

So I think I want to check this metaphor with you, Hayden, make sure this is right. But I think Uniswap V2 and V3, where we had this deployer contract, this factory contract that spit out new Uniswap contracts that were all disconnected to each other is like the cross L1 bridge version of layer ones. Whereas the Singleton contract is like the rollup-centric roadmap for Ethereum because everything is placed into the Singleton contract. Everything is under 1 platform. There is a very constrained, reductive base, call it Uniswap v4 pools.

And then there's hooks. Hence the hook centric roadmap for Uniswap. These are my words. I don't know if Hayden accept these words. The hook-centric roadmap for Uniswap places complexity back into the base of Uniswap v4 via hooks.

And hooks are freely developed in public. They are highly generalized for all public pools to use, or they can be pool or use case specific kind of like role apps or app chains. But we can have hooks that are just meant for 1 or a few pools, or we can have hooks that are generalizable. And so now we have modular Ethereum. And now we also have modular Uniswap.

Hayden, do you accept this metaphor? Would you throw any flags?

I accept the metaphor. I think that definitely, like, we are definitely going to modular, customizable Uniswap. And I'd say that, like, it's not as Like Ethereum, it's not Turing complete the way Ethereum is, but it's much more expressive. And if you have a gradient of Turing completeness, it is more Turing complete than you just thought it would be too. It's more expressive.

And really, you can do a lot of things with hooks and we are definitely pushing complexity to the edges. We're definitely encouraging a world of other people to try. There's no clear single best way to scale Ethereum. And so Ethereum is allowing other people to experiment with the best way to scale Ethereum. And I'd say that Uniswap, very similarly, there's no single best pool design.

We're enabling a whole world of experimentation. So definitely the metaphor lands for me in that way, for sure. I'll also mention just casually, don't wanna open a whole can of worms at this, but technically Uniswap is also on a rollup-centric roadmap and that we all are because Ethereum is on 1. And so I think that that's definitely like an avenue of future exploration, but sort of like kind of parallel to V4.

Hayden, while we're on rollups for a minute, can you also describe Uniswap's approach to all of the various rollups? I know that's kind of orthogonal to our conversation today about Uniswap v4, but will Uniswap have a presence on all rollups or how does that work?

Yeah, I think that, you know, like we're all on this, we're all on this rollup-centric roadmap journey in Ethereum right now. And I think that we've been, you know, to date, it's really been about like supporting the rollups, you know, on the protocol level, it's, you know, there's been this whole process around governance and people are doing votes to deploy to different chains. But within Labs products, we're kind of like supporting chains as there are ones that have users and it's almost worth the time to do the work. And it is a lot of work to support new chains in our, in our products. Um, but yeah, so it's really a bit about like just making sure that Uniswap is on all the chains that get traction and have usage.

And Uniswap v4 would be on all the chains.

And Yeah, Uniswap v4 similarly would be on all the chains. In terms of if there's a future world where there's a Uniswap specific rollup or something like that, I think that sort of remains to be seen. I think it's a really interesting avenue of exploration. I'm personally excited by some of the OpChain vision and all that stuff. But as I mentioned, we're kind of all on this roll-up-centric roadmap.

There's no getting off it because Ethereum's on it. Sometimes I think that people almost don't even internalize everything that that means. But Yeah, it's a pretty cool, interesting direction for Ethereum. I think that maybe what I was getting at, I think that there's a lot, like scaling execution is actually pretty hard. And I think it kind of makes sense that Ethereum pushed that to the edges.

But I think that sometimes people almost underestimate how much work there is to do on the roll-up side and how big of an effort that is. In the long run, maybe it's more of an effort than building Ethereum itself to build the right roll-ups on Ethereum. Anyway.

Yeah, I completely agree. I mean, part of modular Ethereum, the roadmap, roll-up-centric design roadmap was obviously focusing Ethereum on what it does best, the core and the consensus layer. But also, I mean, some of these problems are complicated, they're complex, they're thorny. And so nice to push them up to other teams rather than have the Ethereum research team sort of do everything.

I

don't know if that's similar to strategy with hooks, but

I think that like, I think it like it both makes sense, but like, there are like implications to it, right. Where like the more you push to other teams, like the less, like there's sort of like, there are sometimes benefits of working in multiple layers of the stack. It's something that we've learned a lot at Uniswap is like, are even like working, like having a mobile wallet and having like a smart contract team and a protocol, like having sort of working multiple layers of stack, where you're like able to kind of like, sort of innovate across the stack a little bit. And like, you know, there are things like, like, even like it came up in this conversation where like EIP 1153 is like, provides very significant benefits to Uniswap v4. And that required...

It was already a proposal that happened many years. The initial proposal was before the v1 launch. So this idea has been around for a long time. But there's this... Sometimes there's a...

If you don't have the right like layers of modular-ness, or in like some, like, if you don't have enough expressiveness in each layer, like then like, you sort of can run into like constraints of the system in which you're building. So that's a risk of hooks, it's a risk of Ethereum's roadmap. But it's also like, ultimately, it kind of makes sense as well.

I get it. It's definitely a trade-off though, right? I was thinking of Vitalik's most recent post where he talks about the 3 transitions, by the way, where he talks about everyone moving to roll-ups. That's going to be a massive transition for Ethereum, that everyone has to move to smart contract wallets and we have to somehow figure out how to get privacy working. There is something nice about the monolithic vision because you can control all layers of the stack.

And so what gets sacrificed, or maybe trade-off is the right word for this, in a modular structure is user experience sometimes. It can be difficult to weave this all together, whereas monolithic has other challenges, but you have the opportunity to get user experience down. Let's get back to the hook-centric roadmap for Uniswap. Who's going to build hooks? Who are the devs?

Who are the builders that actually, like we know in the rollup community, all of the teams building rollups and kind of the advantage to doing that. They want to create their own kind of ecosystems, build their own chains, lots of reasons for doing this. Who are the builders behind hooks? What will they look like? What are they going to

dream up? Yeah, there's so many possibilities. We're kind of constrained by what we've already thought of, but there's so many other... We kind of expect maybe the coolest hooks will be ones that we haven't dreamed up yet. So ones we've already mentioned are things like, you know, so obviously we've built a few hooks almost to like prove the system.

So, some of the ones we've already mentioned were like TWAM and on-chain limit orders and swap fees. I think, you know, we expect like probably 1 category of hook builders is people who need... Basically, people with projects with on-chain protocols that interface and interact with... It's basically the people who build on Uniswap today, but they can build on it in a more meaningful way. So any project that has Uniswap as a core component of their system, we expect that they can build what they're building in a more efficient or more expressive or better way with hooks.

So that's 1 category. I'd say that people who want to... Anyone who's building an AMM today, I don't know, maybe they'll continue building their own AMM. It sort of depends, but definitely the type of people who would go out and build a new AMM might be more likely to say, okay, well, rather than building a whole AMM, why don't I just like, you know, try it out as a hook? And, you know, so, so liquidity providers, I think, you know, DeFi builders.

Is it accurate

to say, instead of starting your own layer 1, why not just build a roll up on Ethereum? It's the same conversation.

Exactly. Is it accurate to say anybody who wants to use the verb swap? In the early days of Bankless, we used to talk about making all of these money verbs basically real and bankless. So verbs like lend, borrow, a verb that Uniswap has dominated has been trade, or swap. Anyone who is sort of doing swap functionality as part of their application, whether it's some sort of aggregator, like a matcha, for example, maybe they're dealing with swap.

Anyone who's working with the swap verb might have something that they can build as a hook with Uniswap. So that kind of opens the door to basically any application that needs this basic trade swap type primitive. Is that correct?

Yeah, I think I do like to think of like the 2 sides of the marketplace where it's definitely like swapping and also like creating liquidity in the first place.

Forget about liquidity providers. Yes,

they're important. They're an important bunch, although sometimes not talked about as much as the swappers, but creating liquidity, anyone who's creating liquidity in any way, like I'd say that like this just provides so much more flexibility in how you do it. Now it's very possible that like certain hooks will be much like a few hooks will rise up as like the most popular used hooks. You know, if I had to like take some guesses, things like, you know, some of the ones I already talked about might be examples. So certain hooks might be the most used and maybe most people interact with hooks just by adopting a few common ones that change in meaningful ways.

But then yeah, really anyone that creates liquidity might want to create liquidity in more expressive, interesting ways, as well as like anyone building a protocol that needs swapping functionality. Yeah, I could give like a few more examples of hooks that we've talked about and thought about or built examples of.

Yeah, go for it.

To help spur some of this. So I guess 1 example is even like, this 1 is more theorized. We don't have an implementation of it at the moment. So at any given moment for a Uniswap trade, there's like, you know, Uniswap v3 split the pools up into like discrete ticks. And then like, there's like liquidity exists between ticks and it's almost like many Uniswap pools for each split up into each tick.

And, you know, we sort of theorized about like the idea of like vaults that stored out of range liquidity and lending protocols and would sort of pull them out as the trade got closer. But that wasn't super easy to do in Uniswap v3 because you don't have a guarantee that you can pull liquidity out of the lending pool before the trade crosses a certain price. Whereas with Uniswap v4, you actually can using a hook. And so an example is just increasing your yield, where all liquidity that's not stored in the current tick could be stored in a lending protocol and earning whatever it's earning. And then as the price crosses out of the tick, just in real time could pull the liquidity out of the lending pool and start trading into it.

And in that way, you don't actually have to like, There's sort of like the risk in v3 if you do it externally that you don't pull the liquidity in time and it sort of gets rebalanced in a way you weren't expecting or something, if you were to try to do something like that. So increasing your yield by building a thing that stores extra liquidity in lending pools, but does have a guarantee that it will be executed at the time of this, that it will be included in the contract at the time of the swap. It's like 1 pretty interesting idea. We haven't built this, but we know it's possible. I think this is an interesting class of designs that might come up.

Probably most of these will use the swap fee hook, but just attempting to internalize MEV better for liquidity providers. Liquidity providers, a lot of value is kind of like, there's sort of, yeah, people always talk about MEV and how do we like kind of keep more of that for our swappers or for our LPs. And I'd say that like, there are definitely classes of hooks that can attempt to do that, whether by like adjusting the swap fee in real time or proportional to size of trade or whatever it is. You can even do things like auctioning off, basically allowing people to like, you could almost do a harbor tax or something for all fees in the pool. And so basically it's like, again, this is sort of theoretical.

We haven't built this, we haven't proven it. But these are sort of general places our brains have gone. You could allow basically anyone to set the fees for a pool and they could pay liquidity providers for that, right? And then you could imagine in that way, the MEV is internalized to some degree by properly setting the fees and paying it out to liquidity providers. So those are maybe 2 even more complex examples.

But there's so many different ideas and designs in the AMM space. People are always talking about them. We're always having them. But today we like, it's never worth it to build it because it's like, we can't bet that, like we can't build the entire next version of the protocol around 1 of these ideas. They're just interesting ideas.

Oh, I'll mention another category of hook that exists is actually potential withdrawal fees as a hook as well. So today, fees are only taken on swapping. In v4, it's actually possible for hooks to take fees on adding and removing liquidity, and could redirect those back to LPs. And so in that way, you could, for example, have the more active a liquidity provider is, you could have more of those fees go to passive liquidity providers. And maybe passive liquidity providers would be more willing to provide in those pools.

So those are like sort of like some kind of additional examples. I think that there's like so many though, you know, any project that needs an oracle probably will be tempted. I think that like even V2, like V2 and V3 oracles, they weren't just like opinionated, there are also weaknesses of them because they were like opinionated in that we implemented them but they were kind of like trying to be very neutral in what they were because they were trying to serve all possible oracles. But that's not very, you know, maybe the best Oracle is removing outliers and doing on-chain medians and all these other things. And so anyone that wants an Oracle now, you can actually build your Oracle into a pool and you sort of have a guarantee that that Oracle is like, that that pool is like tracking.

It's sort of the difference between like, you could build an oracle external to a pool, but that pool can only read from the pool at moments where it is asked to do so. Versus when it's in a hook, you have a guarantee that that Oracle can be updated at every swap or at every provide liquidity or at every interaction with the pool. And so you sort of have a guarantee that that Oracle can always be super up to date. And so, you know, you think of it as like any contract that needs to be updated with, you know, any specific type of interactions with a Uniswap pool can now be fully up to date and sort of kind of it doesn't need to rely on like being poked externally by people, which is like kind of interesting.

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And so every time y'all are having your surreal, futurist daydreams about what a crazy Uniswap V4 pool could be, I'm just bullish on the fact that Uniswap V4 can actually receive those ideas now. Because whereas Uniswap v3 was constrained in its ability to accept expressivity, Uniswap v4 can now start to get like pretty crazy and pretty weird. And so that makes me bullish.

That's what's interesting. Exactly.

That's what's interesting about this Hayden. Even the word choice that you're using, you're calling these things hooks, as opposed to maybe widgets, or as opposed to apps, or something like that. I'm not a programmer. I'm sure the term hooks is used in all sorts of other places. The area I'm familiar with is in CMS platforms like WordPress.

WordPress is this kind of ecosystem where anybody can create a hook in WordPress. Hook is not a specific app. It implies kind of openness. It implies permissionlessness. It implies anyone can develop it.

And it could, it's broader than an app. It could do something very small, like implement a capture service on WordPress, or it could do something very big, like implement an entire feature set on top of WordPress. So I'm curious, what other, Maybe an analog to this in another developer ecosystem, why did you use the term hook rather than app or rather than widget or something else?

I mean, I think you nailed it. Like beautifully said, I think it's like, you know, it's, I mean, part of it is it's like moments at which the contract, like, it's not, it's sort of like kind of a moment where the contract can like call out to another, like, it's sort of like, uh, there's sort of like moments where you can like inject code in an arbitrary point and it's, Hooks just felt like a good kind of moment for that versus like a widget or an app sounds almost like marketing or like branding. This is sort of more like a low-level code base kind of feature. So that's part of it. I can mention even something here quickly on the history of how we came up with Hooks.

I don't remember actually specifically who. It's been an idea that's been in our brain for a while. But it came out of this idea that we had had. This was before V2. 1 of the features we were considering in V2 was an external contract that basically had the right, first back-running rights to every trade.

And what I mean by that is like, when someone is making a trade that moves the price from the market price, away from the market price, it's sort of like a backrunning kind of opportunity. And giving backrunning rights to... If you are auction off those backrunning rights, then you can sort of give some of the profit back. Like you can basically reduce the kind of price impact of a trade. And this is sort of a design space that is still very relevant today.

You hear the Flashbots team talking about it. You hear it's something that people talk about when they talk about intents. It's like, how do we reduce MEV? And so we had this general concept of what if at the very end of every Uniswap V2 swap, it arbitrarily called a specific contract and that specific contract was able to, with preset prices built in the contract, would be able to trade back in the other direction and then like reshare some of those profits back to the swapper. And then maybe like you'd sort of like auction off that external contract.

We call this idea like trader DAO or something. It's sort of an idea in the back of our brains for like, literally since before v2 launch. And I think that's sort of that, the idea of that feature where it's like, at the end of every swap, do this. And then we sort of ran into that pattern again with the oracles where it's like, at the beginning of every swap, if it's the first swap

of a transaction, if it's the first swap

of a transaction, if it's the first swap of a block, then update the Oracle. And we start to realize that there were multiple points within the transactions lifecycle, where you wanted to do arbitrary things sometimes. And so that's sort of where Hooks came from. It's like, it came out of this idea of like, oh, there is a time in a transaction lifecycle where it's useful to immediately execute some other code and not allow any other code to execute before that code. That's sort of where some of this comes from historically.

Now those ideas like the TraderDao idea, that can be implemented as a hook.

Yeah, yeah, exactly. And like, maybe it was a good idea, maybe it wasn't. You know, it's sort of like a 20... Now we can find out. Like 2019.

Yeah. I think that like, even if we were doing it today, we'd probably do it very differently from how I just described it. But yeah, now we can find out. Now anyone can run an experiment in AMM designs much faster, much more easy. So super, super exciting.

I'm just going to put on my speculative cap here and I bet you there is a bunch of use cases for token minting and token issuances that I'll probably not ask Hayden about and I'll just leave that to the imaginations of the listeners. There's probably a way to do a token issuance with this as an app on Uniswap that is developed by the open source community. As a hook,

we should say.

As a hook, as a hook, yes. Right. I have a question about some of the bigger pools. So it makes the Uniswap v4 with, you know, specific hooks that do specific things sounds like from the individual developer standpoint, awesome. As in, I can do cool new things that I was never able to do before.

But some of these bigger pools in Uniswap v3 have a ton of liquidity in them, like the Dai Ether pool, the USDC Ether pool. And if we are assuming that we can make a better v4 pool for these very large v3 pools, we're gonna actually need to get that liquidity to migrate. And it's an open, interesting question as to like, how do we determine who decides what the best USDC Ether pool is on Uniswap v4, and how do we even have like a shelling point of like, hey, Uniswap V3 liquidity, go to Uniswap V4, it's better now. How do you think we're gonna get this to progress? Like, how do you think, do you think we are stuck inside of some, some pools are stuck inside of Uniswap V3 forever?

How will we get migration to happen? Do you have any thoughts on this?

By the way, I remember being really worried about this with V2, and I was like, well, how are they going to get all the liquidity to move from V2 to V3?

Well, V2 to V3 was a paradigm shift in liquidity expressivity. And to me that made sense because of concentrated liquidity. With this 1, I don't know. I don't know. ED HARRISON

Yeah. I mean, for what it's worth, like the Unisox pool, the biggest Unisox pool is still in V1. And so yeah, I think that like, the answer is like a combination of things. It's like a really interesting, complex topic. But I'd say that like V1, almost no 1 uses, it's mainly only used for Unisox trading at this point, which is pretty fun.

V2 still actually gets a lot of usage and new pools created. V3, obviously, even more usage, especially by volume.

Because we should tell people, just for the listener who's not familiar with how Uniswap works, is the contracts never die. Once you deploy V1, V2, V3, they live forever. They're out there. Anyone can use them just as the day they were first deployed. They don't go away.

So almost like a new version of Uniswap has to earn its place in the world, earn its liquidity, has to earn its swap users, it has to earn the market, doesn't it?

Yeah, so I'd say that like with V3, what's really interesting, sorry, with V4, I actually don't expect as fast of a migration as from V2 to V3, or from V1 to V2. I think it will be probably a little bit of a slower migration. But the long-term network effects of the gas improvements of pooling liquidity within a singleton contract. Like basically, like maybe the initial liquidity pools in V4 will really be like specific use cases that need a use swap V4 hook. But the more of those that start to get created, the more liquidity that starts to get in this singleton contract, suddenly like you can create an identical pool, like you can make the same trade offs V3 did in V4, And you'll now have more efficient routing against other V4 pools.

And so I'd say that over time, the shelling point of the singleton contract and the benefits of pooling liquidity will win out. And so I do expect a slower migration relative to V2, just because it's more complicated. There's more things happening. It's a bigger ecosystem. V3 is extremely efficient relative to V2.

There are a bunch of other improvements to Uniswap in Uniswap v4 that I haven't mentioned yet, which now might be a good time to mention some of them because I think that they get at some other reasons to migrate, still relating to gas efficiency and shelling points. But I said that maybe in no particular order. 1 interesting, so 1, we support native ETH pools again. So V1 had native ETH. Every token was paired against native ETH.

So maybe a good context for, I guess, bankless listeners who don't know this, wrapped ETH, which is ETH that is a, you know, represented as a ERC20 token, and then there's native ETH, which is like the native token to the network. And transferring native ETH is about half the gas cost of transferring wrapped ETH. But it can't be used in certain smart contract patterns. In the name of code simplicity, we moved to only wrapped ETH pools because it allowed you to treat ETH as an ERC20 token. You didn't need a whole separate code base for that.

But with Uniswap v4, we're bringing back native ETH pools, which do provide significant gas savings for transactions that are buying and selling ETH. So that's 1 benefit. Another benefit is another kind of interesting feature that is kind of, I'd say, cute. It's not game-changing, but interesting, is we've kind of taken the flash accounting stuff I talked about, right, which is like, oh, like I kind of can do a whole bunch of things and I only transfer some amount of tokens in, some amount out, and everything that happens in the middle can sort of be reconciled. With Uniswap before, we actually, that was almost a lie because you actually don't even need to transfer tokens in or out sometimes.

And what I mean by that is that if you buy a token and your only intention is to sell it in the future, there's no reason to actually transfer that token back to your wallet. If you want, you can actually just leave it in the, so the same way that pools are separated out by internal accounting, you can actually leave your tokens you buy inside the Uniswap Singleton contract and sell them later. And if you do that, then you actually don't need to pay the gas cost of transferring them out of the Singleton contract. There's still some cost of updating the internal balances, but it's lower. So there's sort of a nice little benefit there where if you're buying a token only to sell it, you can actually have additional gas savings.

So there's a bunch of these features. And actually when you add them up, if you imagine like a native ETH pool and you remove the Oracle and you have, like maybe you even like buy a token with ETH and then you sell it later for ETH, and you never take that out of the pool. You could imagine that across all of that, you could have a contract that has no hooks, removes the oracle actually, so it's actually less featuresome than v3. And using native ETH, and you actually have very significant gas savings. We don't have actual, I'm not going to say any numbers because we don't have any gas benchmarks and not all of this is, or maybe we have some, but the code base isn't even frozen yet.

So we're not ready to like, you know, be hyping up gas numbers. But the general point being like, there's actually very significant gas savings to be had here for certain use cases. And so that also could be a reason to move liquidity because lower gas for swappers means, you know, more trading volume means more fees for liquidity providers. And so that could be another reason.

I think why this feature, I think, is unique, even though it's small, but it's big at the same time, the idea of you can actually leave funds inside of the Uniswap contract, it really emulates a centralized exchange, but in DeFi, with all the DeFi values, right? And so in the same way I can send my USDC or my Ether to Coinbase, I can now send my Ether and USDC to the Uniswap contracts, DeFi contracts, and they can exist inside of the limbo state of Uniswap. And then if I'm a trader, I can do a bunch of trades and then I can withdraw my crypto assets later. And the cool thing about this is that it's DeFi. There's no central custodian.

It's all protocols. It's all smart contracts. There's no 1 I'm trusting with my funds except for the contracts themselves, except now it's on chain. And so this makes, to me, for traders, I would actually be primarily very, very interested in this because of the gas savings. Like I'm sure 1 of the big reasons why people still host their money on centralized exchanges, leaving it up to the trust of humans that run these exchanges, is because of the UX and fees that are reduced in the centralized exchange world.

But If you are able just to leave your money inside of Uniswap, be charged much reduced gas fees and have those assets ready to trade on a moment's notice, like the UX of a centralized exchange would give you, this starts to make Uniswap very competitive with centralized exchanges on a vector that it has never actually been able to compete before. So it's a small thing, but I'm wondering if it's actually quite a big thing. I'm wondering your perspective on that.

It's sort of, the reason that I'm not making it a massive thing is because it's still on a relative base. It's relatively cheaper, but it's not like centralized exchanges, it's just like a spreadsheet, right? So it's like, there's no gas cost to transactions except for depositing and withdrawing. Here there are, it's just, we're trying to reduce them as much as humanly possible. We're trying to reduce the costs of using DeFi and using decentralized exchanges by finding every gas optimization we can.

And this is 1 of them. And so I think the net result of all of these changes is that it is possible to have, we hope, for very significant gas savings all said and done. But I don't want to promise centralized exchange level scaling because there's no gas cost at all there.

Hayden, when you add all these things up, all of the features that we've talked about today, hooks being maybe the bright, shiny object and 1 of the most interesting things out of this conversation. How order of magnitude level, how big is this change? Is this like the difference between V1 and V2 or V2 and V3 or V3? How big is this compared to previous Uniswap version releases? And you guys have decided to call this 4 rather than a 3.5 or some kind of point release.

How big is this in the scheme of things?

I think that on its own, if you ignore all the hooks that are going to be built, it's only so much better. All the other changes are somewhat marginal. But when you imagine this all, but 5 years from now and everything that's been built on hooks, my hope and expectation is that it is a V2 to V3 style leap, more so than a V1 to V2. Although I think that each version of Uniswap has been legendary in its own right. And I think that the reason that we think this should be called V4 is because we think this is like a real, it's like a massive step forward.

And I don't know how to put multiples on it, But I'm kind of feeling the 10X, you know? But so yeah, extremely excited about Uniswap v4. I think it has just so much potential and it's such a powerful developer platform even for innovation and building on top of liquidity layer. You know, so I don't know, I'm extremely excited.

Another 10X gets us to 15 trillion, I might point out. So that would be quite sizable.

Well, I think the reason why this can be measured as a very big deal is it seems to be an update that allows Uniswap pools to continue to update without needing another v5. And so we can have improvements to the Uniswap protocol naturally or smoothly, emergently, without ever having to actually make a Uniswap V5 because now this can come in via hooks. So we're done.

We found the end of the roadmap then.

Well, that's what I said about a V3 and then we got V4, so I don't know if Hayden's ready to make that promise. But it does seem to be like, hey, first we had analog cars running on combustion engines, and then we got electric cars that had over-the-air software updates. And this kind of feels like a transition to that.

Yeah. For what it's worth, V1 and V2 each lasted a year. V3 lasted 2 years. And so, maybe this 1 lasts like 3 years. It's hard to say, I don't have a 10X.

I say that, look, we have ideas for where things could continue to iterate in the future. This is a huge step forward in the next 1. I think future ones have to be more like, if there are future 10Xs or whatever, they're probably more tightly coupled to layer 2 rollup. The Ethereum roadmap and how blockchain scale in the future, if that makes sense. But this feels like a really obvious huge win and next step that we're incredibly excited about.

It is very exciting. And I think Bankless listeners will definitely be excited about this. And as we draw to a close, Hayden, I want to ask you the question about kind of zooming out. So we've been in bear markets before. I think Uniswap very famously was born in 1 of the worst bear market that Ethereum has ever seen is the

2018-19

bear market when Ethereum certainly was dead and everyone thought crypto was dead. What's going on with DeFi these days? I mean, is DeFi kind of, has it peaked and it's just sort of steady, incremental growth from here? Are there any big innovations left? Just zoom out and tell me about the space because Uniswap has been 1 of the forefather protocols, I would say, this entire DeFi movement.

And you've been a huge piece of that, Hayden. So what do you see right now? What is the future for DeFi?

Yeah. So I guess 1 place I'd start is that to me, it's less about fancy new, shiny new things. I think that at times DeFi has been made about being about these shiny objects. And to me, it's really about doing very simple things better and exposing benefits to users. Uniswap has, for the past 5 years, I've been working on how do we make swapping better?

Swapping is conceptually a relatively simple thing. I want to convert 1 token to another. And that's what we've been iterating on for 5 years straight. And there's definitely cool, interesting, complex financial primitives. But for me, it's always about doing the simple things better and keeping doing it better until it becomes actually better, until it can provide more tangible benefits in the real world.

I think that at times we can talk about, oh, no 1 controls it and that's great, but we also need to make it like useful and usable and put it in people's hands. And we're kind of like iterating our way to getting there. And so I think that it's really not about the sexy things. It's about just constant progress towards making it cheaper, making it easier to use. Those are the 2, cheaper, easier to use, and just constantly pushing on that and pushing on that until we actually get to a system where maybe Uniswap is used to, let's say that I have someone in the US and I want to send money to, let's say someone in the US wants to send money to their family in Mexico.

Ideally that should be built on DeFi, but DeFi isn't there yet. People aren't using it yet for that. People eventually have to build applications on top of it that are better. There's still a lot of... We're in the super early days.

I think that people want it to be in the late days. People want it to be like production use cases where hundreds of millions of people are already using it. But there's a lot of work to get there. We're still learning how to scale blockchains. We're still learning how to make...

AMMs have only been around for five-ish years as a technology. They're just very new. To me, DeFi is a long game of steadily improving until it becomes useful to more people. And I think it already is useful. There are already initial early adopters and early use cases.

I'm wondering if you think we'll get there, though. If your confidence has wavered at all. I remember there was a time where I know you predicted that Uniswap and decentralized exchanges would eclipse everything in TradFi that we've seen from a volume perspective, be larger than S&P and NASDAQ and all of these things combined. Do you still believe that's the case? Do you think we have a chance here?

Yeah. I mean, look, I wouldn't spend 5 years working on this. It's the only thing I want to work on today. So I'm personally still extremely optimistic about DeFi and where it's going. For me, it's funny because people look at the last 1 year, only in a vacuum, maybe it's easy to be negative.

But I think that if you look at where we've come from, even a few years ago, there's just been so much growth in, you know, there's been so much like, you know, exploration of the technology. You know, there's more usage now, even like post FTX, you know, decentralized exchange market share has gone up relative to centralized exchange, like significantly. It was sort of recently at like an all-time high of decentralized exchange versus centralized exchange volumes. And so we're starting to see like even within crypto, like more of a shift towards decentralization. I expect that to continue.

In terms of like TradFi and supplanting that, like that's like a longer kind of a longer game. And it's really about like, I guess to me, like I think that there are like fundamental advantages of this technology. And when we can package them up and expose them to people in a tangible way, I think that they'll by definition win out. But It's not going to happen overnight. It's not going to happen in a few weeks.

It's going to take some time. But I do expect a steady... There are more people using it now than 2 years ago. And there were way more in like, you know, orders, many orders of magnitude more than like, even like 2 or 3 years ago. Right.

So like, you know, for personally to me, like the long-term trajectory is up and you know, we're just like in the early days and that's what it's sort of all about. And so personal confidence hasn't wavered. I do think that maybe to touch on something underneath that, I do think that when you see things like FTX are discouraging to new people in the space. They are a little bit like... I think that people in the space often see...

Or maybe even Tyra Lune is a better example. It was very obviously shitty to a lot of people, maybe, who were diehard early fans of DeFi. And so I think that it can be tiring to have yourself represented by... People often just look at crypto as a monolithic industry, And I think it can be very hard sometimes on people in the space to have the loudest worst voices in the room, be the ones that people see as representative of our broader industry. Whereas I think that the industry is pretty multifaceted and there's people working on all sorts of things across the entire space.

And there's so many incredibly smart, talented people. And sometimes they're getting less attention than people who spend hundreds of millions of dollars on stadium sponsorships. But they're real and they're happening. And so I think that I always try to encourage nuance in these discussions. I totally sympathize with people who look at crypto and are like, wow, it seems like a scammy industry.

Because you see these very high profile scams that have happened. But to me, it's all about that fundamental underlying progress towards better technology and a better financial system. And to me, that is still progressing and improving and on the right trajectory.

The trajectory, of course, is DeFi eating TradFi, DeFi eating the world. And that's certainly what you are building and the Uniswap team is building with this next release. And We'll know we're close when NASDAQ and S&P and all the large exchanges of the world start building hooks on top of Uniswap v4. Hayden, it's been a pleasure to have you on Bankless. Thank you so much for joining us.

Thank you so much for having me. It's been a pleasure.

Hayden, as we get to action steps here, I know you've got a blog post, white paper, code base. We'll include links to that in the show notes. There any other big action items that folks can take to kind of get involved and start doing things, maybe even starting to build hooks? Is it too early for that?

It's not like, I mean, it's too early if you want a guarantee that there will be no changes. So the code base is not frozen, has not been audited, has not been finalized. And so if you are like, I just can't wait to get my hands on it, I just want to experiment with it conceptually, then go for it. If you want a kind of more finished platform to build on, then maybe wait a little bit, maybe wait a few months. 1 thing I'll add is that if you think that you have what it takes to get some code into the core Uniswap v4 code base, we have contributor guidelines in the GitHub.

I don't think that it's... It's obviously still a pretty complex code base and isn't necessarily for super beginners to do. But there are obviously... The space has so many incredibly smart, talented, smart contract engineers. And so If you have a gas optimization, if you have a feature request or a improvement, create an issue, work on an issue, by all means, read the contribution guidelines.

Open invitation there. And of course, we'll also include our previous episode with Hayden in the show notes as well. David, you have an action item too.

Yeah, the actual launch date of Uniswap v4, I believe, correct me if I'm wrong, Hayden, depends on an EIP being included. So perhaps there are some action items for the Ethereum devs to get included? Is that correct? Or is there a different launch date for v4?

I think that the benefits of this sort of singleton and flash accounting that we think is really part of our vision for where this goes, Those benefits increase significantly once this next Ethereum hard fork happens. It's possible to launch a version without it or before it or only on layer 2s or something like that. But my personal guess is that like this will happen post Cancun hard fork, that would be my sort of personal thought on like the best timing. Um, I don't know if there's any action items there. It's sort of already there.

Like it's kind of already slated for

going as fast as they can. Okay. David, it's going to happen. For what

it's worth. We were, you know, we did,

we did another reason to wait for the Cancun hard fork.

Yeah, there you go.

We did do some contribution to 11.53, And definitely support for it in solidity, stuff like that also will be helpful.

There you go. We got some things for action items for everyone. And I guess the main thing is during the bear market, the builders keep building and Uniswap is certainly building. So is Ethereum. So is DeFi.

Hayden, it's been a pleasure to have you on Bankless. Thanks so much.

Thank you for having me.

Risks and disclaimers, Bankless Nation. Got to let you know, none of this has been financial advice, not trading advice, not swapping advice, not hooking advice. Crypto is risky. Perhaps some building advice. Yes, but we are headed west.

This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless Journey. Thanks a lot. You