V2 vs. V3 Volume

    So, how is the adoption of v3 going?

    1. The number of swaps on Uniswap v2 are much higher than v3 even after a 5 months of release
    2. The number of swaps is however trending down on v2 and maintaining a consistent level on v2.
    3. The number of swaps on v2 has decreased by almost 3x since it's peak in May 2021.

    Legend:

    1. Uniswap v2 - Green
    2. Uniswap v3 - Blue
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    Uniswap v3

    Uniswap is the leading decentralized exchange (DEX) on Ethereum network and spawned many derivatives on other blockchain networks. Therefore, it's a big deal when they release a new version.

    In it's launch blog post, the Uniswap team wrote that they wanted to make Uniswap "the most flexible and efficient [automated market maker] ever designed" with the v3 launch. The promised "up to [4,000 times] capital efficiency relative to Uniswap v2."

    Concentrated Liquidity

    The key change that v3 brought forth was "concentrated liquidity." Concentrated liquidity allows liquidity providers (LP) to set minimum and maximum prices on their portion of any given pool thereby giving LPs more control over the price ranges in which their capital is used, with limited effect on liquidity fragmentation and gas inefficiency.

    New fee structure

    The v3 also allows different pools to be created with different fees. Before v3, all trades in all Uniswap pools had a 0.03% fee for trading. Uniswap v3 brought community governed flexibility through multiple fee tiers:

    • 0.05% – expected for stablecoin pools like DAI/USDC
    • 0.30% – for standard non-correlated pools like ETH/DAI
    • 1.00% – for exotic non-correlated pairs

    Full list of new features

    Here is the full list of features Uniswap v3 launched with:

    • Concentrated Liquidity
    • Active Liquidity
    • Range Orders
    • Non-Fungible Liquidity
    • Flexible Fees
    • Advanced Oracles
    • License
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    The total number of swaps on the Uniswap platform has gone down. This is likely due to the increase in Ethereum gas fees in August and September making it unprofitable to execute a swap.