ALPHA LEAK: Uniswap V3 (Layer 2 Rollups on Optimism, Concentrated Liquidity)

Transcript

okay hey everyone it's alpha league time so this is a special series that david and i do whenever some alpha leakable crypto news dropped and boy do we have a big piece of news today we want to talk about the implications of uniswap v3 it has finally revealed its details and announced what it intends to package up in in v3 including a launch date so we're going to talk about that and the implications david how big of news is this for defy and for for crypto i mean everyone has been anticipating this right this is this has been

something that we've all wanted we've all known has been coming and also uh fun fact about bankless bankless history the alpha league series started with the uniswap airdrop in the first place that's right coming full circle uh and so so that's pretty cool and so we're gonna go ahead and dive into what is unit swap v3 and what are the big surprising things about it that we didn't perhaps see coming and there are definitely some very interesting features about uniswap v3 that uh i i did not expect uh the erc 721 nfts are involved which is pretty cool uh well look it fits everyone's getting in on the nft so i guess new swap is getting in on the nfts too right that's exactly right yeah and then there's some other things as

well which uh such as a variable liquidity across the amm curve which really starts to eat into the moats of other amms on ethereum specifically curve i'm going to call curve out here it's like ooh does curve have the moat anymore after unit swap v3 question mark yeah this is the uh the return of the the unicorn david i thought this was going to be ultrasound money week but now suddenly here we are talking about uniswap well hayden adams yeah rug okay so the other thing is hayden is coming on the bankless podcast yeah we are pretty much confirmed in dms he asked us to mark to dump mark cuban for an interview with him as it was a

joke of course we weren't going to dump mark cuban but now hayden adams is coming on the bankless podcast hopefully sometime we will be recording that this week so stay tuned for that guys that will be the exhaustive debrief what you're getting now in this alpha leak is our um unfiltered thoughts on this and we haven't had much time for this to to marinate much time for a conversation around this we're just getting our unvarnished thoughts so take that for what it is uh we're just reading the announcements and the the details here the same as you we will also provide a version of this to bankless premium members in a newsletter segment that we call the alpha league so premium members get that alpha leak there's a link to become a premium member in the show

notes but you're getting it here live streamed on youtube and maybe we'll release this as a podcast episode too david we got to start with the tease because uniswap and hayden specifically have been teasing v3 for what feels like years i know that unit swap hasn't been even uh around for years but it feels like that here's a tweet from hayden um just earlier was it late week last week thursday or friday of last week and hayden just goes if i have to go another week without publicly announcing details of unit swap v3 i might go insane which you know reading through the lines it means it's not gonna be another week it was gonna be literally three to four days and i actually i i quote retweeted this one

and said wow this really reminds me of that tweet where you know where hayden tweeted out a picture of the the v2 uniswap logo and saying ooh pretty colors and then two days later uniform v2 drops uh and so like reading between the lines this is definitely clear that this was uh this was coming but then we got another tease uh just yesterday actually which is this very very dope graphic animation i guess uh and you know it it was it's a really cool piece of art and it's all uni-swap themed uh and so this was there like reading between the lines like this is how uh this is how they're they were wanting to announce the announcement um audio i'm sharing it with uh with sound this time can you hear that yeah

yeah so this is the the uniswap announcement the team's announcement here i love whoever put together this video man i love the aesthetic like uniswap's done a really good job from a branding perspective and capturing like ethereum's weirdness and culture we're in her dms trying to get her to do some stuff yeah definitely all right i'm gonna stop uh i'm gonna stop playing that sound here so i thought that was pretty cool all right and then hold on i gotta reformat things and so that was yesterday and then and then today which again like we were saying this week was supposed to be ultrasound money week but turns out it's unisop v3 week so now everyone's talking

about uniswap v3 so let's get into it what is uniswap v3 and there's definitely one core standout feature that is standing out from the rest and that is their concentrated liquidity feature which is why what i was alluding to when i said does curve that have any moat anymore and so uh and maybe that that's good background good context curve is a is a amm much like unit swap but it's a modified amm where the curve of the amm and of course amm's automated market makers the way that uh amms price things is on a curve and it's very simple curve the uniswap model is this uh what are the letters like um k times x equals y or something three variables

it's an exponential curve we all learned it in like middle school math and what curve did the the the stable coin uh amm curve it it changed that that algorithm so that there was a flat part which allowed for much more capital efficiency and it could do this because it made this assumption that it was trading like for like assets so curve really specializes in high liquidity like for like assets so usdc to die wbtc to rent btc and that was really its big competitive advantage to uniswap because it allowed for that extra capital efficiency yet uniswap v3 has boasts this new feature called concentrated liquidity which does the same at the end of the day it's not

the same design but it achieves the same result which is extremely high liquidity in very tight bands along a trading like range and so in theory uniswap v3 can provide comparable or or even more levels of liquidity for uh very specific assets like stable coins specifically that i don't that curve can match but that therefore what is curves moat anymore yeah the the question i think or the the the the implication possibly as that this new uniswap v2 v3 design rather is kind of a an automated market maker eater right like it's kind of the automated market maker to end all

automated market makers i'm not necessarily saying that's true but i think part of the design is that you can provide liquidity essentially anywhere uh along this curve surgically and surgically um and i actually think and and so the the implication there is maybe you don't need this this diversity of other automated market makers as much or at least uh they play less of a role this kind of generalized case can uh take it all i actually didn't really understand this concept i think until i looked at this video from one of the uniswap tweets uh and here it is this is the idea of concentrated liquidity right so as a liquidity provider um you can provide

basically like a a you could provide liquidity around a range like a price range right so what that what that allows you to do i i think of it almost david as like a stop-loss order right like i can provide liquidity stop-loss liquidity crazy yeah crazy right so i can provide liquidity not for the the entire curve but only around a specific range i think they have an example here of um let's say i wanted to provide oh five i've got five million i want to provide five million easy five million liquidity for the die usdc um pair but only inside of this very narrow band this very narrow range where die trades that um the die usdc

pair is you know 0.995 to like point uh 1.005 so a very narrow band i'm providing liquidity for and i sort of set the parameters for that liquidity and i put in all of this liquidity and the net output it looks like is there's massive depth in the pool for this narrow band that's what you're kind of seeing in this graphic right like look at it right go up mm-hmm right and this is really really good for um for uh specifically uh uh people that want to provide liquidity for that one specific band and like for stable coins which are stable coins are never ever

well they're not supposed to trade at like 10 cents or 20 cents or really all the way up to like if a a staple coin is doing a good job like 95 cents saba coins are supposed to stay in between like 95 cents and a dollar and five cents and ideally as tight as possible which means that that like when you supply ether uh each die or or die usdc you're supplying liquidity across the full range of the full spectrum range when you really shouldn't be you should only be supplying liquidity within a very tight band and ideally as tight as possible and so this and this is where i think uniswap uh boasted that like 4000 x improved capital efficiency i think that's what they were talking about that's what

they're referring to is is like we can cut we people won't be providing usdc die liquidity below 95 cents per per unit and they can just concentrate all of that liquidity in such a in such a tiny band uh that's really cool that's really cool yeah and if and if you're trading in uniswap it means you get a massive amount of liquidity depth for that narrow band and that that narrow band is where you know the majority of the trading is going to consist of two which is uh which is fascinating right and what i expect this to do is i expect this to basically have no slippage across um across stable coins and i think that the fees that people are going to be paying are only going to be gas fees and um lp and unit swap

exchange fees there's not like for for like to like assets i don't think there will be any slippage on unit swap yeah that's the interesting thing as a liquidity provider if you're if you're providing liquidity for that narrow band you're still making the same in terms of uh liquidity provider fees right because you make fees based on every single trade um so you know that that's where that comes in too but like what you were just saying david it comes across in this line for in version three lps liquidity providers can approximate any conceivable order book or automated market maker curve by composing multiple positions per pair that's what that's what they're doing here infinite strategies can be

efficiently aggregated together into a single pool to form a combined curve that users can trade against you know what this tells me ryan is like so when the concept of an amm came out and uniswap really pioneered it technically it came before it but uniswap really made amms come into the to the into the forefront of the conversation and people people like newbies like me who never really cared for order books were like were out like over over the overjoyed because like this is so simple i just input what i don't want and i output what i do want and then boom boom we're done and then i kind of like you know my knowledge grew and i realized well order book exchanges are you know really useful like that like amms aren't killing order book exchanges they're

just supplementing them with something else i think this kills order book exchanges and not not completely but it does all the same things stop loss liquidity providing that's what an order book is that is what an order book is and so to me i don't like as the infrastructure around concentrated liquidity grows and grows and grows that is going to take away from start from order book based exchanges because it's doing the same thing yeah i guess the the the only downside of automated market makers historically have been that they don't have the liquidity depth right of uh centralized exchanges and that was particularly true when unit swap came out you know 2018 right like there would

be some pretty hefty slippage fees before they built up the liquidity um what this is creating is this this ultimate incentive for liquidity providers to provide this this massive depth of liquidity on these narrow bands of the curve this is another way they kind of illustrate is like as a liquidity provider it used to be in in the previous unit swap version you could only enter this entire um curve right you have to provide liquidity for the full curve but with v3 you can enter in any sort of portion and you really get to decide whether like what band what area on the curve you you want to enter it into which is going to essentially juice

the um the returns and decrease the risk for liquidity providers at the end of the day that's what uniswap is it's like a liquidity monster it's like eating up as much liquidity uh as it can and as it as it gets this liquidity like liquidity is very much a power law game and liquidity begets liquidity it just gets stronger and stronger and stronger so um i see this as a massive upgrade for anyone who wants to provide liquidity to uh uniswap there's a comment in the bankless youtube that it says that wouldn't this mean um that there's a lot less liquidity at the extremes of the curve forcing the prices to become more

volatile so that's definitely something to take into account prices inside of a band will be very stable but if they get outside of the band they could do something crazy and i'm kind of reminded of like um wall street bets type behavior where like people will like focus in and say like well if we can get the price to move out of the band all of a sudden it'll jump to something like you know crazy just because the liquidity just stops and all of a sudden like an extra you know 100 of buying pressure moves the price by like some x number of percentages i think there's going to be a lot of games that are played with this mechanism yeah that's a that's a it's fascinating just to try to walk through how this might operate in the in the real world um and

if people will kind of see that liquidity on chain and try to break it in various cases but it definitely means that at the at the edges of the curve the less frequently traded uh parts of the curve you're going to get a lot less liquidity right it's going to be kind of staggered you know pareto principle 80 20 rule inside of these more narrow bands um but of course like you know if if people are trading out on the left and way out on the right side of the curve uh they're paying a lot more a lot higher slippage fees as well um so i i feel like that's the big big uh surprise it's this is kind of a redesign of the entire concept of uniswap and the entire concept of

automated market makers it's really kind of a revolutionary idea here but the the big pieces are this this idea of concentrated liquidity where you can kind of make bets as a liquidity provider at any point along this band that's big idea one and then big idea two sort of falls out of that which is as a result you get massive amounts of liquidity for these bands and you get massive capital efficiency gains here so this talks about the capital efficiency gains max out at 4 000 x for lps adding liquidity in a really tight band like you know 0.10 and that's why i think it's um i think it makes sense for you to talk

about curve because that is an entire i guess protocol d5 protocol that maximizes stable like right that's most appropriate for stable coins right and now uniswap can essentially replicate that or it seems like it can yeah yeah and this this is that's exactly right and like i said i don't i don't understand this this does that same thing of having a curve that's not just an exponential curve but is shaped as exactly what the market needs it to be shaped as just to provide like maybe they will maybe for whatever reason you have an asset and you that asset is typically either a hundred dollars or two hundred dollars

but for some weird reason it's never 150 and i don't i don't know why an asset would do this but people can get creative in defy and so liquidity can providers can just stay providing liquidity around 200 or around 100 and nothing in between and like a lot of games can be played like that a lot of interesting assets can be expressed like that and so what that is that's like curve if it had two flat spots on the curve or or right an n number of liquidity points along the curve and so it's really changing that that x times x times k equals y i think is the right equation really what that's doing is that's manipulating that curve of liquidity to exactly what the market

needs and the liquidity providers will figure out what that optimum shape is because they are profit maximized and that that's what their incentive is yep the the market gets to decide now the right spot on the curve which is super cool because uniswap v1 with automated market makers it really brought the market's ability to decide the um the liquidity depth of any particular asset right so completely permissionless any asset can be listed anybody can you know publish their asset on uniswap and the market decides what the liquidity profile of these assets are essentially right and so the best assets kind of rise to the top they get the most liquidity the best monies get

the most liquidity this does that same thing except uh for like the best curves when essentially are the best curves that fit a particular pair of assets super cool but you know what this is this is uh at the same time this is probably the the meat of the story right in the meat of the innovation but there's also more here by the way there's an entire white paper that david and i have not gone through with all of the uh details behind this including like kind of all of the math uh we'll include a link in the show notes to that to you if you dare enter a white paper yeah we're just trying to summarize this for you at the high level but let's go through a few other things this is actually from our alpha alert that we're going to issue to uh bankless premium subscribers

but we'll go over a few of the tl dr's the the first two we sort of talked about david uh so what is included in this uni-swap thing concentrated liquidity and capital efficiency those are the major innovation points but the third i think is almost as exciting for all of d5 which is uniswap is going to be deploying this on optimism optimism of course is a layer two that means it's ethereum secured roll-up right so they're not just going to put this on main net uh the date by the way uniswap is targeting a v3 launch on may 5th with an optimism deployment they say shortly thereafter which to me

they don't have a date but you know shortly thereafter is that weeks you know they can't they can't announce for optimism so they have to wait for right there's some dependencies there um but how big of a deal is this and what are the implications of uniswap deploying to um a roll-up like optimism right so there's a lot of a lot of content producers like bankless or you know anthony suzanne's daily gray or into the ether or anyone talking about like you know optimism and l2s are coming and they're going to blow everyone's minds and people are like oh okay cool i wonder what that means what that means is that uniswap is feels like coinbase or or robin hood or it's centralized exchange level of

performance and user experience with a decentralized level of security uh and so we retain the values of decentralization which there's you know infinitely long hours of conversations as to why the values of decentralization are important but and by the way practically that means you can exit without anyone's permission right yes you always you always have custody of your funds you can always leave and do whatever you want with your funds no one can ever do anything with your funds that you don't want them to self-sovereignty permissionlessness going bankrupt blah blah blah blah what optimism is doing and what unisoft is doing is like well all of those fees that people are bummed about paying because it costs like 30 to make a trade on uniswap goes to it goes from 30 to maybe three cents or pennies it goes to pennies and

also the the order goes through instantly as it does when you trade on coinbase or through finance and so the the and so getting of your money into the optimistic l2 will take one transaction and that will that will cost your typical ethereum transaction maybe 30 depending on how fast you want it to be maybe 20 to 40 dollars and then once you're on optimism it's just like it's just like you sent your money to coinbase or you're selling your money to finance and then you can trade trade infinitely a thousand times a second do whatever you want uh because that's what the power of optimism is uh and so all of these cool features that we're talking about on the unit swap main chain is just going to be replicated on uniswap on optimism yeah so uh exactly right a couple thoughts there so you know the one is

it's it's awesome that roll ups are here right there they're here enough for for uniswap to be able to deploy on them it's interesting the strategy that uniswap is taking because it's kind of like a you know one foot on the shore and then another in the sea right so it's like they're deploying on main net they're gonna live on main net but they're also going to live on this optimism roll up so it's not one or the other it's like both but this is a contrast from the way some other d5 protocols have chosen to deploy so we talked in in one of our weekly roll-ups david about like sushi's sushi swaps deployment strategy and it was like shotgun approach where are you going to deploy we're going to deploy everywhere we're going to deploy to matic or we're going to deploy the polygon xdi finance

smart chain like polka dot anyone anywhere that will be halved yeah no we're not making any concentrated bets here we're just like going to go where everywhere and we'll see where you know what the market decides uh unit swap is taking a very i would say eath first maybe even you might argue decentralization first strategy and they are leading the way and they're saying like we're picking optimistic roll-ups secured by ethereum and like that's their strategy this is not a shotgun at all it's also interesting that they've picked optimism because uh enroll up specifically is because this is uh we've talked about this in the past david but like layer two is very much a

a coordination game for d5 protocols right so unit swap in an optimistic roll-up isn't going to be very interesting unless there's a lot of erc 20 tokens inside of that roll-up and a lot of liquidity inside of that roll-up and honestly a lot of other d5 protocols joining the party right so uniswap is saying hey manhattan's busy so we're going to build out in the suburbs we're going to build out in in brooklyn a little bit but this is a signal to say like join the party unless other defy protocols join them on the optimistic rollup then it's going to be a lonely place so my like unit swap make i feel like the

market was almost waiting for uniswap to make the move and why una swap well they're 57 or 53 of all d5 trading volume right the one of the the the highest market cap uh d5 token kind of a a leader in many respects of flag baron in many respects and i feel like the market's waiting for uniswap to make its move before it decides which roll-up to support and maybe this is uh this is the push that everyone else needs to get to an optimistic roll-up and join the party well we also need optimism to actually launch so that the party can actually start that is an important variable as well um optimism has just increasingly become the shelling point so i do think

i think and it hasn't even launched and maybe it's too early to say but i kind of think the cats it's already determined um it's going to be basically optimism and and maybe the stark wears ek rollups um and so i don't really have any uh concerns that these d5 protocols won't be able to coordinate uh just over time i think it's all just gonna the party's gonna start on optimism also people that we are in the dms of trying to get on the banquets podcast um and so then hopefully that follows right after uh the the uniswap podcast with hayden um where do you want to go to next round let's keep going so those are i think the three big big pieces right concentrated liquidity capital efficiency that that brings and then

they're deploying on layer two on optimism let's talk about this flexible fees so unit swap v3 has different um uh fee tiers per per pool so and it really depends on the volatility per pool so um that spans from point zero five percent to point three percent and one percent depending on the volatility in version one uh you didn't have that option essentially you you have like the a standard less flexible um fee so that is a difference again providing some more customizability and some more i guess optionality and determining the market preference from liquidity providers so flexible fees is another feature here

interesting like that they already picked out three and then locked you into only three well rather than just why is this not a number that you can input um that's what balance that's what balancer lets you do um specifically curve the the a the highly liquid amm for stable coins and other like assets they have that 0.5 swap fee so it makes sense that we can now choose more optimum fees for our trading payers but why not why not just make this a parameter i don't know something we'll have to ask hayden yeah that's i think that's a great question um and let's continue moving on i think this is important unit swap protocol fee so in v1 for uni token holders money okay revenue right so uniswap introduced a 0.05 governance cut

in v2 like the parameter but it was never turned on a v3 introduces governance fees on a per pool basis so that's one distinction not just doing it for the entire unit swap platform every pool will have a different uh protocol fee that could be between 10 percent and 25 of lp fees so all fees will be turned off by default they're not turning them on but governance unique governance will be able to vote on these fees to turn them on or not so this is something we've talked about since may since before d5 summer of last year the idea that governance tokens will vote to bring cash flows into their token

economics this is another step down that path um everyone's asking like uniswap's uni's valuation what's that based on if it's just a governance protocol well it's not just a it's a governance protocol that's going to add cash flows it's gonna pay you money that's why it's valuable on the wall like that's what's happening it's turning into a capital asset and uh anyone who holds uni tokens is incented to vote on these capital assets um i'm wondering if we oh we did some basic look our analyst uh lucas gamble shout out man he did some basic napkin math on never before seen napkin math specifically to bankless viewers

here's the basic napkin math so he's doing uh uniswap protocol earnings and i suppose this is based on a ten percent rate and then a six red is a 16 so halfway between 10 and 25 and you can see sort of the critical earnings i guess this is um probably your time here 400 yeah annualized yeah okay so between 200 and 400 million dollars on a yearly basis into the protocol not bad into the protocol into the capital asset into your pockets if you are a uni token holder well the crazy thing about this and people still haven't wrapped their heads around the difference between coinbase and and uni but like coinbase has a lot of overhead

that uni just doesn't have no uni exports is overhead to ethereum 15 employees in code right yeah right well like that's that's it it gets it gets everything out of the box with with ethereum whereas coinbase has even it's more like a bank has thousands of employees lots of overhead uh so anyway very cool here should we talk about the next one uh yeah this is this is the very the very interesting one this is this is gonna uh throw the world of composability in for a tizzy uh and so what uniswap has done when you typically provide liquidity to uniftop you you throw like for the eath die pair for example you put in equal parts ethan dye uh and then you get this lp token which is

another erc20 token and that that paradigm that you you put in your deposits and you get a receipt that's also an erc20 token that that alone triggered a massive conversation about the power of composability dan elliser wrote his famous piece superfluid collateral and d5 because you can take that lp token and lock that up as collateral and things like maker dow and maker dow has recently done this there are erc20 lp tokens as collateral in maker dow which allows you to draw debt against it what uniswap v3 has done is because of that that more surgical inserting of liquidity across a specific band in order to enable that feature they

needed to turn their lp tokens into nfts because if you are providing liquidity for each die between like you know eighteen hundred dollars and twenty two hundred dollar ether that is not the same parameters as somebody else who is providing liquidity between one thousand and ten thousand dollar ether those are different parameters and so those parameters i'm pretty sure this is the way this works the parent those parameters gets baked into the nft and that's those unique constructs are part of that nft and so what that means is that not all eth die liquidity positions are the same and all of these lp tokens which are now nfts are not one-to-one tradeable in the same way that they were that they previously were which means accepting these things as uh collateral

into other d5 protocols will take more overhead and take more custom engineering to really get that done and so it's really going to be interesting to see all these d5 protocols have to wrestle with this for sure what you just said is that that customization it there's actually a trade-off here right because with that customization uh that the lp gets to enter at any point on the curve what we lose is fungibility the ability to exchange all of these liquidity pair positions uh one for another now my question is like what are the downstream implications of this right um the first is like uh nfts are there's going to be a whole lot more nfts on ethereum that's for sure imagine every single liquidity provider

like that deposits anything into unit swap getting an nft right and so what's going to happen to all these nfts are there going to be ways to trade them individually where does like something like immutable x which is creating kind of a layer two for nfts where does that come in will there be ways to like tranch these nfts together and turn them convert them back into more more fungible erc20s i'm betting the answer to all of these things is is yes and that's probably the gamble with work yeah but but uh maybe that's the gamble that um that eunice or the trade-off that uniswap is is making for this because i see this is the aspect i don't love about the the new

design i'm just wondering what the implications will be for it right yeah and to be honest we never really saw the composability of lp tokens really take off we only really got a hint of it with unit swap v2 and by the way unit swap v2 will still be a thing and so we if if the market really wants those lp tokens to be erc20 tokens they can still have that because unit swap v2 will never go away units what v1 is still here people still trade on unit swap v1 for whatever reason um nftx has done a fantastic job of producing liquidity across nfts so like crypto punks have liquidity so you can simply just put in one ether and then you can get this token that represents crypto punk liquidity at aggregate and

crypto punks are you know unique there are like i don't know how many 40 000 unique crypto punks uh and so like perhaps perhaps there's a roundabout way to to solve this in the back end where we we go with erc20 tokens into uniswap mints an nft version of an lp and then all these different nft lp tokens are then re-coalesced back into a platform like nftx to produce out another and another erc20 token like it sounds complicated it sounds like it sounds like a lot of work uh but some but people in d5 do stuff like that like people tinker and so maybe this this solution is solvable and i have a sense that some of that experimentation might happen on the optimistic roll up where gas prices are

are really low right so that innovation can live there um let's keep going so there are a lot of advantages to uh to uniswap the the money lego or the system but there's also like system-wide ethereum and system-wide defy advantages that we're getting out of this and one is more advanced oracles right so uniswap has famously been kind of like providing an oracle service to the rest of defy and it's um it's a very censorship resistant oracle service because it's based on some code uniswap code that cannot be stopped itself so it has some advantages

um that you know chain link and off chain sort of oracle services that are feeding data in internally do not have so what we want out of this whole d5 system is the most censorship resistant unstoppable set of oracles possible right because oracle's price feeds provide everything we need they pro like they they provide you know data for synthetics they provide like an underlying primitive that the rest of d5 can use and it looks like i haven't gotten into all of the details here but the uniswap v3 upgrade is going to provide a big boost to its oracle service making it possible to calculate any recent time weighted

value within the past nine days i'm actually previously it sounds like it's been like less than nine days so this gives a longer history to you know provide a price feed oracle based on yeah and i think there's just overall just more robustness about the infrastructure of the unit swap oracle just making it more consumable by other defy apps and i think that's really the key innovation is like it's just it's a it's a developer usability feature and we knew we need internal oracles to come out of ethereum and oracle is really really important if we want to maintain our self-sovereignty right because so many of these defy applications need price feeds to operate maker down needs it of a compound anything with

collateral needs a price feed it and so it's really defy or ethereum is trying to ask the question what are these assets worth and they don't really know the answer to that question without an oracle and historically ethereum or defy at large has had to ask that question externally as in like hey coinbase or hey binance or hate chain link what is this worth and now instead things can ask uniswap what is this worth and like you said that was a feature of unispot v2 this is not brand new in unison v3 but it seems to be that the infrastructure around this oracle is just better and so what that tells me is that this is making d5 more buildable because we have uh censorship resistant oracles

out of unit swap and especially as uniswap is growing to the amounts of volumes that it is competing with coinbase that makes actually the oracle more resistant to attack right because um somebody might be able to just like drain the order book on coinbase and then all of a sudden the coinbase oracle reports a very weird number and that triggers a bunch of events in defy black swan risk the more volume we can put through uniswap and the more censorship resistant these oracles can become makes the oracle stronger liquidity is key here so it's all this great feedback loop um let's talk about this too so gas efficiency so everything with the above upgrades we talked about v3 swaps are actually cheaper than v2 now i don't think this means

significantly cheaper but the fact that they are cheaper at all is pretty seems to me to be a an amazing accomplishment a pretty cool accomplishment it also tells me that it's like it's a competitive advantage to be on main net and to offer trading at the lowest possible gas fee that just in itself if you're gonna operate in manhattan right like that in itself is a competitive advantage and i think that um something that other automated market makers are going to have to compete with uniswap on if they want to garner liquidity so that's pretty cool like unit swap already did a pretty good job of this it's like always been one of the cheapest places to you know trade from a gas perspective and it seems like

they're just continuing that yeah this is a definitely a point of diminishing returns i would say i i don't know i'm not an expert on gas but i'm going to go ahead and guess that this uh increased efficiency by somewhere between five to fifteen percent somewhere in that range it's not cutting it down by ninety percent like it's not an l2 it's just optimizations and you know swap v2 was already pretty well optimized so the fact that they are even able to boast even further optimizations is pretty cool um but like this is not a new paradigm in gas it's still going to be as roughly as expensive as as what people have been used to but just like ryan said like being able to be competitive with making the same trades but with less gas versus competitors is important to as infrastructure

now here's one so this is part of the the tl dr is the license interesting so this is based stuff this is not d5 protocol stuff yeah so there's a piece hidden in the original post that talked about the uh the licensing and here's kind of how i understand this as as as we write this there's some kind of debate on twitter going back and forth as to what this means but it looks like v3 will be re released under a different license meet space license versus v2 business source license which which limits the use of v3 source code in a commercial or production setting for two years after two years time it returns to a similar open source

license that that v2 was under but it's kind of like this time delayed gpl license so to me like when i ask the why why did they do this it seems like very obviously a response some some meat space anti-forking provision right so what they're saying to anybody who would try to fork it is hey if you do this this is actually against the license right so you could see all of the code but you're breaking a license of sushi swap say tries to to clone this or fork this i have kind of mixed feelings about this david to be honest so i want to get your take on it first what do you what why do you think

they're doing this and what what are the implications yeah this is probably a direct response to the whole sushi swap vampire attack thing where sushi swap literally just forked una swap code and then uh did the lp rewards and so they say hey we're gonna clone uniswap and then we're gonna distribute this new token to people that uh use our version of uniswap uh and if this license was up that would make this a little bit more uh restrictive right um the the take here is that like ethereum is inherently open source and the only way that you can stop someone from copying your code is through meet space regulations like the courts laws nation state laws and so it's a little bit antithetical when we're talking about this grand like

arena of open source development to say like no if you if you copy our code which is you know public is b when you put when you publish it to ethereum it becomes public knowledge it's in the public domain now you can file a a license which is what use swap has done saying like well if anyone does this we can legally go after them according to the rules of the nation state i'm pretty sure licenses are maybe usa only or maybe there's an agreement between the usa and european union but it's a little bit antithetical to the space however it ends in two years which is not that long of a time uh and and also uh you know it it's it's it's a compromise like we can't be completely cypherpunk crypto

maximalist we do live in physical reality there are trade-offs that we have to make uh uniswap does deserve innovator innovators rewards and and so do all the investors um and maybe i would i'd be interested to see how much influence paradigm had with this influence if that was really what they push for or if this is something that hayden really wanted something to we'll we'll perhaps ask him on the podcast yeah so it's it's something that uh for sure could be fortunate anonymously right but does it stop anonymous working it doesn't stop anonymous forking but it probably does stop things like there wouldn't be a you know high reputation say silicon valley style d5 protocol with major investors who would just take you to

swap and fork it would do that um so yeah i you know i i guess the the lens through which i see this too is um this is a a a response to what uniswap has clearly perceived as a competitive threat so this is a protocol using meat space now right to defend against and to build a moat against competitors so not the first time yes not the first time i'm also not surprised i guess we'll see how this plays out um i do agree it's not in the spirit of like fork it and see right everything is open source so this is a little departure from that um we'll see how this plays out here um well i think we've gotten through all

the tldr stuff david i think there's one feature that we haven't covered yet and or maybe i misinterpreted something uh i think it'll be in the blog post but it's about like if you want to provide liquidity to eath the east die pair or any two or any pair but you only have one of the assets i think uniswap will take care of that for you and so you can deposit just ether and then in the background it'll give you a liquidity position into the e pair or the east uscc pair uh and so you only need to come to unisop with one asset to provide liquidity and you'll you will be buying it in the back end but instead of having to like come to uniswap with both equal amounts of both uh amounts of tokens in us dollar value terms uh you can just

come to one and then unislop will take care of it in the background just a you know just a ux upgrade as well which is kind of nice yeah absolutely um so again this is not live yet but we're dropping it as an alpha leak because it is such a monumental i think achievement for uh for d5 and for ethereum so it's important that you know about it i guess what are the the action items here david we haven't even talked about uni token price here but um i imagine it's doing something in the background uh at even as we speak um i i think the action items are like or some things to consider are this liquidity won't move over right away again v2 stays open and active and then v3 is launched in parallel and so

it's not an automatic migration lps are going to have to have a market reason to migrate and they'll migrate slowly it feels like optimism is you know maybe going to happen sometime late spring early summer on the heels of this so that will be a big upgrade for the community and the good news is layer two is here i think the other last takeaway is this seems to add some tangible concrete token economics cash flow value streams to uni the token and what are the implications what are the implications when coinbase does its ipo and has a publicly traded uh stock price what are the implications for for unity token there so a lot to think through we

hope you've enjoyed this alpha leak video edition once again bankless premium members you'll get a copy of this alpha alert inside of your emails there's a link so you can subscribe there as well anything else david uh yeah maybe just one more comment on the uni price just to add some market perspective it's been trading pretty strongly i would say in the last week and then the this announcement dropped and uni price went from 34 to 37 and then and then it's fallen from 37 down to 31 and so there was definitely people who were looking to trade on this news and it's uh so far it's turning out to be kind of a sell the news event um but i don't give a because this is so

excuse excuse my language but this is i think this is really cool and again like that coinbase trade that's where my head is at uh coinbase is going to drop a bomb on the public stock market and then people are going to figure out what defy is and unit swap is just the easiest thing to understand after coinbase so that's my market commentary there you go guys david's market commentary i hope you've enjoyed this alpha alert thanks a lot hey we hope you enjoyed the video if you did head over to bankless hq right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence we recommend joining our daily newsletter podcast and community as a bankless premium subscriber to get the most out of your bank list

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