The much-hyped cryptocurrency Uniswap launched its much-anticipated third version this week, yet was outperformed by competitors.
At 7:49 UTC on May 6, UNI was trading at $41.5, down 5% in the past 24 hours and 3% in a week. This is the 7th highest 24 hour drop among cryptocurrencies, despite the launch of v3 being one of the most eagerly anticipated crypto events this year.
In contrast, many of Uniswap’s competitors have seen strong increases in the same period. 1INCH led the way with a 32% rise, while Blackpeal token increased by 28%.
Numerous other tokens of popular decentralized exchanges also saw smaller increases, with SUSHI up 7%, CRV 5%, and 0x 5%.
In a blog post, Uniswap said that v3 offers “unprecedented” capital efficiency for liquidity providers, allowing capital to be held externally, invested in other assets, or used to increase exposure within price ranges to earn more trading fees.
With v3, concentrated liquidity allows liquidity providers to concentrate their capital within custom price ranges. Liquidity positions are also no longer fungible or represented as ERC20 tokens in the core protocol. Uniswap also claimed that v3 would bring better infrastructure for DeFi and improved execution for traders.
The first version of the Unswap initially launched back in November 2018 as proof of concept for automated market maker exchanges. Version 2 followed in May 2020, which facilitated over $135bn in trading volume in less than a year, Uniswap claims.
There have been numerous suggestions as to why UNI fell following the release of V3. Among those are traders reporting high fees and technical difficulties using the uniswap platform.
Many users aired their complaints on social media. One claimed that the new version made it very difficult to figure out how to price your liquidity positions, saying that it is “a huge step backward from the simplicity we had in v2.”
Most grievances were to do with the cost of using the platform, with Ethereum network fees remaining high and there being no gas-saving solutions offered with v3.
Haseeb Qureshi, managing partner at Dragon used an example transaction of three wrapped ETH to DAI costing around $24. He claimed that v3 is approximately 28% more expensive for single-hop transactions than v2.
Other users also complained about the high cost of creating a pool and adding liquidity. This is despite Uniswap’s claims that gas prices would be lower on v3.
However, while many users have been unimpressed, other commentators have praised the benefits v3 will bring.
For example, Gnosis CEO Martin Kopplemann said that it gives users more control. George Harrap, co-founder of Step Finance, said Uniswap v3 will see a more efficient user of cap[ital, while Framework Ventures co-founder Vance Spencer referred to the launch as “the paleozoic era of DeFi capital efficiency.”
Kadan Stadelman, chief technology officer at Komodo, claimed that v3 will lead to a market divergence: “changes look like they will make it more difficult for the average Uniswap liquidity provider but easier for professional market makers. Will other DEXes adopt a similar model to become more like Uniswap v3, or will they choose to stick with their existing models?”