Author: Matti Williamson

Uniswap V4: Powerful New Features and Controversial Code Allegations

https://www.financemagnates.com/cryptocurrency/exchange/uniswap-v4-powerful-new-features-and-controversial-code-allegations/

Uniswap, among the top decentralized exchanges (DEX) released the draft code for its latest version, Uniswap V4. The code has been released as the developers wish V4 to be built in public. Launched in 2018, Uniswap is one of the most known DEX for trading Ethereum and eth-based tokens.

In V2 which was released in 2020, Uniswap introduced ERC-20 trading pairs and Flash Swaps. In V3, concentrated liquidity was added to the protocol. Concentrated liquidity allows allocating liquidity to a price interval. This model improved the standard AMM model.

Liquidity providers (LPs) can execute as many positions as they wish in the pool. LPs have better control over what price ranges their funds will be used. The Uniswap V3 Business Source License (BSL) expired in April 2023.

Other DEX, such as SushiSwap, announced it is adding Concentrated Liquidity to 13 different chains. Arbitrum, Fuse, Polygon, and Gnosis are some of the blockchains that Concentrated Liquidity will be enabled for. The latest version has a new BSL license, which limits its use in commercial or production settings for up to 4 years.

What Is New in Uniswap V4?

The highlight of the new code is ‘Hooks.’ To simplify, Hooks are smart contracts that are executed at certain times in a pool. For example, hooks can be used when liquidity is added or removed from the pool. This allows pool creators to have better control over how their pool behaves in certain conditions.

Hooks can be used for on-chain limit orders and a time-weighted average market maker (TWAMM) pool. TWAMM enables traders to execute large trades (over $30M for example) with minimal gas fees and impact on the price.

The large order is broken down into multiple orders (an infinite number of small orders) using AMM for a predetermined period (days, weeks, etc.). The same applies to buying large amounts. The TWAMM algorithm will split the amount into multiple orders that will be spread across predefined parameters (hours, days, etc.).

TWAMM eliminates the need to use CEX or a trading desk for such transactions. Other features include customized on-chain oracles and internalized MEV profit, which are distributed across LP. Uniswap released several samples on github.

The Singleton Contract

Another major upgrade from V3 is the use of a ‘singleton’ contract. As opposed to V3 where each pool has its own smart contract, in V4 all pools reside within a single contract. Traders will benefit from lower fees on token swaps as routing is dramatically enhanced. Flash accounting will also be enabled. Changes in the pool will be calculated based on net balances rather than at the end of the swap, which will reduce some gas.

Did Uniswap Copy Shell Protocol’s Code?

There have been allegations that Uniswap copied some of the code from the Shell Protocol.

The Shell Protocol has an MIT license, and a permissive free software license. The allegations are that Uniswap used parts of the Shell Protocol for V4, which were then licensed (BSL). While permissive software licenses are likely to remain popular, more projects may choose to protect their code better. V4 will likely be deployed in several months and only once an agreement is made on the final version.

Uniswap, among the top decentralized exchanges (DEX) released the draft code for its latest version, Uniswap V4. The code has been released as the developers wish V4 to be built in public. Launched in 2018, Uniswap is one of the most known DEX for trading Ethereum and eth-based tokens.

In V2 which was released in 2020, Uniswap introduced ERC-20 trading pairs and Flash Swaps. In V3, concentrated liquidity was added to the protocol. Concentrated liquidity allows allocating liquidity to a price interval. This model improved the standard AMM model.

Liquidity providers (LPs) can execute as many positions as they wish in the pool. LPs have better control over what price ranges their funds will be used. The Uniswap V3 Business Source License (BSL) expired in April 2023.

Other DEX, such as SushiSwap, announced it is adding Concentrated Liquidity to 13 different chains. Arbitrum, Fuse, Polygon, and Gnosis are some of the blockchains that Concentrated Liquidity will be enabled for. The latest version has a new BSL license, which limits its use in commercial or production settings for up to 4 years.

What Is New in Uniswap V4?

The highlight of the new code is ‘Hooks.’ To simplify, Hooks are smart contracts that are executed at certain times in a pool. For example, hooks can be used when liquidity is added or removed from the pool. This allows pool creators to have better control over how their pool behaves in certain conditions.

Hooks can be used for on-chain limit orders and a time-weighted average market maker (TWAMM) pool. TWAMM enables traders to execute large trades (over $30M for example) with minimal gas fees and impact on the price.

The large order is broken down into multiple orders (an infinite number of small orders) using AMM for a predetermined period (days, weeks, etc.). The same applies to buying large amounts. The TWAMM algorithm will split the amount into multiple orders that will be spread across predefined parameters (hours, days, etc.).

TWAMM eliminates the need to use CEX or a trading desk for such transactions. Other features include customized on-chain oracles and internalized MEV profit, which are distributed across LP. Uniswap released several samples on github.

The Singleton Contract

Another major upgrade from V3 is the use of a ‘singleton’ contract. As opposed to V3 where each pool has its own smart contract, in V4 all pools reside within a single contract. Traders will benefit from lower fees on token swaps as routing is dramatically enhanced. Flash accounting will also be enabled. Changes in the pool will be calculated based on net balances rather than at the end of the swap, which will reduce some gas.

Did Uniswap Copy Shell Protocol’s Code?

There have been allegations that Uniswap copied some of the code from the Shell Protocol.

The Shell Protocol has an MIT license, and a permissive free software license. The allegations are that Uniswap used parts of the Shell Protocol for V4, which were then licensed (BSL). While permissive software licenses are likely to remain popular, more projects may choose to protect their code better. V4 will likely be deployed in several months and only once an agreement is made on the final version.

Canton Network Might Push Institutional Interest in Assets Tokenization

https://www.financemagnates.com/cryptocurrency/canton-network-might-push-institutional-interest-in-assets-tokenization/

Canton Network, ‘a network of networks’, is striving to become the most suitable blockchain for financial institutions. Some of the network’s participants are SBI Digital Asset Holdings, Goldman Sachs, Microsoft, Deloitte, BNP Paribas, ASX, and other key figures in the financial industry.

But why are such networks have an edge over publicly available decentralized networks? How are they better?

Limitations of Public Networks

Canton Network believes that the current smart contracts fail to attract financial institutions for several reasons.

Indeed, in today’s markets, projects compete for resources. If one project is demanding greater resources, it often reflects in the network fees. Ethereum is a great example of it. When Yuga Labs launched the Otherside land NFTs, Ethereum gas fees spiked over $100.

Another concern is that all data is publicly shared and available to all. Having confidential data publicly accessible is less desired by financial firms.

Canton Network is overcoming these limitations by using the Dami modeling language. Dami offers privacy to every asset or piece of information (sub-transaction privacy). In other words, privacy is applied to a public chain (like Zcash).

Additionally, Canton uses horizontal scaling, which means there are no limits on how many transactions can take place per second (TPS). The testnet is expected to launch in July 2023.

Permission and Permissionless

Canton Network is a permissioned blockchain (also known as a private blockchain). While part of the network is decentralized, it is controlled by private entities. While there are benefits to a permissioned network, such as privacy, scalability, and customizability, there is less transparency.

Permissionless blockchains are quite popular for DeFi projects. However, the reason why Canton Network chose a permissioned chain seems because of US regulations. Matthew McDermott, the Head of Digital Assets at Goldman Sachs hinted it may be the case at the Crypto Assets Conference, saying: “I’ll speak from a highly regulated U.S. bank. We are not allowed to do anything on a public blockchain, be it permissionless or otherwise.”

“The rationale being safety and soundness. Most of the development you will see certainly from the U.S. banks, JP Morgan, ourselves and many of the others, will be on a private blockchain.”

Europe Has the Upper Hand

As opposed to Goldman Sachs, Taurus, a Swiss-based firm that has gained the interest of European firms, chose the public chain of Polygon for asset tokenization. Credit Suisse, Deutsche Bank, and Pictet are just some of the investors in Taurus.

Currently, Taurus is focusing on European and UAE-based firms. To push asset tokenization, the company will allow its clients to issue digital securities.

CMO and the Head of Strategic Partnerships at Taurus said: “Building on Polygon, one of the leading blockchain ecosystems, is a natural step for Taurus. Our banking, consumer goods and sports & entertainment clients can now benefit from low fees and faster transactions for any tokenization use case: equity, debt, structured products, funds, NFTs.”

Earlier this year, Siemens issued a EUR 60 million bond on Polygon. Ramin Ghafari, the Head of Financial Technologies at Siemens Treasury affirmed the company wishes to be independent of individual banks. The digital bond issuance was possible due to Germany’s eWpG legislation.

Private or Public Chain

The US regulations are subject to change. It is possible that in the very near future, the US will adopt Germany’s eWpG legislation. While private chains have their benefits, public chains may have the upper hand. One of the benefits blockchain tech brings is transparency, which has been lacking in several sectors.

Although, providing a secure and transparent environment may have greater appeal than private chains. BlackRock’s CEO, Larry Fink said that: “The next generation for markets, then next generation for securities, will be tokenization of securities.”

The future of tokenized assets is promising. According to a report released by BCG and ADDX, asset tokenization is expected to reach a $1.6 trillion market by 2030. At this rate, tokenized assets may make up 10% of the global GDP.

Tokenizing assets will also enable investors from all over the world to access markets they were previously unable to. The growth is projected to take place in real estate, bonds, and equities as well as patents.

Other Chains Will Be Explored

‘The race to blockchain mountain’ is likely to intensify in 2023. Blockchain firms will compete to lead the herd in tokenizing securities.

While Polygon has garnered some institutional interest, firms will attempt to stand out from the crowd by choosing other public chains. For example, Tokeny partnered with Avalanche for tokenizing assets via ERC3643. Furthermore, Token partnered with CoFund to tokenize real-world assets (RWA) in Bali.

And, if I must speculate, Arbitrum and Celo may be next in line to be adopted by tokenization platforms.

Canton Network, ‘a network of networks’, is striving to become the most suitable blockchain for financial institutions. Some of the network’s participants are SBI Digital Asset Holdings, Goldman Sachs, Microsoft, Deloitte, BNP Paribas, ASX, and other key figures in the financial industry.

But why are such networks have an edge over publicly available decentralized networks? How are they better?

Limitations of Public Networks

Canton Network believes that the current smart contracts fail to attract financial institutions for several reasons.

Indeed, in today’s markets, projects compete for resources. If one project is demanding greater resources, it often reflects in the network fees. Ethereum is a great example of it. When Yuga Labs launched the Otherside land NFTs, Ethereum gas fees spiked over $100.

Another concern is that all data is publicly shared and available to all. Having confidential data publicly accessible is less desired by financial firms.

Canton Network is overcoming these limitations by using the Dami modeling language. Dami offers privacy to every asset or piece of information (sub-transaction privacy). In other words, privacy is applied to a public chain (like Zcash).

Additionally, Canton uses horizontal scaling, which means there are no limits on how many transactions can take place per second (TPS). The testnet is expected to launch in July 2023.

Permission and Permissionless

Canton Network is a permissioned blockchain (also known as a private blockchain). While part of the network is decentralized, it is controlled by private entities. While there are benefits to a permissioned network, such as privacy, scalability, and customizability, there is less transparency.

Permissionless blockchains are quite popular for DeFi projects. However, the reason why Canton Network chose a permissioned chain seems because of US regulations. Matthew McDermott, the Head of Digital Assets at Goldman Sachs hinted it may be the case at the Crypto Assets Conference, saying: “I’ll speak from a highly regulated U.S. bank. We are not allowed to do anything on a public blockchain, be it permissionless or otherwise.”

“The rationale being safety and soundness. Most of the development you will see certainly from the U.S. banks, JP Morgan, ourselves and many of the others, will be on a private blockchain.”

Europe Has the Upper Hand

As opposed to Goldman Sachs, Taurus, a Swiss-based firm that has gained the interest of European firms, chose the public chain of Polygon for asset tokenization. Credit Suisse, Deutsche Bank, and Pictet are just some of the investors in Taurus.

Currently, Taurus is focusing on European and UAE-based firms. To push asset tokenization, the company will allow its clients to issue digital securities.

CMO and the Head of Strategic Partnerships at Taurus said: “Building on Polygon, one of the leading blockchain ecosystems, is a natural step for Taurus. Our banking, consumer goods and sports & entertainment clients can now benefit from low fees and faster transactions for any tokenization use case: equity, debt, structured products, funds, NFTs.”

Earlier this year, Siemens issued a EUR 60 million bond on Polygon. Ramin Ghafari, the Head of Financial Technologies at Siemens Treasury affirmed the company wishes to be independent of individual banks. The digital bond issuance was possible due to Germany’s eWpG legislation.

Private or Public Chain

The US regulations are subject to change. It is possible that in the very near future, the US will adopt Germany’s eWpG legislation. While private chains have their benefits, public chains may have the upper hand. One of the benefits blockchain tech brings is transparency, which has been lacking in several sectors.

Although, providing a secure and transparent environment may have greater appeal than private chains. BlackRock’s CEO, Larry Fink said that: “The next generation for markets, then next generation for securities, will be tokenization of securities.”

The future of tokenized assets is promising. According to a report released by BCG and ADDX, asset tokenization is expected to reach a $1.6 trillion market by 2030. At this rate, tokenized assets may make up 10% of the global GDP.

Tokenizing assets will also enable investors from all over the world to access markets they were previously unable to. The growth is projected to take place in real estate, bonds, and equities as well as patents.

Other Chains Will Be Explored

‘The race to blockchain mountain’ is likely to intensify in 2023. Blockchain firms will compete to lead the herd in tokenizing securities.

While Polygon has garnered some institutional interest, firms will attempt to stand out from the crowd by choosing other public chains. For example, Tokeny partnered with Avalanche for tokenizing assets via ERC3643. Furthermore, Token partnered with CoFund to tokenize real-world assets (RWA) in Bali.

And, if I must speculate, Arbitrum and Celo may be next in line to be adopted by tokenization platforms.

The Crypto Momentum of Traditional Brokers

https://www.financemagnates.com/cryptocurrency/the-crypto-momentum-of-traditional-brokers/

The world is
preparing for digital identities in the digital era. South
Korea is already rolling out national IDs via blockchain technology including
driving licenses (referred to as mobile driving licenses).

A pilot is being
conducted in Europe for a digital ID via a digital wallet, known as the EU
Digital Identity Wallet Consortium (EWC). Marie
Austenaa, the Head of Digital Identity at Visa, affirmed the company has been chosen by the EU
to participate in the EWC pilot. Consequently, the digital ID wallet is expected to be released in
2024.

Blockchain-powered digital identities are more secure,
which will in turn mitigate fraud. It is essential for traditional brokers from
the financial landscape to adjust to the ‘crypto momentum’.

The verification process will be smoother without the
need to upload various documents (regulatory bodies must approve its use first). However, preparing for digital identities is crucial in the medium term.

The Transition of the Internet

Decentralized web domains and hosting environments may
pick up the pace. Traditional brokers should consider entering the web3 phase as
innovation may reflect a higher client base. Financial brokers can purchase a web3 domain and host
their website on the blockchain.

EDNS, a web3 leader on Polygon (layer-2) has recently
partnered with Alibaba cloud. The CEO at EDNS, Joey Lam said: “The motivation
behind this partnership is joining hands to deliver disruptive Web3 solutions
that are demanded by the market, especially in the storage area.”

To remain competitive, Google Cloud partnered with Casper Lands to build blockchain-based products as well innovating the Web3
ecosystem.

The Ethereum Name Service (ENS) is another popular
choice on the Ethereum blockchain. Space id (which is a new service) is
offering the same services as ENS on BSC.

ETH elevated gas fees had some impact on the monthly registrations
(as opposed to 2022), however, the registrations have remained steady. As of today, websites using ENS can be hosted via
IPFS. A web3 presence may be rewarded with a significant PR.

Lower Payments Fees

Alchemy Pay, a well-known payment provider has
made headlines as the service obtained a license from the Central Bank of
Indonesia. Alchemy Pay is providing a range of payment services.
The client selects Alchemy Pay from the checkout page. The exchange rate is
locked, the customer makes the payment, and Alchemy Pay converts the cryptocurrency that is used for the transaction to your local currency. As opposed to traditional payment solutions, the
settlement
Settlement
Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer’s name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2
Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer’s name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2
 Read this Term is one day. The fees are 1%, and the fraud rate is zero.

Despite the “crypto winter”, usage of cryptocurrencies
remains elevated. As regulations are a matter of time, exploring innovative
products in today’s markets is of great importance.

Decentralized Forex Trading

Although it is still in the making, decentralized
forex trading is the future of online trading. “Pendulum,” a new layer-1
Mainnet on Polkadot aims to deliver a new on-chain trading experience.

Stablecoins will be used for the currency pairs.
Algorithmic stablecoins will not be used, only stablecoins that are compliant
in their region. Although the stablecoins that will be used were not
revealed, it is likely that either USDC or USDT will be used.

The price will be provided by 0xAmber. Several oracles
will be used for the price of a single asset including sanity checks. As opposed to traditional forex brokers, there is no order book but liquidity pools. 0xAmber will act as the proactive market maker
without impermanent loss.

Liquidity draining is a concern. The matter is tackled
by increasing the slippage
Slippage
In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price
In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price
 Read this Term in an event of low liquidity. The protocol is in the process of building its own
liquidity, relying on external liquidity providers will reduce over time. It is important to note that on-chain costs are
substantially lower, mainly due to the design of the AMMs.

Ending a transaction takes seconds using payment
versus payment (PvP). All the reserves, rates, liquidity and trades are
visible, something that is not seen in traditional forex brokers.

As it is a protocol, most of the code is open source,
permissionless and available to the public. Three currencies are expected to be
added in the first stage.

In an event, a large number of traders will flock to
on-chain forex trading. It may reshape the forex trading industry as we know
it today.

The world is
preparing for digital identities in the digital era. South
Korea is already rolling out national IDs via blockchain technology including
driving licenses (referred to as mobile driving licenses).

A pilot is being
conducted in Europe for a digital ID via a digital wallet, known as the EU
Digital Identity Wallet Consortium (EWC). Marie
Austenaa, the Head of Digital Identity at Visa, affirmed the company has been chosen by the EU
to participate in the EWC pilot. Consequently, the digital ID wallet is expected to be released in
2024.

Blockchain-powered digital identities are more secure,
which will in turn mitigate fraud. It is essential for traditional brokers from
the financial landscape to adjust to the ‘crypto momentum’.

The verification process will be smoother without the
need to upload various documents (regulatory bodies must approve its use first). However, preparing for digital identities is crucial in the medium term.

The Transition of the Internet

Decentralized web domains and hosting environments may
pick up the pace. Traditional brokers should consider entering the web3 phase as
innovation may reflect a higher client base. Financial brokers can purchase a web3 domain and host
their website on the blockchain.

EDNS, a web3 leader on Polygon (layer-2) has recently
partnered with Alibaba cloud. The CEO at EDNS, Joey Lam said: “The motivation
behind this partnership is joining hands to deliver disruptive Web3 solutions
that are demanded by the market, especially in the storage area.”

To remain competitive, Google Cloud partnered with Casper Lands to build blockchain-based products as well innovating the Web3
ecosystem.

The Ethereum Name Service (ENS) is another popular
choice on the Ethereum blockchain. Space id (which is a new service) is
offering the same services as ENS on BSC.

ETH elevated gas fees had some impact on the monthly registrations
(as opposed to 2022), however, the registrations have remained steady. As of today, websites using ENS can be hosted via
IPFS. A web3 presence may be rewarded with a significant PR.

Lower Payments Fees

Alchemy Pay, a well-known payment provider has
made headlines as the service obtained a license from the Central Bank of
Indonesia. Alchemy Pay is providing a range of payment services.
The client selects Alchemy Pay from the checkout page. The exchange rate is
locked, the customer makes the payment, and Alchemy Pay converts the cryptocurrency that is used for the transaction to your local currency. As opposed to traditional payment solutions, the
settlement
Settlement
Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer’s name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2
Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer’s name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2
 Read this Term is one day. The fees are 1%, and the fraud rate is zero.

Despite the “crypto winter”, usage of cryptocurrencies
remains elevated. As regulations are a matter of time, exploring innovative
products in today’s markets is of great importance.

Decentralized Forex Trading

Although it is still in the making, decentralized
forex trading is the future of online trading. “Pendulum,” a new layer-1
Mainnet on Polkadot aims to deliver a new on-chain trading experience.

Stablecoins will be used for the currency pairs.
Algorithmic stablecoins will not be used, only stablecoins that are compliant
in their region. Although the stablecoins that will be used were not
revealed, it is likely that either USDC or USDT will be used.

The price will be provided by 0xAmber. Several oracles
will be used for the price of a single asset including sanity checks. As opposed to traditional forex brokers, there is no order book but liquidity pools. 0xAmber will act as the proactive market maker
without impermanent loss.

Liquidity draining is a concern. The matter is tackled
by increasing the slippage
Slippage
In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price
In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price
 Read this Term in an event of low liquidity. The protocol is in the process of building its own
liquidity, relying on external liquidity providers will reduce over time. It is important to note that on-chain costs are
substantially lower, mainly due to the design of the AMMs.

Ending a transaction takes seconds using payment
versus payment (PvP). All the reserves, rates, liquidity and trades are
visible, something that is not seen in traditional forex brokers.

As it is a protocol, most of the code is open source,
permissionless and available to the public. Three currencies are expected to be
added in the first stage.

In an event, a large number of traders will flock to
on-chain forex trading. It may reshape the forex trading industry as we know
it today.