Uniswap V2: What It Means For OrFeed Users and DeFi As A Whole

Today on Twitter, Uniswap announced the launch of Uniswap V2.

There has been quite a bit of talk about Uniswap V2 since Devcon last October. Let’s start with the basics.

Uniswap V2 transactions are more expensive to perform than Uniswap V1 transactions.

Here’s 1 DAI converted to Ether on the Uniswap V1 contract: https://etherscan.io/tx/0xfc532c58c5735c56869c221275764757eb2710c7441aa25a28bb47b8be0a7543

And the same conversion on the Uniswap V2 contract: https://etherscan.io/tx/0x14711f244663a50e844de9aefeabc3185e8b40672a5926fc42d0dd7668ba26f1

$0.41 versus $1.32 is a noticeable difference. Gas is pretty expensive right now (32 gwei), so under normal gas price circumstances, these transaction fees might be a bit lower.

Another thing you might notice is that Uniswap V2 no longer uses the native Ether token for swaps. Instead, they are going with WETH, which makes sense as it’s just wrapped ETH, yet can be treated like every other ERC20 token. Not to mention, there was quite a bit of price discrepancy between ETH and WETH the last few months on the Uniswap V1 Exchange, which is obviously a bit nonsensical. Markets.

Next, and probably most importantly, V2 does not depend on liquidity provisions exclusively in Ether. This, for a long time, has created a pretty intense correlation between Ether and ERC-20 token price action in DeFi markets. Kind of how most crypto assets being denominated in BTC on Bitmex causes an intense correlation between BTC and the rest of crypto markets in general. Now that any token can be used for liquidity provision to make markets, we have a much more efficient method for price discovery in swap markets. Essentially, they are going the Bancor-esque route, but removing the need for a native exchange token to create paths between tokens. Being able to provide liquidity for a token in stablecoins like USDC or DAI now means ERC-20 tokens can function more like assets in normal, fiat-based markets.

Upon the announcement for Uniswap V2, we added an oracle to the OrFeed registry to support Uniswap V2 pricing data (“UNISWAPBYSYMBOLV2”), so you don’t need to change your code to support Uniswap V1 and V2 markets as far as price feeds go.

Further, the DeFi Arb Finder was updated and now includes that oracle’s Uniswap V2 data on the popular stablecoin rates.

From the looks of it, USDT is now supported on UniswapV2. Here’s why it wasn’t included in V1. However, there seems to be quite a spread, as Uniswap liquidity providers haven’t made adjustments. It’s only been a few hours at this time of writing.

All in all, this is great news for the DeFi space as a whole and will more than likely bring more liquidity to these markets. If so, it’s a self-reinforcing gain: liquidity begets liquidity in most cases, especially in early markets such as these.

Furthermore, as a pretty decentralized platform, Uniswap V1 and (from the looks of it) V2 can never really go away and truly are censorship resistant. The real success story here is that not only is V2’s codebase now off of Vyper and transitioned to Solidity, but both codebases can be abandoned by the Uniswap team and still work… and integrated by anyone today.

DeFi at its finest.