UniswapX is a revolutionary, permissionless, open-source (GPL), non-custodial auction-based protocol designed for trading across Automated Market Makers (AMMs) and other liquidity sources. It brings next-level aggregation to the table.
UniswapX incorporates both onchain and offchain liquidity. It internalizes Miner Extractable Value (MEV) as a form of price improvement, offers gas-free swaps, and is extendable to support cross-chain trading. Built with the familiar interface of its predecessor, UniswapX upholds the same principles of security, self-custody, and community that make Uniswap the most trusted name in DeFi.
MEV is one of the biggest challenges in onchain swapping today. With UniswapX, MEV, which would otherwise be captured by arbitrage transactions, is returned to swappers through improved prices.
1/ New beta drop! 👀— Uniswap Labs 🦄 (@Uniswap) July 17, 2023
Meet UniswapX⚡— a new permissionless, open source (GPL), auction-based protocol for trading across AMMs & other liquidity sources.
TL;DR: Over time, it’ll give users more liquidity, better prices, MEV protection, & gas-free swapping!
Opt-in to the beta👇 pic.twitter.com/30s4dxdeoW
Benefits of UniswapX:
- UniswapX uses routing and batching to a permissionless set of fillers, who then route orders to a mix of onchain and offchain liquidity, guaranteeing swappers always receive the best possible execution on their orders.
- Trades utilize Permit2 executable offchain signatures, allowing swappers to pay transaction fees implicitly as part of their swap without needing to maintain a balance of the chain’s native token.
- Swappers are never charged gas costs for failed swaps. Orders that are batch settled or filled directly from filler inventories are more gas-efficient than those on the core Uniswap Protocol.
- Unlike AMMs, UniswapX internalizes MEV, returning any surplus generated by an order to the swappers in the form of price improvement, thereby reducing value loss.
- UniswapX orders are less prone to frontrunning.
- The system can be extended to support cross-chain trading, enabling swappers to easily trade assets on an origin chain for desired assets on a destination chain.
UniswapX utilizes Permit2, a token contract that defines the signature and exchange of an ERC20 token. It also deploys the Reactor contract to manage contract exchanges. This contract is tasked with verifying whether the execution of an operation aligns with the user's request and retrying the transaction as needed.
Certain interfaces and wallets may opt to impose additional fees for transactions conducted through their platforms. Despite this, UniswapX still provides customers with numerous benefits including better prices, MEV protection, and gas-free swapping. As UniswapX is currently in beta, most orders will continue to use the classic routing. However, as more fillers join the system and the parameterization is fine-tuned, more trades will be routed through UniswapX.
The UniswapX Protocol doesn't enforce a specific decay function, nor does it prescribe a method for setting the initial Dutch order price. Instead, it offers optional functionalities to enable various mechanisms. One method of setting the Dutch order starting price is to survey a selection of fillers through an offchain Request For Quote (RFQ) system. To incentivize this network of fillers to offer their best possible price, UniswapX allows orders to specify a filler who gets the exclusive right to fill the order for a brief period. After this duration, the Dutch auction commences and any filler is permitted to execute the order.
As development progresses, UniswapX will offer users increased liquidity, improved prices, MEV protection, and gas-free swapping. Currently in its beta phase, UniswapX will continue to rely on classic routing for most orders. However, as more fillers join the system and the parameterization is adjusted, more trades will be routed through UniswapX.
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