Uniswap announced and launched the V4 upgrade but the ‘hooks’ raised questions

In a February 15th post on X, the Uniswap Foundation announced the release window: “Now presents the launch of Denkun. [Ethereum upgrade] It is scheduled for March 2024 on Mainnet.

The Q3 release of Uniswap v4 will happen after the Ethereum Denkun update, which will enable EIP-1153 for temporary storage. EIP-1153 Uniswap v4 allows updating gas payments with “flash billing”.

In addition, Uniswap v4 introduces “hooks” that allow for flexible adjustments and different use cases, which can result in lower fees for users.

Now that Denkun's mainnet launch is scheduled for March 2024, we're excited to update it for the community! 🎉

Uniswap v4 launch is tentatively set for Q3 2024.

From community-built hooks (to Events, to Twitter Spaces, to…

— Uniswap Foundation (@UniswapFND) February 15, 2024

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Uniswap hooks raise eyebrows

The foundation says v4 code will be audited more rigorously than ever to ensure smooth launch. The code is currently suspended and security updates, testing, and general internal and community audits are being performed before launch.

However, it was the introduction of “hooks” that raised flags for DeFi researchers. “It's not just an upgrade, it's a transition from a protocol to a platform,” said DeFi researcher “Ignas” following the announcement.

Hooks turn Uniswap v4 into a platform, before adding, think of them as “plugins” or “extensions” that allow custom code to be executed during key events in the pool.

These “hooks” enable things like on-chain limit orders, time-weighted market averaging, off-regional liquidity to credit protocols, automatic processing of liquidity provider payments, and KYC (Know Your Customer).

He compared it to Apple and the App Store, which opened the door to third-party developers, allowing the company to not make its own apps but get a huge discount from them.

1/13 Uniswap V4 launch is around the corner.

It's not just an improvement; It is a transition from protocol to platform.

Imagine the iPhone finally getting an Apple Store.

This is the reason that worries me: 🧵

– Ignatius Defi Research (@DefiIgnas) February 15, 2024

Protocols face liquidity issues when they're just starting out, but with “hooks,” developers can do their own experiments using Uniswap as liquidity, he explained.

Hurts DEX competition.

This risks making Uniswap the main, concentrated liquidity layer for all of DeFi. When too much liquidity accumulates in Uniswap, it can hurt rival DEXes.

While hooks may be good for users due to increased liquidity, they pose a risk of stifling competition in DeFi trading and lending.

There are parallels with Apple's App Store: innovation benefits but with high fees and strong central control.

Meanwhile, Uniswap's native token, UNI, jumped 10% on the day to reach $7.65 at the time of writing.

UNI was slow to respond during the 2024 rally, gaining only 10% from the same period last year. Additionally, it is down 83% from its May 2021 all-time high below $45.