The problem with V2 liquidity
In a constant-product pool, liquidity is spread evenly across all prices from zero to infinity, so most of it sits at prices that may never trade. That is capital-inefficient: a stablecoin pair might use a tiny fraction of its reserves near the $1 peg where all the volume is. Concentrated liquidity fixes this. (New here? Start with how DEX prices work.)
How V3 ticks work
Uniswap V3 divides the price axis into discrete “ticks.” An LP chooses a price range and their liquidity is only active — earning fees and being traded against — while the price sits inside it. Inside the range, the position behaves like a much deeper V2 pool; outside it, the position is fully converted to one token and earns nothing.
- Capital efficiency: up to thousands of times deeper liquidity near the active price.
- Active management: positions must be rebalanced as price moves out of range.
- Amplified impermanent loss: narrow ranges concentrate both fees and divergence risk.
What V4 adds: hooks and singleton
Uniswap V4 keeps concentrated liquidity but rebuilds the architecture. All pools live in a single contract (the “singleton”), which slashes the gas cost of creating pools and routing multi-hop trades. “Hooks” let developers run custom logic at key points in a pool’s lifecycle — dynamic fees, on-chain limit orders, custom oracles and more.
Why it matters for reading data
Concentrated liquidity means a pool’s headline TVL no longer maps simply to its depth at the current price. CoinVerum reads on-chain reserves and prices each side independently, so the liquidity it reports reflects value that can actually back trades — see what is TVL for how that figure is built.
Frequently asked questions
Is concentrated liquidity better than V2?
For capital efficiency, yes — far more depth per dollar near the active price. But it demands active management and carries amplified impermanent loss, so it is not automatically better for every LP.
What are Uniswap V4 hooks?
Hooks are plug-in smart contracts that run at defined moments in a pool’s life (before/after a swap, on liquidity changes), enabling custom features like dynamic fees or on-chain limit orders without forking the protocol.
Does CoinVerum track Uniswap V3 and V4?
Yes. CoinVerum indexes Uniswap V2, V3 and V4 pools on Ethereum, reading each pool’s on-chain state to value its liquidity and price the tokens in it.