After much anticipation, Uniswap v3 — the latest upgrade to the Ethereum-based decentralized exchange — was announced Tuesday.

On this episode of The Scoop, The Block Research's Mika Honkasalo walked through the designed upgrade, explaining the significance of Uniswap's adoption of "concentrated liquidity" which aims to make trading on the platform more capital efficient. 

In Honkasalo's view, this move will help with the adoption of Uniswap among traders and perhaps serve as a tailwind for the broader DeFi market. 

"I think this is why Uniswap really had nowhere to go in their design except move towards this sort of active liquidity provision because that’s something that works with traditional markets,” he said, adding:

"I think what this unlocks next is the possibility to support just more volumes, especially in combination with the L2 launch, which hopefully comes very quickly after the L1 launch is to really start competing against centralized exchanges."

Uniswap v3 — set to be implemented in May — will also include Uniswap's adoption of scaling solution Optimism, which aims to reduce gas fees.

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