TL;DR Arrakis is building on Uniswap V4 to drive better outcomes for LPs and token issuers. Arrakis Pro is developing several in-house Hooks and will use its modular architecture to help token issuers optimize their Protocol Owned Liquidity across Hooks.

Key Takeaways:

• Arrakis is building on Uniswap V4, solving the complexity of LPing and optimizing returns for token issuers.

• Through its modular design, Arrakis Pro will guide token issuers to the Hooks that meet the needs of their Protocol Owned Liquidity.

• The Arrakis Filler will also ensure that token issuers receive order flow when they deploy liquidity to a new Hook.

• Arrakis is developing several in-house Hooks. The upcoming Arrakis Pro Private Hook will exclusively use Arrakis liquidity, implementing dynamic fees to prevent arbitrage.

• Hooks open the design space for third-party builders to create AMMs custom-designed to solve any problem. But similar to the jump from V2 to V3, this upgrade creates another leap in complexity for LPs to grapple with or outsource.

Uniswap has been at the forefront of DeFi innovation since the movement began. As one of the earliest AMMs, the protocol famously pioneered the x*y=k formula to enable permissionless trading in pools on Ethereum. It then broke new ground with V3’s concentrated liquidity feature. Now, DeFi’s biggest project is redefining how the onchain future could look yet again with its most anticipated upgrade yet, V4.

The updated Uniswap features an innovation called Hooks, contracts that let builders customize their own pools. The number of liquidity pools is likely to soar with Hooks, reigniting the question of where LPs should deposit their capital and how they should manage said positions.

As a day one builder on Uniswap V3, Arrakis is one of the most experienced teams when it comes to liquidity provision and navigating the V3 and V4 codebase. Arrakis Pro, the onchain market making solution for token issuers, has successfully leveraged V3 to help teams improve their liquidity depth and returns, automating liquidity provision and rebalancing across concentrated liquidity pools. Today we can announce that we’re bringing the same white glove liquidity management experience to Uniswap V4. Arrakis Pro will concentrate liquidity across pools and Hooks and launch our own Hooks to drive better outcomes for token issuers.

Hooks are the latest sign that the AMM landscape is evolving. Arrakis is excited to be a key driving force in the renaissance.

How Hooks Pose Challenges for LPs

V4 expands on Uniswap’s earlier designs by letting developers modify the execution flow for pools. This upgrade should radically transform the DEX landscape because Hooks unlock an abundance of new possibilities. Where Uniswap previously defined the concept of the DEX, builders can now create entirely new protocols on top of it.

V4 adopts a singleton architecture, where one contract manages all pool state. This helps LPs save gas. But as the number of pools is set to explode, and these pools will be dynamic, LPs face a difficult question:

Where is the best place to deploy capital?

Concentrated liquidity created complexity for LPs because it asked them to actively manage positions to capture fees and avoid IL. V4 adds yet another layer of complexity. LPing is getting more sophisticated and teams must level up to stay capital-efficient.

As new pools launch, LPs will need to choose the right one to deposit into to get the best returns. We can expect many Hooks to launch, and as most will not get liquidity routed from the Uniswap frontend, they’ll need to tap fillers (AKA solvers) to capture order flow.

Additionally, while customizable pools could offer new ways to capture higher fees, staying on top of them will eventually require constant monitoring and capital rotation.

With V4, LPs must find the best pool and Hook combination for their capital, ensure that fillers (solvers) are routing to their pool/Hook, and perform the same position management required on V3 like rebalancing and compounding fees.

Arrakis Pro is building on V4 to address the complexity issue every token issuer will face.

• Arrakis Pro will manage liquidity through a modular framework, allocating capital across Hooks deployed by Arrakis and other builders.

• The Arrakis Filler, essentially a solver for UniswapX and Uniswap V4, will also help route order flow to Hooks used by Arrakis Pro customers.

• Arrakis Pro will continue to bring best-in-class rebalancing and liquidity management to V4 as well.

Making Capital More Efficient on V4

We launched Arrakis Pro (formerly known as PALM) to help teams use V3 pools effectively. Many protocols (including EtherFi, Euler, Puffer, and Maple) use it to manage their treasuries because it offers them more liquidity depth with less capital.

Arrakis Pro is built on a modular framework, meaning projects can use it to deploy strategies on any AMM. With Arrakis Pro’s launch on V4, token issuers can port their liquidity into Hooks in the most optimized manner.

Arrakis is developing several in-house Hooks optimized for capital efficiency and MEV awareness to drive better outcomes for token issuers. Additionally, the Arrakis Filler will route order flow to these Hooks. This will ensure that token issuers can generate returns when they deploy their liquidity to one of our customized Hooks.

For the first phase of Arrakis Pro’s V4 rollout, users will migrate and liquidity will be concentrated on the simplest V4 pools with V3-style fee tiers. Arrakis Pro will run V4-optimized strategies to create deep liquidity with low price impact for token issuers.

Arrakis Pro responds to V4’s complexity by creating a layer above Hooks to simplify liquidity management for token issuers and LPs across Hooks.

Introducing the Arrakis Pro Private Hook

Arrakis is pleased to announce the upcoming launch of the Arrakis Pro Private Hook, a module on Arrakis Pro that adopts two key properties on UniV4.

Firstly, the Private Hook uses UniV4’s `beforeAddLiquidity` logic to exclusively allow liquidity from Arrakis’ module to deposit into the pool.

Secondly, the Private Hook uses UniV4’s `beforeSwap` logic to customize swap fees. With this configuration, the Hook can implement dynamic fees that respond to market volatility and inventory conditions. Lower fees can be used to replenish the inventory (by incentivizing trading in one direction) and higher fees can be used to prevent MEV and LVR (by putting a price on volatility, which disincentivizes arbitrage).

The Private Hook also offers LPs extreme capital efficiency by leveraging the AMM’s concentrated liquidity feature.

In short, LPs have several reasons to concentrate their liquidity on the Private Hook:

• MEV protection

• Increased fee capture with dynamic volatility-based spreads

• Maximal capital efficiency

• A fully non-custodial user experience

Future Hooks for MEV Awareness and Price Discovery

Arrakis Pro is also exploring using Whetstone Research’s Doppler Hook, which focuses on enabling price discovery for all kinds of tokenized assets. Doppler combines a Dutch auction and dynamic bonding curve to prevent arbitrage. The price of tokens initially decays until buyers step in, which disincentivizes arbitrageurs and ensures liquidity gets priced accurately. This design aims to maximize liquidity by finding a market clearing price and gradually increasing prices. Similar to the Arrakis Pro Private Hook, Doppler adopts a MEV-aware design to offer LPs a better experience.

Arrakis is building MEV-aware market making solutions to make onchain markets more sustainable and our plans for Uniswap V4 prove that. The Hooks detailed above are brand new designs, which suggests they could gain early traction, capturing private order flow from searchers and helping token issuers launch successfully.

Arrakis is the first solution that empowers token issuers to rival the most sophisticated centralized market makers onchain. With today’s launch, Arrakis Pro is building to meet the needs of token issuers as LPing becomes more complex. To learn more about how we’re supporting the space’s leading token issuers, read up on Arrakis Pro and keep an eye out for more V4 news dropping soon.