Uniswap Aggregator Hooks: Can We Use Liquidity from Other Exchanges for Swaps?

When you trade ETH for USDC on Uniswap, it's easy to assume the exchange only happens within Uniswap. But now, it's possible to check liquidity from other sources while finding the best swap route.

This is about Aggregator Hooks, introduced by Uniswap on October 22. While the name sounds a bit complex, you can think of it as a feature that adds more options to your swap path, so you don't have to manually hunt for the best price across every exchange.

Why do we need assets from other places?

A swap is a trade where you exchange one token for another. The assets pooled together for these trades are called 'liquidity.' Depending on where and how much of these assets are pooled, the final amount you receive for the same quantity can vary.

Liquidity isn't concentrated in just one service. There are many trading venues outside of Uniswap. So, what if we could check outside assets while making an exchange?

Hooks connect external liquidity

The 'hooks' in Uniswap v4 are a mechanism that allows adding custom features to liquidity pools. Aggregator Hooks connect external liquidity sources similarly to v4 pools, allowing routing programs to incorporate them into their pathfinding.

For example, when you try to swap ETH for USDC, the routing program checks quotes from both Uniswap pools and connected external sources to assemble the best available path. The entire trade is processed as a single transaction. Which specific path is used can vary based on trading conditions.

According to the official announcement, this feature is available in the Uniswap web app and API for Ethereum mainnet, Base, and the Robinhood Chain. On the web app, connected external sources are automatically included in path exploration. There were seven connected sources at the time of the announcement.

What should you look for on the trading screen?

Having more options doesn't always guarantee the cheapest trade, as quotes fluctuate depending on the scope of the routing search, timing, and trade volume. It's best to check the expected output, fees, and network costs before confirming your swap.

Checking the Uniswap swap screen allows you to see details like the trade route, price impact, and maximum slippage. Price impact refers to how your trade affects the pool's price, while slippage is the difference between the expected price and the actual executed price.

Even though the swap button remains the same, the scope of candidate sources behind it has broadened. Next time you check a trade quote, try looking at the route and associated costs alongside the amount you're receiving.