On September 10, local time, Uniswap Labs announced the launch of StablePair Hook, which automatically adjusts fees when swapping assets expected to trade at the same price, such as USDC and USDT. A hook adds specific functionality to a trading pool. Uniswap Labs said it had put the hook into operation in two pools on Ethereum mainnet: USDC/USDG and USDC/USDT. In pools of this kind, an imbalance in trading pushes the price away from a predetermined one-to-one reference, and arbitrage bots profit by trading in the opposite direction to bring the price back. With a fixed fee, the pool receives only the specified fee while bots capture most of the gains from the price difference. Uniswap Labs explained that the aim is to return a larger share of those gains to the liquidity providers who deposit assets in the pool.
To achieve this, when the pool price is within a configured range around the reference price, the hook adjusts fees so that the quoted bid and ask prices each remain constant, much like the prices quoted before a transaction at a currency exchange. When the pool price moves outside that range, trades that bring it back toward the reference price initially incur a high fee, which decreases gradually with each block. This resembles a Dutch auction in which the fee starts high and falls until a trader accepts it. An arbitrageur who waits for a lower fee risks losing the opportunity to another trader, making a trade more likely to occur before the fee reaches its floor. The fee at the time of execution remains in the pool. Conversely, a trade that moves the price farther from the reference does not extract a gain from the pool's mispricing; it trades at a price more favorable to the pool than the outside market price. The fee paid to liquidity providers is therefore zero. However, having no fee does not mean having no cost: the larger the trade, the more the trade itself moves the pool price and worsens the average execution price. The fee rate is determined solely by the pool price at the start of the block and the direction of the trade, regardless of trade size.
According to the technical documentation, only Uniswap Labs can currently create new trading pools using this hook. Users seeking to add a new asset pair cannot create a pool themselves and must request support from Labs. Uniswap governance has the authority to change who can create pools. Labs sets the initial fee parameters when creating a new pool, while governance is responsible for changes to fee settings during operation and for hook upgrades. Uniswap Labs explained that existing liquidity providers would not need to move their assets to a new pool even if governance changed the fee settings or the hook's logic.