MEV Sharing is Caring: Uniswap v4 dynamic fee hook for pool deviation from reference price

This repo provides a Uniswap v4 hook that applies a dynamic pool fee based on the deviation between the implied pool price and a reference rate.

POC FOR UNISWAP HOOK INCUBATOR; DEFINITELY NOT PROD-READY AND ALMOST GUARANTEED TO CONTAIN BUGS

Why?

There are many proposed approaches to handling MEV. While some solutions propose MEV as a "problem" to stop, this takes the opposite approach of treating MEV as profit to be shared amongst liquidity providers.

How it works

To share MEV, this hook:

1. is invoked during beforeSwap
2. calculates the approx expected finalPoolPricerice post-swap (using a custom, read-only fork of PoolManager.swap() calculations logic)
3. queries the referenceRate call associated with the pool
4. calculates the percent deviation of finalPoolPrice from referenceRate (e.g., 5%)
5. applies a dynamic fee that increases with percent deviation

Current version and future improvements

• the reference rate is hardcoded to be a ChainlinkAggregatorV3 interface. It will work with any contract adhering to that interface.
  • improvement: handle arbitrary rate calldata
• uses a binary fee that is either "base" or "elevated"
  • improvement: add a dynamic fee curve
• uses the same fee and deviation tolerance for all pools
  • improvement: per-pool fees and deviation tolerances
• current assumption: final price deviation is assumed to represent MEV
  • improvement: account for direction, size, and initial tick of swap
• general improvement: optimize for gas by caching pool and reference rate precisions

Build

$ forge build

Test

$ forge test