Bunni: How To Build a Leading Uniswap v4 Hook
How Bunni's architecture and playbook helped it become the No. 1 hook.
Bunni v2 has emerged as the most successful hook built on Uniswap v4, revolutionizing how liquidity providers optimize their capital.
It’s posted some impressive markers too, recently achieving 100x more volume/TVL than the non-hooked ETH-USDC pool.
With Bunni, LPs can participate in yield-maximized, dynamic, and automated liquidity pools. The platform's re-hypothecation hook boosts LP returns by pairing steady yields from lending vaults with swap fees, effectively making each deposited token work harder than on competing platforms.
In this article we dive into how Bunni managed to gain the top spot among all Uniswap v4 hooks and share some takeaways that all hook teams could benefit from.
BUNNI BUILT THEIR AMM ON UNISWAP V4
This is somewhat baked in but still needs to be said. Every hook is its own AMM that could have been developed independently.
Building on v4 provides several benefits:
Building on top of a powerful & audited codebase written by Uniswap Labs (and other contributors) which reduces time to market and facilitates trust from end-users;
Making order flow integrations easier for partners by inheriting v4’s swap/routing interfaces. In fact, we believe that most of Bunni’s order flow did not originate from its own UI;
Enjoying the support of the Uniswap Foundation, other hook teams and the whole Uniswap community.
A STRONG AND UNIQUE VALUE PROPOSITION FOR LPS
Bunni v2, a DEX built as a Uniswap v4 hook offers two simple benefits for depositors:
Higher yields,
No need for active management.
Bunni's core innovation lies in its re-hypothecation hook, which allows tokens in liquidity pools to simultaneously earn yields from lending protocols.
For example, when users deposit tokens into a Bunni ETH-USDC pool, their assets don't just sit idle waiting for trades – they're also deployed to lending protocols to generate additional yield. This creates a dual revenue stream: swap fees combined with lending interest.
One example is the cbBTC-USDC pool on Base with double re-hypothecation using Seamless Finance.
Beyond re-hypothecation, Bunni implements several improvements over traditional AMMs.
The Liquidity Density Functions (LDFs) maintain constant gas costs for swaps regardless of price movement, eliminating the unpredictable gas fees that plague Uniswap v3.
The platform also includes autonomous rebalancing that eliminates the need for manual position management, and built-in MEV protection via Surge Fee that prevents sandwich attacks during liquidity adjustments.
For liquidity providers, Bunni automates compounding by automatically reinvesting swap fees back into positions, removing the manual claiming process required on other platforms.
This article by HookRank goes into more detail on Bunni’s architecture and innovations.
All these features combine to create a more efficient, higher-yielding liquidity provision system that requires less active management.
USING INCENTIVES AND PARTNERSHIPS TO ATTRACT LPS
Bunni's implemented a proactive growth strategy across multiple fronts and the results speak for themselves.
First, Bunni implemented an effective incentive program directing its new BUNNI tokens to strategic liquidity pools. This initial liquidity bootstrapping quickly generated $100M in trading volume with rewards specifically targeting high-potential pools. The team also created an innovative referral program distributing 50% of protocol revenue to referrers, incentivizing community-driven growth and enabling more organic user acquisition.
Second, strategic partnerships drove both TVL and volume growth. The collaboration with Resolv stands out as particularly successful, with Resolv allocating 30x points to Bunni pools. This partnership alone added $8M in TVL and generated $16M in volume since launch. The Arcadia partnership further expanded Bunni's reach, allowing users to leverage farm liquidity pools on Base using both delta-neutral and trending strategies.
Finally, Bunni deployed an in-house re-balancer utilizing ODOS aggregation to optimize all liquidity pools while also running an arbitrage bot on Base to ensure a base level of service for LPs collecting MEV revenue.
These technical upgrades ensured pools remained efficient and profitable even during periods of market volatility.
BOOTSTRAPPING ORDER FLOW
Bunni secured critical order flow integrations quickly. Bunni was one of the first hooks to get integrated in the Uniswap app. They also secured integration with major aggregators including Matcha (0x), Bungee (Socket), Relay protocol, and Definitive Fi. These integrations ensured Bunni could compete for volume without just relying on swappers on its own UI.
They’ve now established clear dominance in the Uniswap v4 ecosystem, with Bunni hooks securing 3 of the top 4 positions on HookRank.
This dominance translates into impressive market metrics, with Bunni processing nearly 59% of all tracked volume across Uniswap v4 hooks. Out of the $235.86M total trading volume across all hooks, Bunni accounts for $138.24M.
The flagship ETH-USDC 1.1 pool on Base stands as Bunni's most active market, generating $80.76M in volume over a 30-day period. This impressive volume comes despite the very low TVL of $27.68k, creating a remarkable Volume/TVL ratio. Due to that the pool also generates a massive amount of fees for liquidity providers, with $51.06K in fees collected over the same period and offering a 2.69k% APY.
This is impressive capital efficiency even compared to non-hooked v4 pools and Uniswap v3 pools.
Generally deep liquidity is required to attract order flow, which is why Uniswap v3 pools still outperform v4 pools.
However, Uniswap v4 is more gas efficient, making it more attractive for single swaps at smaller order sizes.
Bunni’s automatic range adjustment makes sure that the pool always has the deepest liquidity possible in the active range. This combined with gas efficiency allows Bunni to offer better pricing and handle a lot more volume than its liquidity depth would suggest.
On the TVL side, the highest liquidity is concentrated in stablecoin pools on Ethereum mainnet, particularly the USR-USDC pools. USR-USDC holds $5.01M, delivering a 7.41% APY to liquidity providers. The Flagship USDC-USDT pool also shows strong performance with a 9.32% APY.
EARLY DAYS FOR BUNNI AND HOOKS
The hook landscape remains largely unexplored within Uniswap v4, with only 31.78% of v4 pools using hooks and just 8.28% of all v4 swaps flowing through them.
Bunni's early trajectory offers valuable insights for the hook ecosystem. By maximizing capital efficiency through order flow integrations, strategic partnerships, and community-engaging incentives, they've generated impressive volume relative to their liquidity depth.
This early stage presents significant opportunities in specialized market segments where v4's programmability offers substantial advantages over existing solutions.
As trading gradually shifts toward hook-enabled pools, well-designed hooks targeting specific use cases and executing with precision will likely capture an increasing share of DeFi's liquidity ecosystem.