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I have seen these two new concepts introduced in react v16.

As per my understanding:

useState is similar like setState with hooks and useEffect works similarly like life cycle methods.

Is my understanding correct? If not, what’s the exact difference between useState and useEffect?

To put it simply, both useState and useEffect enhance functional components to make them do things that classes can but functional components (without hooks) cannot:

• 
  useState allows functional components to have state, like this.state in class components.


• 
  useEffect allows functional components to have lifecycle methods (such as componentDidMount, componentDidUpdate and componentWillUnmount) in one single API.

Refer to the examples below for further illustration:

useState

class CounterClass extends React.Component 
 constructor(props) 
 super(props);
 this.state = count: 1 ;
 
 
 render() 
 return <div>
 <p>Count: this.state.count</p>
 <button onClick=() => this.setState( 
 count: this.state.count + 1
 )>Increase</button>
 </div>;
 


function CounterFunction() 
 const [count, setCount] = React.useState(1);
 return (
 <div>
 <p>Count: count</p>
 <button onClick=() => 
 setCount(count + 1)
 >Increase</button>
 </div>
 );


ReactDOM.render(
 <div>
 <CounterClass />
 <CounterFunction />
 </div>
, document.querySelector('#app'));

<script src="https://unpkg.com/react@16.7.0-alpha.0/umd/react.development.js"></script>
<script src="https://unpkg.com/react-dom@16.7.0-alpha.0/umd/react-dom.development.js"></script>

<div id="app"></div>

useEffect

class LifecycleClass extends React.Component 
 componentDidMount() 
 console.log('Mounted');
 
 
 componentWillUnmount() 
 console.log('Will unmount');
 
 
 render() 
 return <div>Lifecycle Class</div>;
 


function LifecycleFunction() 
 React.useEffect(() => 
 console.log('Mounted');
 return () => 
 console.log('Will unmount');
 ;
 , ); // Empty array means to only run once on mount.
 return (
 <div>Lifecycle Function</div>
 );


ReactDOM.render(
 <div>
 <LifecycleClass />
 <LifecycleFunction />
 </div>
, document.querySelector('#app'));

<script src="https://unpkg.com/react@16.7.0-alpha.0/umd/react.development.js"></script>
<script src="https://unpkg.com/react-dom@16.7.0-alpha.0/umd/react-dom.development.js"></script>

<div id="app"></div>

Read more about useState and useEffect on the official React docs.

For useState()

First, we have the functional component which is not supported state, in other words, a functional component is a stateless component.

Now, with Hooks, we have the functional component but stateful. It is achieved by using useState.

For useEffect()

First, with stateless functional component, we don't have component lifecycle hooks. In other words, whenever you want to use component lifecycle hooks, you should consider using class component.

Now, we are able to use component lifecycle hooks without using class component. It is achieved by using useEffect. In other words, now whenever we want to use component lifecycle hooks, we already have two options either using class component or using Hooks with useEffect.

UPDATE

what’s the exact difference between useState and useEffect?

In simple words, useState allows our functional components which used to be stateless become stateful. And useEffect allows our functional components leverage the component lifecycle hooks which are, in the past, only supported for class components.