Six things worth knowing before you provide liquidity on Uniswap. Short on purpose; the pool pages show each of them on real data.
Liquidity in a range
- In Uniswap v3 and v4 you choose a price range, and your liquidity works only inside it.
- The same deposit in a narrower range is more liquidity at each price, so it takes a larger share of the fees charged there.
- In v2, liquidity was spread over every price; most of it sat at prices nobody traded at.
Inside and outside the range
- While the price is inside your range, your position earns a share of the fees on every swap.
- When the price leaves it, the position earns nothing and holds only one of the two tokens.
- It earns again only if the price comes back — or you move the range, which is a new position.
Impermanent loss
- As the price moves, the pool sells the token that is rising and buys the one that is falling.
- So a position ends up worth less than simply holding the two tokens; the further the price moves, the larger the gap.
- It is only impermanent if the price comes back. Fees are what a liquidity provider is paid for carrying it.
Narrow or wide
- A narrow range takes a larger share of the fees on the days it holds, and nothing on the days it does not.
- A wide range stays inside on more days, with a smaller share on each of them.
- Which suits depends on what the position is for. Past days describe the past, not the ones to come.
Fee tiers
- The same pair can have several pools, each charging a different fee on every swap: commonly 0.01%, 0.05%, 0.3% or 1%.
- Each tier is a separate pool with its own liquidity and its own price step — the smallest price gap a range edge can sit on.
- A higher fee is not more income by itself: it also depends on how much trading that pool attracts.
v4 hooks
- A v4 pool may name a hook: a contract called at fixed moments of a swap, a deposit or a withdrawal.
- Which moments is written into the hook's address, and the protocol enforces it.
- A hook allowed to act on swaps can change what they cost, so figures read from the curve alone may not hold for that pool.
Explore poolsSee every hook →