Understanding Uniswap v3 Pools
DeFi Pool Share works on top of Uniswap V3 Pools. Here's a brief overview of what are Uniswap V3 Pools
Last updated
DeFi Pool Share works on top of Uniswap V3 Pools. Here's a brief overview of what are Uniswap V3 Pools
Last updated
In Uniswap V3, liquidity providers (LPs) add liquidity to these pools by depositing an equal value of two different ERC-20 tokens. In return, LPs receive NFT that represent their share in the liquidity pool. These NFT's can be held as a representation of the LP's contribution to the pool.
The liquidity provided by LPs is used to facilitate trades between different ERC-20 tokens in the pool. Traders can swap tokens by depositing one token and receiving the other token in exchange at a price determined by the ratio of the two tokens in the pool. This ratio is automatically adjusted based on the amount of each token in the pool.
Uniswap V3 uses a unique bonding curve algorithm that allows for more precise price ranges and lower slippage than previous versions. The bonding curve algorithm allows for a range of prices to be set for a specific token pair, and trades can be executed within this range. The algorithm ensures that trades occur within the specified price range, reducing slippage for traders.
Overall, Uniswap V3 pools and LPs play a critical role in the decentralized exchange ecosystem by providing liquidity for traders and enabling efficient price discovery for different ERC-20 tokens. DeFi Pool Share steps in here to enable Uniswap V3 Liquidity providers with predictable returns on their positions, avoiding impermanent loss and lp management by lending their Positions to interested borrowers. The borrowers borrow the Position NFT from the lender for a specific period of time for a fraction of the total liquidity provided by the LP (based on a percentage of the estimated fees the position will collect within the loan duration) and gain access to claim fee function of the position NFT. This enables the borrower to earn the fees the position will make within the loan duration, whereas on the other hand the lender gets upfront instant ETH without worrying about impermanent loss and lp management.
