How to Provide Liquidity on Uniswap (Arbitrum)
Last updated
Last updated
Whenever someone does a swap, they pay a small fee to the pool. A portion of that fee goes to all the liquidity providers. So you can earn passive income from other people trading back and forth.
Go to https://app.uniswap.org/
Connect your wallet (Make sure you’re using Arbitrum Network)
Click “Pool” at the top
Click the + New position button
Fee Tier
Once you hit + New position, you’ll see a control panel interface appear, and it will be mostly blank until you pick your pair from the dropdown menus
0.01% fee tier: Best for very stable pairs
0.05% fee tier: Best for stable pairs
0.3% fee tier: Best for most pairs
1.0% fee tier: Best for exotic pairs
The 1.00% fee tier is designed for exotic assets, where LPs take on extreme price risk.
Set Price Range
When making a price range decision, you should consider the degree to which you think prices will move over the course of your position's lifetime.
If the price moves outside your specified range, then your position will be concentrated in one of the two assets and not earn trading fees until the price returns to its range.
Instead of picking a price range, you can provide liquidity across the Full Range like in Uniswap v2 by clicking "Full Range" button. Please note your rate of return will be significantly lower than a similar position with a more narrow price range.
Range Order
Since Uniswap V3 allows LPs to choose the price range at which players want to provide liquidity, there are two possible scenarios:
Note:
il: Lower price
ic: Current price
iu: Upper price
When the current price is in the middle of the target price range. Ex: range [1000; 3000]. At this point, the price of GRB will be in the middle of the range. Therefore, you need to add both ETH and GRB with the same equivalent value to the pool.
When the price is still within the target price range but not in the middle. Because the price is not in the middle of the price range, there will be a difference in liquidity provisioning requirements. Specifically, the closer the current price is to iu, the more asset Y will be than asset X, and vice versa.
In this case, the user does not need to add liquidity with two types of assets, but only one depends on the target price. If the current price ic is lower than the target price il within the range [il; iu], then the player only needs to add asset Y. If the current price ic is higher than the target price iu within the range [il; iu], then you add asset X.
In addition, investors should pay attention to the Add Single Asset feature in V3 and second-generation AMMs. With second-generation AMMs, one asset is sold into two assets with a 50:50 ratio before adding liquidity. With Uniswap, it's like placing a limit order to buy or sell when trading spot.
Deposit Amounts
Enter a value in one of the ‘Deposit Amounts' boxes and the other box will automatically populate the corresponding amount.
The ratio of these two fields is based on the position of your price range around the market price. If your price range skews more toward one side of the market price, you will provide more of that asset. This can be okay, it is not necessary to target a 50/50 ratio though some strategies may choose that ratio.
You can adjust your ratio by sliding the price range left-right along the chart or dragging the min or max price boundary. The deposit amount you typed in will remain fixed, while the second asset amount will adjust to the new ratio based on your new price range.
Finally, you are ready to submit the transaction. Once the approved transaction has been confirmed, you can press preview, review the transaction details, and then click "Add" to trigger the transaction in your wallet
Once that transaction confirms, your Uniswap V3 NFT will be generated. Your assets now provide liquidity to Uniswap traders and your position is earning fees. You can monitor and manage your position on the Pool page
Event for liquidity providers on Uniswap
Uniswap V3 NFT can then continue to earn additional profits on Garbi farming to earn veGRB (NFT Pool)
To provide more liquidity, simply withdraw your Uniswap V3 NFT and add the desired amount of LP tokens to the Uniswap pool. Finally, deposit the NFT back into the Garbi farming pool to complete the process.
Range requirement: $0.0001 - $0.01 ETH per GRB
Your LP must be within the required price range in order to be eligible for farming on Garbi. Depending on each person's strategy, choose the most suitable price range.
