Uniswap Exchange | capital price
Uniswap’s journey started with the launch of its first version (V1) in November 2018, offering a simple yet powerful platform for decentralized token trading. Over the years, Uniswap
Last updated
Uniswap’s journey started with the launch of its first version (V1) in November 2018, offering a simple yet powerful platform for decentralized token trading. Over the years, Uniswap
Last updated
In Uniswap v2, liquidity is distributed evenly along an x*y=k price curve, with assets reserved for all prices between 0 and infinity. For most pools, a majority of this liquidity is never put to use. As an example, the v2 DAI/USDC pair reserves just ~0.50% of capital for trading between $0.99 and $1.01 , the price range in which LPs would expect to see the most volume and consequently earn the most fees.
V2 LPs only earn fees on a small portion of their capital, which can fail to appropriately compensate for the price risk ("impermanent loss") they take by holding large inventories in both tokens. Additionally, traders are often subject to high degrees of slippage as liquidity is spread thin across all price ranges.
In Uniswap v3, LP's can concentrate their capital within custom price ranges, providing greater amounts of liquidity at desired prices. In doing so, LPs construct individualized price curves that reflect their own preferences.
