Uniswap V3 for Novice Users

The continuous growth of the Defi market encouraged new users to dive into the Defi marketplace, the new and improved Uniswap V3 attracted crypto holders to become the liquidity provider(LP), Uniswap V3 allowed crypto holders to concentrate liquidity on a specific position and choose as many different combinations, Uniswap V3 was already launched the Ethernet Square in May of this year which is the main network and has many improvements such as granular control of aggregate liquidity, multi-level rates, range orders, advanced oracles, and software license protection.

In the previous version of Uniswap V2, the liquidity providers were never earned high enough profit even after invested more then1 a million US dollars, in the previous version margin of return always the same whether the user will invest 1000 USD or 1 million USD, liquidity provider pool have many numbers of users, the fees earned by the pool will uniform for each provider, and each participant must pay their proportion, although users are willing to participate due to the fairness of the pool, however, the capital efficiency is not high enough in V2, the liquidity provider only capable to earn a small proportion of the capital, the big problems users face are higher slippage rate and the leverage was very poor in all price ranges.

Uniswap V3 brought a unique idea and turns liquidity providers into the NFT arena, now V3 become the largest application of the NFT world, users can trade on all individual pairs and forgot the gas cost, the transaction fees charged in a specific price range is according to the amount contributed. Uniswap V3 is more capital efficient than its predecessor, just like in V2 investors can provide the same depth of liquidity in V3 within the specified price range and could obtain a higher return rate.

Multi-level rates

Uniswap V3 offers three levels of rate for LPs such as 0.05%, 0.30%, and 1.00%, you can choose a rate according to your needs for example you can select a higher rate for risky trading pair(ETH/DAI), and for lower-risk trading pair (USDC/DAI) select the lower rates, in case your assets have very small fluctuations then you can select the 0.05% handling fee and if your crypto assets have high trading volume and large fluctuations then you can select 0.30%, and for any other types of assets, you can select the 1% handling fee.

Range Orders

Uniswap V3 also gives a new feature to its users such as Range Orders, which is an upgraded version of Limit Orders just like in normal exchanges, the user can set up the fixed auto recharge on specific assets, if the prices of assets meet at a specific rate then system triggers the asset to replaced by a replacement asset which preconfigures by the user.

The oracle

The oracle function was added in the Uniswap v2 which is basically the time-weighted average price (TWAP), the major improvement over this function, a third party can calculate any TWAP price in the last past days through only one on-chain call.

Gas Cost

The gas cost always lowest in Uniswap but lunch of aggregate liquidity will increase the overall complexity as well as the gas cost, the addition of Optimism’s Layer 2 is introduced to solve this problem, in V3 gas consumption is slightly lower compare to V2 but if you are using the granular capital pools then your gas cost could be increased.

Source: https://medium.com/cryptocurrencies-ups-and-down/uniswap-v3-for-novice-users-86a378e6456e?source=rss——-8—————–cryptocurrency