Uniswap V3 - Providing Liquidity & Calculating Returns

what is going on my beautiful people as you can see by the title of this video uh today we're going to be looking at uniswap v3 i now if you already know before we kind of get into everything you know that i've been yield farming on polygon for quite a while and i kind of felt like that was the only place for me to kind of spread my wings and sort of yield farming i really felt like polygon was currently the only way to actually yield farm without having to pay high fees um and you know those wait those long transaction periods but it turns out that you can still make a good amount of money on the regular ethereum main chain using uniswap so today i'm going to kind of show you guys what i've been doing with uniswap um how i've been making a little bit of money off it uh so you can do it maybe yourself as well we'll also be actually doing it live as well because i had to do a couple things so let's go ahead and get straight into it uh we got a uniswapa live on the screen here uh if you're not familiar uniswap v3 uh this is pretty much like the unit swap the new uniform that came out uh more recently and the main difference between uniswap v3 and v2 are what they called concentrated liquidity positions and essentially if you go over to the pool over here this is going to pretty much show you what types of pools that you already have in the positions you already have and it'll tell you the range uh in between where your liquidity is concentrated uh we're gonna we're gonna get into a little more explanations and all that stuff but i just wanna be clear that's why uniswap v3 is different than v2 and why i'm personally providing liquidity for v3 instead of v2 because v2 still exists it's a smart contract it'll exist forever uh but you know v3 in this case i think is a lot more it's a lot more capital efficient and i think that's what hayden adams likes to talk about on twitter a lot so let's get into my position real quick um and again before we get into this i'm no expert by any means on you know like d5 yield farming whatever i'm just you know a dude experimenting with this stuff and kind of reporting back to you guys on my findings pretty much so let's get into it so number one obviously the uni eath pair now i specifically chose this pair uh number one because eth is like the number one asset that i want to be collecting over time that's something i want to be stacking as much as possible now people talking about people talk about stacking sats i'm trying to stack some gway shout outs to eth um uni is the other asset that i'm like like i wouldn't mind having a lot of uni either because i love una swap they're governed in some like i mean shut the guys out of there they're out of brooklyn over here so everything about unit swap i love so i don't mind having a lot of unit swap either so to me i think when you're doing this you should find a pair of tokens that you don't mind having like a ton of because you're going to see why in a second um but ethan uni in terms of like the liquidity app i put in here about five thousand dollars uh i don't mind having that five thousand each or uni in this case secondly as you can see and i kind of wanted to throw this out there you see this this is my position essentially over here uh this is another huge difference between v3 and v2 is the fact that your liquidity position aren't just like kind of tokens that you throw into the to the chain and then you're given like um what do you call it and then you're given a uh what do you call liquidity pool tokens instead no instead of instead of giving instead of being given liquidity pool tokens that represents your position you're given an nft that shows you like kind of it's really cool it pretty much shows you again like your range uh how you know how much liquidity you have and where within that range the price currently is so like obviously you can't show it live because the price range isn't moving right now but if it were to be in range you'll see this little dot kind of move back and forth between this line over here so i just thought also that's something that was really cool now now that we have the position uh kind of explained there let's talk about the liquidity range which is going to be over here so this is going to be one of the most and i think the most important parts about unit swap v3 and kind of explaining it is min price and max price so pretty much as you can see because i have a uni east pair i have to go ahead and pretty much put my range in terms of either uni per eth or eth per uni uh we're going to go with unibreathe so in this case my min price is 95 uni per each so that means that i want personally to be providing liquidity for the price range of 95 uni per eth between 97.8 guinea preeth so if it goes out of this price range i won't be collecting any fees on it that's why you see right now it says out of range this price because as you can see the price of this pool is outside of your selected range your position is not currently earning fees that's going to be one of the negative parts about v3 is that you need to actively monitor your position it's really just depending right and part of that part of the bad part about that is that like for example if it's out of range and i want to get back in range i have to as far as i'm concerned with draw my liquidity and go back in you know and adjust the price range obviously the problem is that it costs a lot of money to do that because of the fees however i will say that because my price range is so tight 95 and 97 uh like the fees that i get are a lot like when it's in that price range when people are trading back and forth it's a lot of money so for example you can see i have 98 in unclaimed fees uh i pretty much got around like 70 of that literally within like like a 24 hour period after putting in like 5 000 bucks before that i think i had like 800 deposited and i made like 20 something dollars in like two days uh but after i put in 5k i made like 70 bucks like look like literally less than 24 hours so as you can see that's quite i mean that's a lot that's really really efficient in terms of me just throwing in 5k whatever it is and getting 70 bucks from it like percentage-wise that's a lot so that's why i'm starting to look more at univ3 and providing more liquidity for positions that i am a fan of like next one i might do is like eat anchor if they have it obviously they have it but you know whatever but um i love this kind of model because it's like you get so much money from it depending how much risk you want to take on again you know because of that because i get that crazy amount of fees you know obviously when it when it moves out of range i'm not getting anything uh so again that's kind of like uh that's kind of the the risk you take and then i should say actually as you kind of go farther out you know you'll you won't get as many uh fees but you so you'll get more fees technically within that price range but the fees won't be as high that makes sense so we're gonna go ahead and do is uh after showing you guys our profit i want to go and show you guys this calculator because we're gonna we're actually gonna withdraw the liquidity um that i had over there because i you know i kind of want to change it i want to start collecting fees again so as you can see uh there's this uniswap v3 fee calculator i think this just came out like a couple days ago uh so and there are a couple other ones out there as well but i think this one is like really i think it's a lot easier to kind of picture essentially so what we're gonna we're gonna kind of go ahead and kind of walk us through it so as you can see that you want to go ahead and select the pool we're going to go ahead and go to uni eth bam we're going to go ahead and set the investment number here we're going to put in 5700 because that's how much i have right now now this is going to say move active price assumption this is essentially where the price currently is at as you can see according to this the price is at 98.6 we can just leave it at 99. there's no like a well okay we'll make it more accurate 98.6 and my liquidity bounds we're going to see if we can match up what i have here so 95.5 and 97.8 and something to keep in mind is that although this is a like a great visualizer to see kind of where your stuff is at and i'll kind of explain what this is too in a second all right it won't be entirely accurate because at the end of the day like like you know trading on unit swap is quite you know uh uh inconsistent i would say really just depends on if people are trading your pair or not so as you can see we have the liquidity bounds here and obviously uh it's saying that we have 24 hour fee zero zero dollars because we're outside of the range the price assumption is outside of our liquidity range so if we were to put it back in range let's try to put it back in here you can see that 24 hour fee goes up a lot right and again that's just when we're in that range and that's probably why i got so much money the other day you know what i mean so this this is what i'm saying you can end up getting 277 annual returns if you want to take that risk and kind of um get those concentrated liquidity positions in those pairs sorry uh in you know yeah for these pairs so what you'll see here and obviously again this is going to be the price curve right uh that's kind of what this represents so again this is my position right now and whenever the actual price of the uni heath pair is within my range i'm getting a i'm getting a ton of fees right especially when it's closer to the middle uh but as you can see when it starts moving out i have i think it's zero fees either on this side or on this side um so in this case what i'm going to probably do is withdraw my liquidity and kind of widen out my my liquidity bounds so let's say we're over here now right um 44 annually i kind of just want to see how it's going to adjust itself so let's say i raise it to 100 and i lower the other one to it's already going down so much um let's say we just do that raise it to 100. pretty much what that would mean is assuming that we're right around the same price my 24 hour fee would still be pretty good so what i might do is set my liquidity balance to 95 uni breathe and 100 uni breathe so we can kind of get although i won't be getting as much technical like liquidity when it's in the range i'll be getting i'll be getting sorry although i'm not getting as much fees because it's not in the range i'll technically be getting more fees rather than like higher amounts because essentially what it does is when when the when the price of the uni eat pair is actually within that range right from what i understand like 100 of your capital is being used at that time and that's why you get such high fees because 50 5700 of my liquidity is being used actively whereas in your swap v2 only part of your fees are only sorry only part of your liquidity is being used you know so that's kind of the biggest deal especially when you're doing concentrated stuff however you can see this is kind of where most of most of the liquidity is actually pooled in uh in terms of like like where people are providing liquidity for in terms of what range and you can see a lot there's actually very little people providing liquidity over here and they're probably making a lot of money from it uh because there's not that many positions over there most of the positions are actually where i have it at which is right between that 95.6 and 97 for whatever range so i might go ahead and actually again just withdraw my liquidity and kind of stretch it out to 100. uh the only issue that we're going to have now is going to be the fact that as you can see here because of the way this works and i should have explained it maybe a little bit earlier is if this the current price range goes above the max price in this case the uni per eth pair 100 of my liquidity will be concentrated in uni so as you can see right now i have 100 unicoins you need tokens and when i first submitted it i had like 50 50 more or less uh however if it were if the current price were to go below 95.6 or 95.5 uni parith i'd have 100 ethereum so as you can see the liquidity providing is a little bit more complicated for um 340 v3 than v2 but it's just so much more interesting though so what we're going to do is go ahead and remove the liquidity and i'm going to try to find a way to provide that 100 of uni i'm talking about uh at the same time and get a get a bigger price range so i'm not going to lie to you i'm not exactly sure how we're going to do that but we're gonna go ahead and try it out anyways and the good thing is that i'm also gonna be collecting my 100 in fees so let's go ahead and remove 100 i really hope the gas fees are cheap today 20 bucks okay it's not that bad all right the crazy part is that i probably wasted more money withdrawing it and taking it out than i have just leaving it in there oh my god it's fine though it's fine so we're gonna go ahead and wait for that to kind of uh finish pending as well and what again what i'm planning on doing is going ahead and setting the liquidity bounds again from probably i might even set it even lower the thing is that i don't mind having a lot of eth like at the end of the day i'd rather have a lot more ethan uni but i don't really mind either way uh as and as you can see there's very little people over here right now so i definitely want to take advantage of that so again plan extend the max range to 100 which means like by by like a couple more you know uni brief um what points i guess uh and hopefully collect more collect more fees off of it and again i think this 24 hour fee i think this calculator is believe it or not actually um under representing you know underrepresenting what you might get in returns it just from what i've seen again because i got a lot more than 40 the other day uh when i did that here we go all right so we removed the liquidity we're gonna go ahead and do now is go back to the pool and i'm gonna okay that's cool i know did that uh i wonder if i can provide liquidity this thing again increase liquidity and okay yeah i'm gonna have to go ahead and change the price bounds in the other one so let's go ahead and do a new position we're going to do uni per eth uh see uni price ether there we go eat the price okay 95 97 98.63 is what it is so we're going to go ahead and do max the market price is currently outside of your price range single asset deposit only so we're going to go ahead and somehow deposit single assets only our uni pair so i'm going to find a way on how to do that let's see if we can actually go ahead and uh and go ahead there we go okay we can just go ahead and add it right there uh oh wow that's a lot oh wow yeah that's a lot of money 63 wait what oh i already i had an extra amount of uni in my wallet okay that's why but whoa all right so we're gonna go ahead and add uh the this pair but it's staying out of the price range so i'm trying to see if we can go ahead and just change it though i may have to go ahead and let's see if we can go back to the overview over here uh more create a pool migrate here we go new pool we're going to do uni and eath 0.3 um and by the way this this is going to be kind of like a fee breakdown of how much you want to end up making and it's you can really just put it depending on the kind of period you're getting so in this case for stable pairs like if you have usdc and usdt or die and use dc like stable coins essentially maybe um you can use point zero five percent fee because no one's no one's going to want us no one's going to want to pay 0.3 percent on trading their stable coins back and forth it's not going to happen this also by the way probably works with derivatives so if you have like for example um actually yeah that is true like ethan rapte i guess anyways the point is that if you're using more like unorthodox pairs uh you're gonna want that one percent fee and as far as i'm concerned this is more for like pairs that like don't aren't really popular or really mainstream like that and you can probably check that out in like the charts section over here because it should give you kind of like a uh overview of like the most popular pools uni eath is like the fifth one and it tells you what the slippage is so you know which one so you know that you're joining the right pool but the one percent fees like the ones like all the way back here for example like wnx and xm or uh sheba 2 with ether like the more the way more volatile ones in this case we're using like a regular 1.3 percent fee best for most pairs uh and what we're going to do is take a look at the min price i'm going to set it again to can i change it over here i'm going to set it to 95 and set it set this to 100. uh as you can see over there 94.9.26 and we're going to provide the max amount of uni but i'm going to need to find a way to actually only provide liquidity for this pair i think you know what i might have to be able to do i might only be able to um provide liquidity then if i put it exactly on that spot hold on let's see 98.52 okay so a single asset deposit only okay i think we should be good actually want so then if i put if i put it back to 100 yeah okay okay i see i see i see so i think what we can do is be as close to it as possible and still add that most of that uni as you can see right okay there we go so we're depositing 100 of my uni no eath uh the e price per uni is 98.5 let's just hope that it doesn't go any farther than this because if it goes any further above 9.4 9. 9.5 right now then i'm pretty much like you know sol but i get it so i'm gonna go ahead and add it 29 dollars in gas fees baby dude i wasted like how much money did i waste from that uh 50 bucks just changing my position and i only made 100 from that before so as you can see it's not like if you have to constantly manage a liquidity position it's probably not that worth it uh but again i'm mainly doing this just kind of show you guys how to do it more or less um you know what my kind of what my uh experience with it has been so far i just show you how to do it if you don't know how to but again i think this is a great way though to yield farm like like literally like uh in the long term to be honest with you and i think this is what i'm gonna start doing because i'll be honest as much as i love polygon and other different side chains or l2s that are probably going to come out i like the idea of just being able to kind of like being on the main chain of ethereum knowing that it's as secure as possible and being able to yield farm on it i just feel a lot better knowing that i'm on like the ground level of ethereum rather than on a bridge somewhere yield farming over there and technically like my like your assets are never really as safe as they are if they're on the main chain so this is what i'm doing currently um i'm probably going to take some maybe some of my anchor actually provided into one of the pools over here i don't know how i don't know if it's getting that much you know like trading or volume going on there so i may not get that many that much in fees uh but i just thought of something interesting i mean let me know what you guys think if you do plan on doing something like this i definitely recommend you kind of take a look at the pairs that you like personally the most right and you know maybe provide liquidity for those right like if you're a link if you're a link fan and you have you have you don't mind having either then join the link ethe pool right uh if there's like another pool here that's a little more unorthodox maybe like the east tribe i don't know what the hell tribe is um then go ahead and do that uh the only thing that like i think i'm not too sure on is how permanent loss works here i don't think it's as much of an issue on v3 i don't i could be wrong there i could be 100 wrong so that's why i'm not even bothering uh with any stable pairs because stable pairs will make it a lot worse although it'll make you a little bit less risk like exposed i don't know man like to me you in the uni eth pair is pretty unrisky in my opinion like i like that pair so that's just me let's take a look at my actual current position uh oh yeah obviously it's out of range so the hope right now is that it comes back into range and goes below the 98.5 a uni period but nonetheless if you want to kind of keep track of what i'm doing in terms of defy stuff and all that give me a follow on twitter you know i pretty much post more or less like what i'm doing in terms of d5 all the time on there and just kind of keep people updated with what i'm kind of looking at um i do have something interesting in the works in terms of not me personally but i have my eye on a new ecosystem that's coming out soon i'm sure you guys have probably heard of it um it's arbitrary obviously uh but they're gonna essentially gonna be a new layer two on ethereum and my thing i think what's gonna happen is i think that most people are gonna move a lot of their stuff from polygon and from the ethereum main chain over to arbitrary because of how many projects are going to be deploying on it i don't have any insider information i just you know know all this stuff because of the they had like a uh interview on bankless it was a couple days ago and they kind of spilled the beans as they say over there but i would definitely keep your capital ready for that if you are trying to yield farm um i'm i definitely will probably be moving some of my stuff over there uh because i hear that like a lot of the big products are going to be there i think including uniswap i think but we'll see nonetheless uh this is what i'm doing what are you guys doing are you getting involved in unit swap liquidity pool staking are you getting a whole bunch of fees let me know down below um that's what i'm doing today and i'll see you guys on the next one all right peace out

Channel: bfresh

Views: 18,442

Keywords: uniswap v3, uniswap v3 liquidity providing, uniswap v3 yield farming, uniswap v3 liquidity pool, uniswap v3 explained, uniswap v3 tutorial

Id: hdWMRtt14qg

Length: 20min 19sec (1219 seconds)

Published: Fri Jun 04 2021