Providing liquidity

Liquidity providers (LPs) deposit two tokens into a pool and earn a share of every swap's fee in it.

v2 pools

• Your liquidity covers every price, from zero to infinity.
• Each pool has one fee: 0.3% per swap.
• Your share of the pool is an ERC-20 LP token. Fees build up inside the pool and are paid out when you remove liquidity.

v3 pools

• You choose a price range. Your liquidity only trades, and only earns fees, while the price is inside it. A narrow range earns more per dollar but stops earning if the price leaves it.
• There are three fee tiers: 0.05% (for stable or highly correlated pairs), 0.3% (most pairs) and 1% (volatile pairs; ElysiumPad launches use it).
• Each position is an NFT. Collect its fees at any time from its position page, without removing liquidity.
• If no pool exists for your pair and tier, the New position page creates it and asks you to set the starting price.

Setting a starting price

Whoever creates and first funds a pool sets its price. If you set it wrong, arbitrage traders will buy from you at your price. Check the market price before you create a pool.

Impermanent loss

When prices move, a pool rebalances your two tokens, so you end up holding more of the token that fell. Compared with holding the tokens, you can be worse off even after fees. v3 positions with narrow ranges feel this more.