How To Provide Liquidity on Uniswap
This post will share information on how to provide liquidity on Uniswap.
About Uniswap and DeFi in 2021
Uniswap has been getting a lot of attention in 2021 thanks to the huge growth of the platform. An event that really showed the emergence of Uniswap was when trading volume surpassed that of the largest US exchange, Coinbase. It was the first time that decentralized exchanges showed they could compete with their centralized competitors on a large scale.
Uniswap pioneered fair token distribution with a retroactive airdrop that gave 400 UNI tokens to any who used the platform. Those 400 tokens are now worth $12,000 to users who held on to them. The common joke is that Uniswap was able to give more stimulus than the US government!
What makes Uniswap special for liquidity providers is the huge amount of pairs available to provide liquidity to as well as lots of volume on the platform that helps generate solid yields. This article will show you how to provide liquidity on Uniswap and earn a yield on your tokens.
What you will need:
- A wallet with access to the Ethereum blockchain
- ETH in your wallet with enough gas for two transactions (Approve and Enter Liquidity)
- Two crypto assets in your wallet of equal amounts for the 50/50 pool
Preparation for liquidity pools
You will need to hold the two assets you would like to use for liquidity providing in your ERC-20 compatible wallet (Uniswap supports — Metamask, WallectConnect, Coinbase Wallet, Fortmatic, Portis). If you would like to supply $1000 to the ETH/USDC pool, you would need $500 ETH and $500 USDC, plus some extra ETH to cover gas costs. You can check current gas prices at Gasnow.org. You will need to pay gas to do two transactions, one for approving the token and one to enter the liquidity into the pool.
Using Uniswap on Ethereum
Navigate to the Uniswap App page, connect wallet, and select Pools from the top menu
Click the “Add Liquidity” button and select the pool you want to invest in by selecting the two assets that comprise the pool in the Uniswap interface — NOTE: It is important to verify you have the correct assets selected (many have similar names), you can verify that information using Etherscan, CoinGecko, and Uniswap.info.
Uniswap will quote some current token prices and your projected share of the pool before you hit the Supply button. Once you hit “Supply”, the two assets in your wallet will be exchanged for Uniswap LP tokens, representing your share of the liquidity pool. The tokens will start to earn you fee revenue and expose you to potential impermanent loss.
Tracking Your Liquidity Pool Investment
APY.Vision is an all-in-one liquidity pool analytics and yield farming rewards tracking tool that lets you manage your liquidity pools and track yield farming rewards with one easy dashboard. Because liquidity pools are complex and have many variables that dictate profit or loss, it is essential to have tools to understand what is happening with your various positions. APY.Vision also will assist you in searching for new pools to invest in. and will also track your profit and loss.
APY.Vision does not give investment advice and always insists that you do your own research. Read our full Legal Disclaimer.