Uniswap V3 — Concentrated Liquidity on Ethereum
ETH Uniswap V3What is Uniswap V3?
In 2021, UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → launched V3 — the first concentrated liquidity protocol. It was a major breakthrough, because it let people choose which price range they wanted to provide liquidity in.
Why does this matter?
UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 created a standard that almost everyone else later copied — OrcaOrcaA Solana DEX with concentrated liquidity (Whirlpool). The basis of our LP strategy on the Solana network.Read the lesson → (SolanaSolanaA fast blockchain (under 1s, gas under $0.01). Home to the Kamino, Orca and Meteora ecosystem.), PancakeSwap, and many more. It's like the iPhone — not the first phone, but the first one that changed everything.
How Uniswap V3 works
The tick system
UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 divides the price space into small segments called ticks (the smallest price steps). Each tick equals a 0.01% price change.
| Term | What it means |
|---|---|
| Tick | The smallest price unit (a 0.01% change) |
| Tick Spacing | The distance between active ticks |
| Position Range | Your chosen range |
| Active Tick | The tick where the price currently sits |
Simplified example (the real tick step is 0.01%, i.e. roughly $0.30 at $3,000; for clarity we show steps of $10 here): an ETH/USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies. pool at $3,000.
- TickTickThe smallest price step in concentrated-liquidity protocols (Uniswap V3, Orca).Read the lesson → 1: $2,990
- TickTickThe smallest price step in concentrated-liquidity protocols (Uniswap V3, Orca).Read the lesson → 2: $3,000 (current)
- TickTickThe smallest price step in concentrated-liquidity protocols (Uniswap V3, Orca).Read the lesson → 3: $3,010
Only LPsLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → whose range covers the current tick earn fees.
Every position is an NFT
A unique UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 feature — every LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → position is an NFT (a unique digital object).
An NFT position = your ticket
Like a concert ticket — every one is unique: a different seat (price range), a different price (amount of liquidity). You can transfer this "ticket," or even sell it to someone else.
Fee Tiers
UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 offers several fee levels. Each pool has exactly one tier.
| Fee Tier | Fee | Best for |
|---|---|---|
| 0.01% | Very low | StablecoinStablecoinA cryptocurrency pegged to a real-world currency (usually $1). USDC, USDT, DAI, USDY. pairs (USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies./USDTUSDTTether USD stablecoin. An alternative to USDC. Liquidity on Solana has historically been smaller — most Solana DeFi liquidity is still in USDC.) |
| 0.05% | Low | Similar tokens (ETH/stETH) |
| 0.30% | Standard | Major pairs (ETH/USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies.) |
| 1.00% | High | Exotic token pairs |
How to choose?
- Stable pairs — 0.01% (a tiny fee, but huge volume)
- ETH/USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies. — 0.30% (a good balance)
- Exotic tokens — 1.00% (compensates for the higher risk)
How to open a position
- Connect to app.uniswap.org with MetaMask
- Click "Pool" and hit "New Position"
- Pick a pair — e.g., ETH/USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies.
- Pick a fee tier — usually 0.30%
- Set your price range — e.g., $2,500–$3,500
- Enter the amount — e.g., 1 ETH + 3,000 USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies.
- Confirm in your MetaMaskMetaMaskAn Ethereum/EVM wallet. Used with Aave, Uniswap and Arbitrum. wallet — you'll pay a gas fee
- You get an NFT — your position is active and collecting fees
Gas fees — mainnet vs Arbitrum
GasGasThe transaction fee on a blockchain. Solana: under $0.01. Ethereum mainnet: transfer ~$0.01, swap ~$0.03-0.30. Varies with network load. used to be UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3's biggest complaint. Since EthereumEthereumA blockchain with smart contracts. We use Aave (lending) and Uniswap (LP) on it.'s Dencun upgrade (March 2024) that has changed: mainnet operations now cost cents, not tens of dollars.
| Action | Ethereum Mainnet | Arbitrum (L2) | Difference |
|---|---|---|---|
| Open a position | ~$0.05–$0.30 | ~$0.01–$0.05 | Cheaper and steadier |
| Collect fees | ~$0.03–$0.20 | ~$0.01 | Cheaper and steadier |
| Close a position | ~$0.03–$0.20 | ~$0.01–$0.03 | Cheaper and steadier |
| Move the range | ~$0.05–$0.30 | ~$0.01–$0.05 | Cheaper and steadier |
These are typical figures — gas moves with network load and can spike many times over during congestion, so before a large operation it's worth a quick glance at etherscan.io/gastracker.
Arbitrum — a great home for Uniswap V3
Arbitrum is EthereumEthereumA blockchain with smart contracts. We use Aave (lending) and Uniswap (LP) on it.'s "fast lane" (a Layer 2Layer 2A second layer built on top of a base blockchain. Arbitrum and Optimism offer cheaper Ethereum transactions.):
- The same UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 protocol
- Fees that stay flat (~$0.01–$0.05) even when mainnet gets busy
- Faster confirmations (~0.25s)
- EthereumEthereumA blockchain with smart contracts. We use Aave (lending) and Uniswap (LP) on it.-level security
Range strategies
Narrow range
Price: $3,000
Range: $2,900 – $3,100 (±3.3%)
Efficiency: ~30x
Upside: The largest share of fees, as long as the price stays in range. Downside: The price often "leaves" — you need to watch it constantly.
Medium range
Price: $3,000
Range: $2,500 – $3,500 (±17%)
Efficiency: ~6x
Upside: A good balance between earnings and stability. Downside: Lower earnings than a narrow range.
Wide range
Price: $3,000
Range: $2,000 – $5,000 (−33% / +67%)
Efficiency: ~3x
Upside: Rarely needs moving. A calm position. Downside: The lowest earnings.
Uniswap V3 in our strategies
On the platform, UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 is used in Strategy A with ETH:
| Parameter | Value |
|---|---|
| Network | EthereumEthereumA blockchain with smart contracts. We use Aave (lending) and Uniswap (LP) on it. / ArbitrumArbitrumAn Ethereum Layer 2 network. Cheaper and faster transactions than Ethereum mainnet. |
| Pair | ETH/USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies. |
| Fee tier | 0.30% |
| RangeRangeThe price range of a concentrated LP position. Fees only accrue while the price is inside the range.Read the lesson → type | Single-sided USDCUSDCA USD stablecoin issued by Circle. Regulated, audited monthly. Our primary stablecoin and loan asset in the Kamino/Aave strategies. (below the current price) |
| Goal | Generating income |
Uniswap V3 vs Orca Whirlpool
Both use the same concentrated liquidity idea. The main difference is the network:
- Uniswap V3: EthereumEthereumA blockchain with smart contracts. We use Aave (lending) and Uniswap (LP) on it., bigger TVLTVLTotal Value Locked — the total value deposited in a DeFi protocol. An indicator of how popular a protocol is., gas now in cents
- Orca Whirlpool: SolanaSolanaA fast blockchain (under 1s, gas under $0.01). Home to the Kamino, Orca and Meteora ecosystem., faster, cheaper
DeFiDeFiDecentralized Finance — financial services without intermediaries, operating through smart contracts. Risk OS supports both — depending on whether you're working with ETH or SOLSOLSolana's native token. Used to pay gas and as collateral..
Risks and how to manage them
UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V3 is one of the most battle-tested DeFiDeFiDecentralized Finance — financial services without intermediaries, operating through smart contracts. protocols — smart contract risk is low. The remaining three risks are known, and each has a concrete lever:
| Risk | Level | Explanation |
|---|---|---|
| Smart contract bug | Low | AuditedAuditAn independent security review of smart-contract code. Not a guarantee, but it reduces risk., running since 2021 |
| IL (loss) | Medium | Concentrated LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → = larger IL |
| GasGasThe transaction fee on a blockchain. Solana: under $0.01. Ethereum mainnet: transfer ~$0.01, swap ~$0.03-0.30. Varies with network load. fees | Low | Cents per operation; can spike during congestion |
| Price leaves the range | Medium | Fees stop |
- IL (impermanent loss) → you choose your range deliberately (wider = smaller IL); you'll calculate and hedge the IL separately in later lessons
- Gas spikes during congestion → ArbitrumArbitrumAn Ethereum Layer 2 network. Cheaper and faster transactions than Ethereum mainnet. keeps fees flat and predictable even when mainnet gets busy — same protocol, one click away
- Price leaves the range → you watch the range and move it, or choose a wider, calmer range from the start
Every risk has a solution. You're not meant to fear it — you're meant to learn how to manage it.
Once you understand the tick system, fee tiers, and range types, you can look at any pool and decide for yourself which range suits you — narrow for attention, or wide for calm.
Next up: Let's look at what UniswapUniswapAn Ethereum concentrated-liquidity protocol (V3/V4). Its Solana counterpart is Orca.Read the lesson → V4 brings — a new version with extra features.
See what concentrated liquidity looks like in the wild. Takes about 15 minutes, no wallet needed — just exploring and paper.
We're ONLY looking — don't open a position, and you don't need to connect a wallet. Uniswap V3 runs on Ethereum/Arbitrum, and real positions there cost gas — we'll use a simulator for practice later.
This is learning, not investing — use only small amounts you treat as tuition.
You just compared two fee tiers by earnings-per-dollar and sketched three range scenarios — that's how an LP who manages risk thinks, instead of blindly chasing APR.