Educational content, not investment advice. Crypto-asset values fluctuate.

Modulis 4 · Concentrated liquidity
2/9

Uniswap V3 — Concentrated Liquidity on Ethereum

Video · 3 min.
Uniswap V3

Inga's liquidity range worked about 60 times more efficiently until the price left it and fees stopped. How Uniswap V3 works on Ethereum: ticks, NFT positions, fee tiers and the protocol's cut, narrow vs wide ranges, and which network to open a position on.

Narrated, with light music
The full lesson with numbers and rules is below.
Watch on YouTube
ETH Uniswap V3

What is Uniswap V3?

In 2021, Uniswap 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?

Uniswap V3 created a standard that almost everyone else later copied — Orca (Solana), 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

Uniswap V3 divides the price space into small segments called ticks (the smallest price steps). Each tick equals a 0.01% price change.

TermWhat it means
TickThe smallest price unit (a 0.01% change)
Tick SpacingThe distance between active ticks
Position RangeYour chosen range
Active TickThe 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/USDC pool at $3,000.

Only LPs whose range covers the current tick earn fees.

Every position is an NFT

A unique Uniswap V3 feature — every LP 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

Uniswap V3 offers several fee levels. Each pool has exactly one tier.

Fee TierFeeBest for
0.01%Very lowStablecoin pairs (USDC/USDT)
0.05%LowSimilar tokens (ETH/stETH)
0.30%StandardMajor pairs (ETH/USDC)
1.00%HighExotic token pairs

How to choose?

The fee tier is not what you receive

The percentage in the table is what the trader pays. Since late 2025 (the UNIfication vote), the Uniswap protocol fee is switched ON: in the 0.30% and 1.00% tiers the protocol takes 1/6 of the LP fee, and in the 0.01% and 0.05% tiers 1/4. In practice, an LP in the ETH/USDC 0.30% pool keeps about 0.25%.

This is not only Uniswap: Orca takes 13% (12% to the DAO treasury, 1% to its Climate Fund), and Meteora DLMM takes 5% of its dynamic fee. So in every fee-APR calculation you do later (4-6, 4-8), subtract the protocol cut — otherwise your expected return is systematically too high. Figures as of 2026-09; protocol governance changes them.

How to open a position

  1. Connect to app.uniswap.org with MetaMask
  2. Click "Pool" and hit "New Position"
  3. Pick a pair — e.g., ETH/USDC
  4. Pick a fee tier — usually 0.30%
  5. Set your price range — e.g., $2,500–$3,500
  6. Enter the amount — e.g., 1 ETH + 3,000 USDC
  7. Confirm in your MetaMask wallet — you'll pay a gas fee
  8. You get an NFT — your position is active and collecting fees

Gas fees — mainnet vs Arbitrum

Gas used to be Uniswap V3's biggest complaint. A series of upgrades changed that — Dencun (2024), Pectra (2025) and above all Fusaka (December 2025) with the blob forks that followed it: mainnet gas is now around 0.07 gwei and a Uniswap swap costs roughly $0.06 (2026-09-05). LP makes sense even with a small position. The next major upgrade, Glamsterdam, has not shipped yet (targeted for late 2026).

ActionEthereum MainnetArbitrum (L2)Difference
Open a position~$0.05–$0.30~$0.01–$0.05Cheaper and steadier
Collect fees~$0.03–$0.20~$0.01Cheaper and steadier
Close a position~$0.03–$0.20~$0.01–$0.03Cheaper and steadier
Move the range~$0.05–$0.30~$0.01–$0.05Cheaper 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.

Fees move with network load and can spike several times over during congestion, so glance at etherscan.io/gastracker before a large operation. What an L2 like Arbitrum gives you: fees that stay low and predictable even when mainnet gets expensive. Switching networks is one click.

Where to open a V3 position: mainnet, Base or Arbitrum

A swap on Ethereum mainnet costs about $0.06 today, so an L2 is no longer a necessity on price grounds. If you do pick an L2, the main criterion is liquidity:

NetworkDeFi TVL (2026-09)Uniswap V3 24h volume
Base~$5.6B~$163M
Arbitrum~$1.4B (down ~52% over 2026)~$152M

Base currently has roughly 4x Arbitrum's DeFi TVL and higher Uniswap volume. Arbitrum still works and is a full-featured L2, but it is no longer the default choice.

What any of these L2s gives you:

A bridge is a separate risk

To reach an L2, your assets travel across a bridge. The bridge is not part of Uniswap and its risk is counted separately: in April 2026 a bridge misconfiguration in the KelpDAO rsETH incident cost $292M. If a mainnet operation already costs you $0.06, an extra bridge crossing can be a bigger price than the gas you save.

Range strategies

Narrow range

Price: $3,000
Range: $2,900 – $3,100 (±3.3%)
Efficiency: ~60x

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: ~12x

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: ~5x

Upside: Rarely needs moving. A calm position. Downside: The lowest earnings.

How to work out the efficiency yourself

Efficiency ≈ 1 / (1 − (√(lower/price) + √(price/upper)) / 2)

Worked example with the narrow range: √(2900/3000) = 0.9832, √(3000/3100) = 0.9837; their average is 0.9835 → 1 / (1 − 0.9835) ≈ 60. Plug in your own bounds and you get your own number.

Remember: efficiency tells you how much more liquidity your capital places at the active price compared with full range. It is not a return multiplier — the same multiplier also scales your sensitivity to price moves (IL, lesson 4-6).

Uniswap V3 in our strategies

In our strategies, Uniswap V3 is used in Strategy A with ETH:

ParameterValue
NetworkEthereum / Arbitrum
PairETH/USDC
Fee tier0.30%
Range typeSingle-sided USDC (below the current price)
GoalGenerating income
Uniswap V3 vs Orca Whirlpool

Both use the same concentrated liquidity idea. The main difference is the network:

The DeFi Risk OS platform plans to support both — depending on whether you're working with ETH or SOL.

Risks and how to manage them

Uniswap V3 is one of the most battle-tested DeFi protocols — smart contract risk is low. The remaining three risks are known, and each has a concrete lever:

RiskLevelExplanation
Smart contract bugLowAudited, running since 2021
IL (loss)MediumConcentrated LP = larger IL
Gas feesLowCents per operation (post-Fusaka, Dec 2025); can spike during congestion
Price leaves the rangeMediumFees stop

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 Uniswap V4 brings — a new version with extra features.

Quick check
What's the recommended Fee Tier for the ETH/USDC pair on Uniswap V3?
Practice task
0 / 5
Explore a Uniswap V3 pool and sketch a paper range plan

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.

Mark as read

Support

Free material is easy to put off

Something practice teaches: when you paid nothing to learn, it is easy to postpone learning indefinitely. If these lessons actually gave you something — saved you a mistake, or explained what nobody else did — you can pay whatever you think they were worth.

This is not a price, a subscription, or a fee for access. The amount is yours to choose, and paying nothing is entirely fine.

Solana address

CUj6wYQLSBxidzm7Lqtkxbw2d8Sv2H2tbJELyAjR756M

Solana network only

Send SOL or SPL tokens (e.g. USDC) only on the Solana network. Sending from an exchange over a different network loses the funds permanently — nobody can recover them.

What you get for it

Nothing extra, and that is deliberate. Every lesson, all three difficulty levels and every calculator stay free and sign-up-free, with or without a donation. There is no gated section, no share of profits, no future token and no claim on anything.

Where the money goes

A donation becomes my own money. I use it to keep the site running and to fund a public demonstration position on a lending protocol — real money, so the lessons have something to show instead of only theory. I publish the results, losses included, publicly and free for everyone. It is my position and my risk, not a pooled fund.

This is a gift for content already received, not an investment and not a payment for a service. Non-refundable. Educational content, not an investment recommendation.