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Today, we’ll talk about Uniswap farming.

Uniswap is one of the most well-established Ethereum-based AMM protocols in the space, and arguably the largest liquidity pool in decentralized finance (DeFi).

Uniswap allows liquidity providers (LPs) to earn fees as a reward for adding their capital to the pool.

On Uniswap, liquidity pools are structured between two assets in a 50-50 ratio, a model typical of automated market makers (AMMs).

LPs are of vital importance to Uniswap’s functionality as a DEX.

They provide the liquidity and collateral needed for the protocol to execute trades in a decentralized manner.

In fact, every time someone executes a trade through the liquidity pool, the LPs who contributed to that pool earn a fee for facilitating the transaction.

The exchange has a trading fee of 0.30% for every token swap, but instead of going to Uniswap, these fees are given to the LPs as a reward for providing capital.

Unlike most DEXs, Uniswap doesn’t have order books.

Its liquidity is maintained through the liquidity pools.

This means anyone can become a liquidity provider for a token pair on Uniswap simply by depositing equal amounts of each token in exchange for token pools.

For example, if you wanted to add liquidity to an ETH-DAI pool on Uniswap, you’d have to add the exact same amount of each token to the pool.

For example, let’s say 1 ETH equals 2,270 DAI. If you wanted to provide liquidity to the pool with 3 ETH, the necessary 50-50 ratio would end up with 3 ETH and 6,810 DAI.

To add liquidity to a Uniswap pool and start yield farming, you will need to go to uniswap.org and click “Launch App,” then click “Pool.”

Next, connect your wallet, at which time you can either browse through popular liquidity pools by clicking on “Top Pools” or can click on “New Position” and select your preferred token pair.

Remember to review the preferred fee tier before finalizing anything.

Uniswap offers 3 different fee tiers for every token pair: 0.05%, 0.3%, and 1.0%.

The lowest fee is ideal for assets that trade at a fixed or highly correlated rate, such as stable coins.

The 0.3% fee is best for most pairs, and the ones that undergo price fluctuations such as ETH-DAI for example.

This higher fee tier is more likely to compensate farmers for the greater risk they take on relative to the stable coin.

The 1.0% fee is primarily used for exotic pairs, and is implemented to reward farmers for taking on major risks on their assets.

Next, you need to set your price range.

Uniswap allows you to select a specific range in which you can provide liquidity, which is one of the perks of a recent upgrade.

This means if prices move outside your selected range, the user’s position will be concentrated in one of the two assets and will not earn any interest until prices come back into the range.

Now, all you have to do is deposit the desired token amounts and you’re off and farming!

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