research-article

Concentrated Liquidity Analysis in Uniswap V3

Authors:

Saleh Hashemseresht,

Mohsen PourpounehAuthors Info & Claims

DeFi'22: Proceedings of the 2022 ACM CCS Workshop on Decentralized Finance and Security

Pages 63 - 70

https://doi.org/10.1145/3560832.3563438

Published: 07 November 2022 Publication History

Abstract

Uniswap V3 is one of the most successful decentralized exchanges for digital cryptocurrencies. The latest version of the Uniswap (V3) introduces a number of new features, notably the concentrated liquidity that allows the liquidity providers to add liquidity within a specific price range. In this paper, we analyze the effect of concentrated liquidity on the return of the liquidity providers and present an approximation for the expected fees and the impermanent loss of a liquidity provider. First, we provide analytical results and then verify them using simulations.

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Aigner, A. A. and G. Dhaliwal (2021). Uniswap: Impermanent loss and risk profile of a liquidity provider. arXiv preprint arXiv:2106.14404.

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Fritsch, R. (2021). Concentrated liquidity in automated market makers. In Proceedings of the 2021 ACM CCS Workshop on Decentralized Finance and Security, pp. 15--20.

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Lambert, G. (2021a). A guide for choosing optimal Uniswap v3 LP positions, part 1. https://lambert-guillaume.medium.com/a-guide-for-choosing-optimal-uniswapv3-lp-positions-part-1--842b470d2261.

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Lambert, G. (2021b). A guide for choosing optimal Uniswap v3 LP positions, part 2. https://lambert-guillaume.medium.com/a-guide-for-choosing-optimal-uniswapv3-lp-positions-part-2--4a94b0a12886.

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Loesch, S., N. Hindman, M. B. Richardson, and N. Welch (2021). Impermanent loss in Uniswap v3. arXiv preprint arXiv:2111.09192.

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Tassy, M. and D. White (2020). Growth rate of a liquidity provider's wealth in xy= c automated market makers.

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Yin, J. and M. Ren (2021). On liquidity mining for Uniswap v3. arXiv preprint arXiv:2108.05800.

Cited By

Luo KJin NMa J(2025)Concentrated Liquidity in Ethereum Blockchain’s Digital Asset Trading: Insights from Innovative Back-Testing AlgorithmsComputational Economics10.1007/s10614-024-10823-xOnline publication date: 2-Jan-2025
https://doi.org/10.1007/s10614-024-10823-x
Hägele S(2024)Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A systematic literature reviewElectronic Markets10.1007/s12525-024-00714-234:1Online publication date: 18-May-2024
https://doi.org/10.1007/s12525-024-00714-2
Cartea ÁDrissi FMonga M(2023)Predictable Losses of Liquidity Provision in Constant Function Markets and Concentrated Liquidity MarketsSSRN Electronic Journal10.2139/ssrn.4541034Online publication date: 2023
https://doi.org/10.2139/ssrn.4541034
Show More Cited By

Index Terms

Concentrated Liquidity Analysis in Uniswap V3
1. Applied computing
  1. Law, social and behavioral sciences
    1. Economics
2. Theory of computation
  1. Theory and algorithms for application domains
    1. Algorithmic game theory and mechanism design

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cover image ACM Conferences

DeFi'22: Proceedings of the 2022 ACM CCS Workshop on Decentralized Finance and Security

November 2022

80 pages

ISBN:9781450398824

DOI:10.1145/3560832

Program Chairs:
Fan Zhang
Yale University, USA
,
Patrick McCorry
Infura, United Kingdom

Copyright © 2022 ACM.

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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Association for Computing Machinery

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Publication History

Published: 07 November 2022

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Carlsbergfondet

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CCS '22

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CCS '22: 2022 ACM SIGSAC Conference on Computer and Communications Security

November 11, 2022

CA, Los Angeles, USA

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Cited By

Luo KJin NMa J(2025)Concentrated Liquidity in Ethereum Blockchain’s Digital Asset Trading: Insights from Innovative Back-Testing AlgorithmsComputational Economics10.1007/s10614-024-10823-xOnline publication date: 2-Jan-2025
https://doi.org/10.1007/s10614-024-10823-x
Hägele S(2024)Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A systematic literature reviewElectronic Markets10.1007/s12525-024-00714-234:1Online publication date: 18-May-2024
https://doi.org/10.1007/s12525-024-00714-2
Cartea ÁDrissi FMonga M(2023)Predictable Losses of Liquidity Provision in Constant Function Markets and Concentrated Liquidity MarketsSSRN Electronic Journal10.2139/ssrn.4541034Online publication date: 2023
https://doi.org/10.2139/ssrn.4541034
Xiong XWang ZKnottenbelt WHuth M(2023)Demystifying Just-in-Time (JIT) Liquidity Attacks on Uniswap V32023 5th Conference on Blockchain Research & Applications for Innovative Networks and Services (BRAINS)10.1109/BRAINS59668.2023.10316935(1-8)Online publication date: 11-Oct-2023
https://doi.org/10.1109/BRAINS59668.2023.10316935
Cartea ÁDrissi FMonga M(2023)Predictable Losses of Liquidity Provision in Constant Function Markets and Concentrated Liquidity MarketsApplied Mathematical Finance10.1080/1350486X.2023.227795730:2(69-93)Online publication date: 16-Nov-2023
https://doi.org/10.1080/1350486X.2023.2277957

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