Uniswap v3 will launch the new version of the platform to segment the markets’ liquidity on May 5.
Uniswap will launch the third version (V3) of its platform, an update that focuses on upgrading and optimizing the performance and capital liquidity in this decentralized market. On the white paper of Uniswap v3, users can read a definition of the upcoming platform:
“Uniswap v3 is an automated non-custodial market maker implemented on the Ethereum Virtual Machine (EVM). Compared to previous versions of the protocol, Uniswap v3 provides greater capital efficiency and fine control of liquidity, improves the accuracy and relevance of the price oracle, with a more flexible structure”.
Its third version will be available on May 5, 2021, and this is the indicated date in the announcement, which also reveals other relevant details about this new version. In Uniswap v3, the liquidity pool participants in the many different markets that work there will pick the range of the exchange price in which they would place capital as a contribution.
The decentralized applications whose exchanges work on Uniswap enable creating a token market that uses a liquidity pool or liquidity pool. This capital, which facilitates the liquidity of the exchanges, is, in turn, a provision from other participants who earn commissions for blocking their funds.
Many of these Applications Offer high Returns to those Providing Liquidity
On the other hand, in most Uniswap token pairs, which work based on smart contracts, this liquidity gets blockage for a not too long time. This action happens to prevent liquidity providers from unexpectedly withdrawing their capital from the pool because a decision like that would seriously hurt the market, especially in the realm of decentralized finance (DeFi).
In the upcoming Uniswap upgrade, liquidity providers will now gain the ability to contribute their capital only in a selected price range. A pool participant would provide liquidity only to exchanges that occur on a given price curve, such as between 2 and 3 ETH per token.
Outside of that price range, the liquidity pool could not sell the tokens for ETH to other users, which would be an impermanent loss, on which the price of the asset could fall without a bottom.
Uniswap Clarifies that Liquidity Providers Might Serve as Contributors to Different Price Ranges of their Platform
This efficiency could at the same time pave the way for the so-called slippage, which is a percentage price range that configures itself as permissible at the same time it is making an exchange. This percentage is the variation that a buyer is willing to accept when placing the token’s purchase order.
During times of high volatility, where the price of assets fluctuates so fast, users have no idea how to explain the situation. It is usual to increase the slippage percentage, so achieving a Defi token’s purchase or sale happens at the desired price range.
By: Jenson Nuñez
