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=== Liquidity Providers === | === Liquidity Providers === | ||
A liquidity provider (LP) is someone who deposits a pair of tokens to a smart contract. In return, they're compensated with a percentage of the trading fees for the given pair. <ref>https://docs.uniswap.org/protocol/concepts/V3-overview/glossary#liquidity-provider--lp</ref> | A liquidity provider (LP) is someone who deposits a pair of tokens to a smart contract. In return, they're compensated with a percentage of the trading fees for the given pair. <ref>https://docs.uniswap.org/protocol/concepts/V3-overview/glossary#liquidity-provider--lp</ref> | ||
A liquidity provider share of the pool is represented by the LP token, unique for each liquidity pool. LP tokens automatically earn the trading fees, since they represent a portion of the whole pool which grows as fees are accumulated. | |||
=== Swaps === | === Swaps === | ||
Swaps are the most common use. For users, swapping is straightforward: a user selects an ERC-20 token that they own and a token they would like to trade it for. Executing a swap sells the currently owned tokens for the proportional amount of the tokens desired, minus the swap fee, which is | Swaps are the most common use. For users, swapping is straightforward: a user selects an ERC-20 token that they own and a token they would like to trade it for. Executing a swap sells the currently owned tokens for the proportional amount of the tokens desired, minus the swap fee, which is given to liquidity providers. <ref>https://docs.uniswap.org/protocol/concepts/V3-overview/swaps#introduction</ref> | ||
=== Slippage === | === Slippage === | ||
When transactions are submitted to Ethereum, their order of execution is established by the | When transactions are submitted to Ethereum, their order of execution is established by the gas price offered as a fee for executing each transaction. The higher the gas price, the faster the transaction is included in a new block. The transactions with an insufficient gas price will remain pending for an indeterminate amount of time. During this time, the price environment in which the transaction will eventually be executed will change, as other swaps will be taking place. <ref>https://docs.uniswap.org/protocol/concepts/V3-overview/swaps#slippage</ref> | ||
== Uniswap v3 == | == Uniswap v3 == |
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