πŸ”₯ I don't think the insane efficiency of @Uniswap v3 has sunk in yet. Just how efficient is it?

The equation for calculating the efficiency of a concentrated v3 position relative to providing to the entire v2 curve:

1/(1 - (a/b)^(1/4))

where a and b are your price bounds

Over the past 3 months (Jan8-present) the price of ETH/BTC has ranged from 0.0295 to 0.0454

Plugging into the formula, we find it is 9.8x more efficient than v2

So what does this actually mean?

Today, the Uniswap v2 WBTC/ETH pair has $318m in it.

If WBTC/ETH LPs instead provided to the range of 0.0295 and 0.0454 on v3 they could create the same amount of liquidity, and take on the same amount of impermanent loss with just

318/9.8 = $32m

🀯 The pools would have behaved identically, except that v3 LPs would be taking on 10% of the inventory risk and required only 10% of the upfront capital

You can create identical liquidity with far less capital. You can also create more with the same amount of capital.

If the $318m of v2 liquidity was deposited to a v3 position between 0.0295 and 0.0454 it would create the equivalent of:


in Uniswap v2 liquidity, with the same amount of upfront capital / inventory risk and 9.8 increased impermanent loss

Efficiency is just a means to an end - the result of concentrated liquidity is offering far better execution rates and giving LPs more desirable positions

How much better will they be once v3 is live? These things can be hard to predict.

πŸš€ But i have a good feeling

β€’ β€’ β€’

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More from @haydenzadams

24 Mar

Uniswap v3 provides the only possible "solution" to impermanent loss and price impact

It also lets you reduce total price risk while increasing your impermanent loss (relative to v2) with concentrated liquidity

This might need a blogpost but I'll try a long thread first

"Impermanent loss" (IL) refers to the fact that if you sell a token before it rises in value it would have been better to hold it and sell more at the higher price

Similarly, if you buy a token and it drops in value it would also have been better to hold

The "impermanent" part refers to the fact that if you sell a token and it rises in value you, but buy it back as it falls in value you are back to where you started

IL is only "impermanent" if prices eventually revert to where they started. Then all fees are pure profit
Read 19 tweets
23 Mar

A surreal moment, I can't believe it's finally ready.

🧠 Uniswap v3 was born out of @danrobinson's research into ways of improving AMM efficiency which began 18 months ago

Without him, v3 would not exist

It also would not exist without @sendmoodz and @NoahZinsmeister - who have been working on implementing v3 since the launch of v2


Developers like to call difficult tasks "non-trivial"

But to describe what they pulled off as "non-trivial" would be an absurd understatement

Implementing v3 efficiently in solidity is an incredibly difficult task.

Seriously, just look at the code:
Read 5 tweets
27 Dec 20
UP003 - a proposal to establish a UNI grants program is the first @UniswapProtocol governance proposal to meet quorum and pass!

And it wasn't even close, exceeding the approval threshold by more than 20M votes:

βœ… YES - 60,088,813 (99.99%)
❌ NO - 9,300 (0.01%)
Thrilled that this is the first proposal to pass.

A resounding message from the Uniswap community in favor of funding developers and contributors.

Which reminds me - everyone complaining about slow governance is either concern trolling or missing the point.
On-chain governance is not a panacea. It opens up new risks and trust assumptions that do not exist in immutable, automated systems.

This is why Uniswap is highly automated and governance-minimized.

It's no coincidence the biggest project on Ethereum follows this ethos.
Read 4 tweets
2 Dec 20

Mind-blowing results from @_charlienoyes @danrobinson @dave_white_ and @MartinTassy

TLDR: super bullish for AMMs/Uniswap

Will share some of the interesting results and some thoughts below

Result 1:
"If the volatility of an asset is high enough relative to its average rate of return, LPs on Uniswap will do better than HODLers over time, even when the only incoming trades are arbs."

TLDR: LPing can be good without "retail" volume and arb is not bad for LPs

Result 2:
In a zero latency, zero network fee, arbitrage-only (no "retail") world, the profit-optimizing LP fee approaches (but never touches) 0.

This was one of the more shocking results

TLDR: Lower fees = more profitable arb trades = more total fee revenue Image
Read 7 tweets
30 Nov 20

I disagree with a few things here.

First, the number of unique price sources is quite meaningless on its own.

For example, if 95% of a tokens volume and liquidity is one one exchange, averaging in 4 others could lower the quality of the price feed.

Second, you can’t directly compare manipulation resistance of entirely on-chain oracles that pulls from dex with something like chainlink that reports off-chain data

The attack surfaces and trust assumptions are very different

Uniswap TWAPs report 100% accurate average of Uniswap price (at start of block) across arbitrary time periods with perfect reliability and accuracy.

The cost of manipulating is whatever is lost to arbitrage by moving the average market price across this period
Read 7 tweets
1 Sep 20

Can't tell who is pretending and who legitimately doesn't understand that the $1B TVL deposited in an incredibly high risk investment on a single days notice is mostly massive whales

Anyone talking about community vs VC here is either delusional or intentionally misleading.

This is not YFI. Andre built something new and real, that has value.

Sushi is one days effort by any competent dev at most.

It's just whales playing whale games trying to cash in on a hype cycle and the value created by Uniswap.


Not surprised to see @iamDCinvestor talking about this, he's one of seemingly few people on crypto twitter who seems to understand the games whales play when the stakes are raised (and tries to explain them).

Read 4 tweets

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