Uniswap V3 User Revenue Analysis and How to Improve It with LP NFT Mining

(https://dune.xyz/msilb7/Uniswap-v3-Competitive-Analysis)

UniV3 user revenue status

From the current overall Uniswap data, UniV3 has significantly outperformed UniV2 in terms of both TVL and trading volume, because of V3’s innovative concentrated liquidity AMM design, which greatly enhances capital efficiency and provides a lower slippage trading experience for users while providing higher commission revenue for liquidity providers.

(https://dune.xyz/cronii/Uniswap-v3)
(https://dune.xyz/cronii/Uniswap-v3)

How to increase LP’s revenue and improve capital efficiency

Based on the above data and analysis, the conclusion is obvious, that is, by implementing liquidity mining based on UniV3 LP NFT token, it will greatly increase the expected revenue of liquidity providers and attract more users and funds to participate in its ecology. At the same time, the NFT liquidity mining will also make up for the shortcomings of UniV3 while providing a lot of convenience for various kinds of Blockchain projects, and it will also consolidate the monopoly of Uniswap V3.

Izumi’s UNI V3 LP Mining

We have talked so much about the many benefits that traders, liquidity providers, project teams and the Uniswap platform itself will gain if UniV3 LP NFT Mining is implemented. So how will Izumi Finance actually make this happen?

  1. nonce:NFT’s sequence number, a natural number starting from 0
  2. operator: the address which can operate this NFT, the default address is 0
  3. token0: the first type of token LP put in, represented by the smart contract address
  4. token1:the second type of token LP put in, represented by the smart contract address
  5. fee: the percentage of commission charged per transaction, 3000 means 0.3%
  6. tickLower: the tick of the lowest price in the price range where the liquidity is placed, p_l=1.0001^tickLower
  7. tickUpper:the tick of the highest price in the price range where the liquidity is placed, p_u=1.0001^tickUpper
  8. liquidity: Trading liquidity, expressed as a 128-bit number
  9. feeGrowthInsider0LastX128:The number of token0 in the accumulated fees (X128 is a mathematical deformation)
  10. feeGrowthInsider1LastX128:The number of token1 in the accumulated fees (X128 is a mathematical deformation)
  11. tokensOwed0: the number of tokens0 currently available for withdrawal in the accumulated fee
  12. tokensOwed1: the number of tokens1 currently available for withdrawal in the accumulated fee
  • Reward token: Number of tokens for liquidity mining incentive program
  • Reward per block: the number of liquidity mining incentive tokens distributed per block
  • Reward_tickUpper: the tick of the highest price in the price range of the liquidity mining incentive, Reward_pu=1.0001^Reward_tickUpper
  • Reward_tickLower:the tick of the lowest price in the price range of the liquidity mining incentive, Reward_pl=1.0001^Reward_tickLower
  • start_block: the block number at the start of the liquidity mining program
  • end_block:the block number at the end of the liquidity mining program

v_Liquidity=L*N²

The “L” is the Liquidity contained in the NFT and “N” represents the number of ticks contained in the part of the incentive price range that overlaps with the NFT liquidity placement price range.

N=max{min{tickUpper,Reward_tickUpper}-max{tickLower,Reward_tickLower},0}

The “v_Liquidity” computed by the izumi official version will calculate the proportion of the incentive reward that each NFT receives in each block:

Reward(NFT_i)=Reward per block/ Sum(NFT_i)

This version of the algorithm has the following features:

  1. Inclusiveness: LP will get rewards when the price range in the NFT of Uniswap V3 overlaps with the price range of the liquidity mining inventive.
  2. Effective bootability: Based on the same amount of token0 and token1, the maximum gain is obtained when the upper and lower bounds of the liquidity price range overlap exactly with the upper and lower bounds of the liquidity mining incentive price interval. For example, the user, who provides liquidity into a very small price range, will get a large Liquidity number and a small N , and eventually the liquidity mining incentive weight obtained by L*N² is less than the case of tiling the token to complete incentive price range.

About izumi Finance

izumi Finance is the first protocol to support Uniswap V3 “non-homogeneous” liquidity mining and extend concentrated liquidity service for multi-chains. izumi provides “Liquidity as a Service” (LaaS) based on Uniswap V3, with innovatively designed liquidity mining modules of “Concentrated liquidity mining” model for stable assets with a fixed price and “One-sided non-impermanent loss Mining” model for non-stable tokens. These structured models would support any blockchain project to better implement liquidity incentives with much higher capital efficiency and enable liquidity providers to earn extra rewards.

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iZUMi Finance

iZUMi Finance

iZUMi Finance: A Multi-chain DeFi Protocol Providing One-Stop Liquidity as a Service; Twitter:twitter.com/izumi_Finance; Discord: discord.gg/izumifinance