Providing Liquidity on Uniswap!

Published in

PhantasticPhantasma

5 min readNov 11, 2020

Dear Souldiers,

Phantasma launched its Ethereum bridge in early October, which means both SOUL and KCAL are listed on Uniswap. We are very happy with the turn up of liquidity providers of KCAL. However, to further improve the liquidity pool (LP) of both SOUL and KCAL, we shall discuss how the LP works and how you as a Souldier can contribute to it.

Uniswap is a trustless decentralized exchange for Ethereum (tokens) which allows third party individuals to setup their own LP and contribute to it. This means you can easily trade any ERC20 token for Ethereum or any other ERC20 token. Users of the DEX basically are trading against the LP. Anybody can swap tokens at any point of time. Since you are swapping directly from your own Metamask/Ethereum wallet, your funds are always in your own control, as opposed to centralized exchanges in which the exchange controls your funds.

The fees per swap are 0.3% of the total swapping volume. LP providers share the fees which are accumulated during every swap through Uniswap, based on the proportion you have contributed to the LP. e.g. if you contributed 10% of the total LP, you shall receive 10% of the total fees. These fees are automatically contributed to the LP, so your total personal LP contribution keeps on increasing according to accumulated fees.

So what can one contribute to the LP on Uniswap?

You can create a new Uniswap pair for any token combination as you wish. One could add liquidity to the LP of SOUL-ETH or KCAL-ETH, but one could also create a new LP for SOUL-KCAL or SOUL-USDT. However, for somebody to contribute to the LP, one would require an equal amount in USD value for both tokens. e.g. if you want to contribute to $1,000 to SOUL-ETH LP, you need $500 in SOUL and $500 in Ethereum. As a result, if a regular user uses Uniswap to swap SOUL for Ethereum, the SOUL ends up in the LP and the Ethereum ends up in the user’s wallet. Based on the swapping behavior, the Ethereum and SOUL in the LP will fluctuate, while the LP providers accumulate trading fees.

How does one create or contribute to the LP on Uniswap?

If you wish to contribute to SOUL-ETH and/or KCAL-ETH, it is easiest to visit the Uniswap webpages for SOUL and KCAL and add directly from there. For other pairs, you can reselect a different token.

Contributing Liquidity

Step 1)

Step 2)

Input your contribution amount to the Uniswap LP. Click on approve SOUL, to approve the transaction of your selected token (SOUL) between Metamask and Uniswap.

Note: If you wish to create other pairs for SOUL or KCAL (for example SOUL/KCAL or SOUL/USDT), you can select a different token instead of Ethereum.

Step 3)

Set transaction fee and confirm the transaction.

It is recommended to click on ‘’edit’’ and select ‘’fastest’’.

Step 4)

Set the amount of the selected tokens you wish to contribute to the Uniswap SOUL-ETH LP, in this case 10 SOUL is being pegged to 0.00131316 ETH based on current price, and click ‘’supply’’ to proceed.

Step 5)

Check the data and click ‘’confirm supply’’ to confirm the contribution to the LP.

Step 6)

Set transaction fee and confirm transaction.

Set transaction fee and confirm the transaction. After the transaction has been processed you shall receive a confirmation of your contribution. Congratulations! You have contributed liquidity into the SOUL-ETH Uniswap LP! In return for the liquidity, you receive UNI-V2 tokens which represent the liquidity you contributed. You can check Etherscan for the contract addresses for these UNI-V2 tokens. Every liquidity pool pair generates its own UNI-V2 token.

These UNI-V2 tokens represent your share of the liquidity in the liquidity pool and are necessery to access and withdraw your liquidity. It is your receipt/proof of your liquidity, do not send these tokens to other wallets except for your own wallets. Store it safely!

Dashboard

You can view and withdraw your share of the LP and add more to the Uniswap LP in the pool dashboard.

In this dashboard you can view your total liquidity, statistics and how much fees you have earned per pair with your contribution to the Uniswap LP. Depending on the pair’s volume, LP providers accumulate more fees (0.3%).

Remove Liquidity

To remove liquidity, select the pair you wish to remove liquidity for and click on ‘’remove’’. With the UNI-V2 tokens, you have the ability to withdraw the liquidity from the Uniswap LP. You can select how much of your total LP you would like to withdraw.

Step 1)

Use the slider or the buttons and click approve once you are happy with the amount to withdraw.

Step 2)

Sign the transaction to allow interaction of your UNI-V2 tokens.

Like with adding liquidity, you have to approve the transactions between Metamask and Uniswap for the UNI-V2 tokens.

Step 3)

Click on ‘’remove’’ to deposit your UNI-V2 tokens and to withdraw your tokens from the LP.

These UNI-V2 tokens represent your share of the liquidity in the liquidity pool and are necessery to access and withdraw your liquidity. It is your receipt/proof of your liquidity, do not send these tokens to other wallets except for your own wallets. Store it safely!

Step 4)

Check the data and click on ‘’confirm’’.

Step 5)

After the transaction has been processed on the Ethereum blockchain, you shall receive a confirmation on the top right. You have successfully withdrawn your liquidity from the Uniswap LP!

Farming/Harvesting

With this Uniswap guide published, we will monitor whether there is an interest for yield farming type of staking mechanism for more rewards on top of the Uniswap 0.3% fees!

However, there might be risks involved by providing liquidity. You might have impermanent losses due to your liquidity tokens being traded against Ethereum or vice versa.