The pools are open! The Uniswap V3 staking smart contract is now up and running. With it, the decentralized exchange (DEX), which is now sitting comfortably at the top of the CoinMarketCap ranking, experiments with an innovative gamified approach to rewarding users for contributing coins into liquidity pools. Uniswap first announced the new feature in the whitepaper for its V3 release back in May, and in some ways, it reinvents the entire strategic calculus for liquidity providers (LPs). Is this the best solution for crypto’s long-running liquidity woes?
To work as a regular market maker, a decentralized exchange needs pools of various tokens that users can tap into when exchanging or buying crypto. These pools are made by allowing DEX users to stake their coin pairs of choice into a smart contract, locking it for the exchange to use. The user cannot make transactions with the staked coins unless they choose to withdraw them. They do, however, earn yields from transaction fees accumulated by the pools they have contributed to based on their relative share there.
From an LP...