Liquidity mining is a term used in decentralized finance (DeFi) applications where users supply liquidity to decentralized financial applications and receive rewards for doing so. In the context of Uniswap, liquidity mining refers to users (Liquidity Providers, or LPs) supplying both assets to a given trading pair market so that the protocol can execute trades.
Whenever liquidity is deposited into a pool, special tokens known as liquidity tokens are minted to the Liquidity Provider’s address, in proportion to how much liquidity they contributed to the pool. These tokens are a representation of a Liquidity Provider’s contribution to a pool. Whenever a trade occurs, the 0.3% fee is levied and is distributed pro-rata to all Liquidity Providers in the pool at the moment of the trade. The user is able to claim the fees when they take their assets back from the protocol.
Beyond receiving trading fees for supplying liquidity, liquidity providers on Uniswap for eligible markets will also receive UNI tokens for providing their service.
Liquidity providers will earn UNI proportional to their contribution liquidity. The UNI and ETH earned through liquidity mining are not subject to any vesting or lock up.
In many scenarios, you would earn more by supplying liquidity to Uniswap yourself. This is because if you supply liquidity yourself you will not incur the 2% commission on accumulated exchange fees and earned UNI tokens.
However, for people who do not know how to supply liquidity to Uniswap, are worried about making a mistake when interacting with smart contracts, would like to participate in USD, or are looking to participate with a smaller amount of funds, then CoinList Uniswap Mining may be for you.
Anyone living in CoinList's supported jurisdictions can participate in the CoinList Uniswap Mining
Participating users will receive all of the following assets at the end of the program:
The reason why users will receive all 6 of these assets is that in order to supply liquidity to Uniswap, we must rebalance your initial deposit into the eligible trading pair assets on Uniswap. We will then distribute these assets back to you pro-rata depending on your contribution size.
You will be able to trade any of these assets on CoinList after the period if you would like to consolidate your holdings.
September 29th – Registration for Uniswap Mining + deposits open
October 2, 9:00 am PDT – Deposits for first deployment closes
October 2, 5:00 pm PDT – First deployment to Uniswap
October 9, 9:00 am PDT – Deposits for second deployment closes
October 9, 5:00 pm PDT – Second deployment to Uniswap
November 17 – Uniswap Mining ends
November 24 – Tokens are distributed into CoinList wallets
The Uniswap V2 smart contracts underwent a four month long audit earlier in 2020. The audit was administered by six engineers associated with dapp.org, a research and development collective focused on safety and correctness in smart contract development. The audit found three bugs and suggested seven improvements. None of the bugs were critical and all issues discovered in the audit have been addressed in the git repository uniswap-v2-core at commit 8160750.
By participating in Uniswap Mining on CoinList, your funds will be sent to the smart contracts for the four eligible Uniswap pools in the liquidity mining program. Those pools are:
We have linked each of the pools above with their corresponding smart contract for you to review.
Uniswap incentivizes users to add liquidity to pools by rewarding providers with fees on trades. Market making, in general, is a complex activity that has the risk of losing money (compared to just hodling) in the case of big directional moves of the underlying asset price.
In the Uniswap Mining on CoinList, users that participate will be rewarded with accumulated fees on trades as well as the UNI token.
To understand the risks associated with providing liquidity you can read this blog to get an in-depth look at how to conceptualize a liquidity position.
In sum, participating users are not guaranteed their principal amount back but are guaranteed their pro-rata share of the liquidity pool, accumulated exchange fees, and UNI tokens.
Unfortunately, CoinList will not be providing any compensation in case something wrong happens. When you agree to participate in the CoinList Uniswap Mining program, you are also agreeing to take on that risk. CoinList works with qualified custodians to custody your assets when they are not deployed in the Uniswap pool contracts to ensure. We will be interacting directly with the Uniswap pool contracts from our qualified custodian.
UNI is the newly announced governance token for the Uniswap protocol. UNI holders will have immediate ownership of:
UNI is not being distributed via a token sale, but rather the token will be distributed to network participants who participate in the network and supply liquidity to eligible markets on Uniswap.
CoinList’s fees are as follows:
Additionally, users will cover transaction costs on the Ethereum network, but because we are pooling everyone’s funds together and batching transactions together, those costs will be socialized across all users.
Through Uniswap Mining on CoinList, users are able to earn the new UNI governance token by committing funds to Uniswap liquidity pools.
Deployment and Rebalancing. CoinList helps you manage the rebalancing and deployment of funds into Uniswap liquidity pools on behalf of participants.
Earnings. Participants on CoinList receive their pro-rata share of accumulated exchange fees and UNI tokens at the end of the Uniswap Mining program.
Simple Funding. On CoinList, participants will be able to fund their Uniswap Mining participation with USD, USDT, BTC, wBTC, ETH, USDC, and/or DAI.
Uniswap is a protocol for exchanging ERC-20 tokens on Ethereum. It eliminates centralized intermediaries and unnecessary forms of rent extraction, allowing for fast, efficient trading.
Rather than relying on order books to facilitate trade, Uniswap is an automated liquidity protocol.
In practical terms this means there are template smart contracts that define a standard way to make liquidity pools and corresponding markets that are compatible with each other.
There is no orderbook, no centralized party and no central facilitator of trade. Each pool is defined by a smart contract that includes a few functions to enable swapping tokens, adding liquidity and more. At its core each pool uses the function x*y=k to maintain a curve along which trades can happen.
Prices are determined by the amount of each token in a pool. The smart contract maintains a constant using the following function: x*y=k.
In this case x = token0, y = token1, k = constant. For each trade a certain amount of tokens are removed from the pool for an amount of the other token. To maintain k, the balances held by the smart contract are adjusted during the execution of the trade, therefore changing the price.
Uniswap is one of the most used applications on Ethereum with
Uniswap announced that 5,000,000 UNI will be allocated per pool to liquidity providers proportional to liquidity, which roughly translates to:
These UNI are not subject to vesting or lock up.
On CoinList, users will receive a pro-rata share of the UNI earned through the program relative to their contribution to the Uniswap Mining program on CoinList. The amount of UNI earned by all the participants will vary depending on how much liquidity CoinList supplies to Uniswap on behalf of our participants.
Example: Contribution of $1M
Estimated ETH and UNI Rewards for Eligible Uniswap Liquidity Pools
|Pool||Allocation||Contribution Amount||Est. Pool Share||Est. Daily ETH Rewards (USD)||Est. Daily Uni Rewards (USD)||Est. Total ETH Rewards (USD)||Est. Total UNI Rewards (USD)||Value at End (USD)||Yield||APY|
Data provided above is only an estimate. Actual results will vary. Liquidity Pool data collected via Uniswap smart contracts 9/23/2020. Volume per pool estimated at ETH/USDC (135k ETH), ETH/USDT (205k ETH), ETH/DAI (90K ETH) , ETH/wBTC (55k ETH) based on previous 30 day average volume per pool. Assumes ETH price of $344.85 and UNI price of $5.15 and fixed pool sizes, ETH price, and UNI price.