Uniswap pool

If you’re new to LP’ing, we recommend using the auto-selected fee tier . However, advanced LP strategies may find it worthwhile to provide liquidity in the other fee tiers. Note that LPs who choose the non-consensus fee tier might be running a sophisticated strategy to offset certain risks.

Every time a trade is executed on Uniswap, liquidity providers (LPs) earn fees proportional to the amount of liquidity they have supplied. This fee is usually set at 0.3% but can be as low as 0.05% for stable assets, and as high as 1% for more exotic pairs .19 Kas 2021

Earlier this month, a study by Bancor revealed that over half of liquidity providers in Uniswap had negative returns. This means that from an investment perspective, it is more profitable to hold than to provide liquidity in automated market makers (AMMs) .