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How to LP on Uniswap (Optimism)

Alex Yao
Alex Yao
0x57eF
August 16th, 2021

✨ Welcome Crypto Explorers ✨

In this tutorial, we will be learning how to be a liquidity provider (LP) on Uniswap (Optimism Network).

We'll be covering how to add Optimism to your wallet, deposit funds onto the Optimism network, and how to provide liquidity on Uniswap.

Let's get started!

What is Uniswap?

Uniswap is an Ethereum-based decentralized exchange (DEX) that allows anyone to swap ERC20 tokens without order books.

The Uniswap protocol provides incentives for people to become liquidity providers (LP): users who pool their money together to create a liquidity pool / fund that is used to execute all trades that occur on the platform. A buyer or seller in this system doesn't have to wait for another party to appear to complete a trade, and the trade can be executed instantly at a known price if there is enough liquidity in the particular pool to facilitate it.

What is Optimism?

Optimism is a Layer 2 scaling solution built on top of Ethereum to reduce transaction costs.

It allows Uniswap to make transactions nearly instant and gas fees extremely cheap.

Note: There is a seven-day withdrawal period when bridging tokens from Optimism back to Ethereum L1, meaning that funds will be completely inaccessible during this period.

If you want to learn more about the details of the Uniswap Optimism alpha launch and Optimism:

  1. https://uniswap.org/blog/uniswap-optimism-alpha/
  2. https://research.paradigm.xyz/rollups

Uniswap x Optimism LP Tutorial

In this tutorial, we'll be walkthrough how to become liquidity providers (LP) on Uniswap on the Optimism network.

Part One: Set up your Metamask for the Optimism network.

  • Login to MetaMask on your browser
  • Click on ‘Ethereum Mainnet’.
  • From the dropdown, select ‘Custom RPC’.
  • Enter the following information into the available fields:
  • Click ‘Save’.

Part Two: Bridge assets from the Ethereum mainnet to Optimism mainnet.

  • Go to https://gateway.optimism.io/ and connect your MetaMask wallet.
  • Make sure you are currently connected to the Ethereum Mainnet by selecting it from the network dropdown list in MetaMask (the same list where you found ‘Custom RPC’ earlier).
  • Once connected, select the token you would like to transfer to Optimism and the token you would like to receive on Optimism from the dropdown menus. Then, enter the amount you would like to transfer.

Part Three: Provide liquidity on Uniswap (Optimism Network)

1. Go to Uniswap.org and click on Launch App in the top right

2. Make sure your Metamask is currently connected to the Optimism network.

  • Select the Optimism network from the network dropdown list in Metamask.

3. Navigate to the [Uniswap Pool(https://app.uniswap.org/#/pool) option at the top.

4. Click on '+ New Position' to add liquidity to a liquidity pool.

5. Navigate to Select Pair

  • Select which pair of ERC-20 tokens to provide as liquidity.

6. Review Fee Tier

  • Select a fee tier.
  • Recommended: The app will auto-select the fee tier with the most liquidity. In most cases, LPs will align around one fee tier for a pair.

7. Set Price Range

  • Choose a price range in which to provide liquidity.
  • You can choose your price range at which you think prices will move over the course of your position's lifetime.
  • OR you can choose to provide liquidity across the Full Range like in Uniswap v2 by clicking the Full Range button. But your rate of return will be lower than if you set a more narrow price range.

8. Deposit Amounts

  • Enter a value in one of the 'Deposit Amounts' boxes and the other box will automatically update with the corresponding amount.
  • The ratio is based on the position of your price range around the market price.
  • You can also adjust your ratio by sliding the price range left-right along the chart or dragging the min or max price boundary.

9. Approve and Add

  • Approve the Uniswap transaction.
  • Click preview, review the transaction details, and then click Add to trigger the transaction in your wallet.

Congratulations! Once the transaction has submitted, your assets are now successfully providing liquidity to Uniswap traders.

Keep On Questing and Leveling Up Your Skills!
🧙‍♂️ Tutorial created by: @TheAlexYao

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