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Themis Protocol

Benjamin George Nelkin Follow

Mar 17

· 5 min read

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Uniswap v3 NFTs Here’s Everything You Need To Know

If you’re reading this then you probably already know that Themis is DeFi’s leading protocol for leveraging Uniswap v3 NFTs… but what exactly is a Uniswap v3 NFT?

We wanted to give our community more insight into this exciting new development so they can better understand our protocol, and DeFi as a whole.

Let’s get right into it👇

What is a Uniswap v3 NFT?

Uniswap v3 liquidity positions are now represented as NFTs, but how do they work?

To answer this question we need to first take a step back and look at how Uniswap v3 differs from v1 and v2.

V3 positions are now equipped with custom liquidity ranges, meaning that each position is subject to a distinct and customizable set of parameters that determines its value and rewards.

Liquidity providers are now able to concentrate and deploy their liquidity within whichever price range they choose.

This is the defining idea behind Uniswap v3; concentrated liquidity .

Previous versions of Uniswap saw liquidity distributed uniformly along a price curve between 0 and infinity.

That uniform distribution allowed trading across the entire price range (0 , ∞) without any loss of liquidity. However, in many pools, the majority of the liquidity was never used because it was deployed outside of the price range in which the token pair was being traded.

Consider stablecoin pairs where the relative price of the two assets stays relatively constant. The liquidity outside the typical price range of a stablecoin pair is rarely utilized to facilitate trading.

For example, the v2 DAI/USDC pair utilizes ~0.50% of the total available liquidity for trading between $0.99 and $1.01, the price range in which LPs would expect to see the most volume — and consequently earn the most fees.

With Uniswap v3, liquidity providers are able to concentrate their liquidity into smaller price intervals rather than being deployed across the entire curve. In a stablecoin/stablecoin pair, for example, an LP may choose to allocate capital solely to the 0.99–1.01 range. As a result, traders are offered deeper liquidity around the mid-price, and LPs earn more trading fees with their capital.

Whereas liquidity providers in previous versions of Uniswap were awarded with fungible LP tokens for holding a position, Uniswap v3 position holders now see all fees generated held directly within the NFT itself.

These NFTs can be traded between wallets, and fees accrued by the position can be collected by the holder at any time.

Go ahead and check the Uniswap v3 positions on OpenSea to see for yourself.

Uniswap v3 NFT representing a USDT/DAI position

What do Uniswap v3 NFTs look like?

You can find all sorts of important information represented on the Uniswap v3 NFT artwork.

Written across the top is the token pair that the position represents, with the selected fee tier just below.

The example above shows a USDT/DAI pair at a fee tier of .05%.

In the middle you can find the bonding curve that represents the “steepness” of your position.

The shape of the curve is determined by the price ranges set by whoever opened the position. Both the liquidity concentration and the ratio at which the tokens were initially deposited have an impact on the curve’s shape.

Under the curve you will find the position’s unique ID, and the minimum and maximum price ranges set by the liquidity provider.

The small curve icon in the lower right hand corner shows the LPs position in the curve where the provider is active in the pool.

In some cases you might even find a small sparkle hovering over the curve icon; a purely aesthetic attribute that becomes increasingly rarer as more Uniswap v3 positions are opened.

Lastly, each Uniswap v3 position has a unique color scheme.

Each position has a different set of colors that is based on the two tokens held in the position, with different pools being represented by different color variations.

How do you cash out?

You can only remove the liquidity from the position if you hold the Uniswap v3 NFT in your wallet.

Doing so will burn the NFT along with your position, and the tokens held within are deposited into the holder’s wallet along with the fees generated while the position was open.

If the price stays within your set range, you will receive both tokens represented by the position.

Should the price of the tokens shift to outside the price range you set when opening the position, a phenomenon known as Impermanent Loss, you will receive your position back paid only in one of the paired tokens.

Let’s wrap it up

Now that Uniswap has released v3 with positions represented by NFTs, a whole range of opportunities has opened up for new projects to integrate with the ecosystem — projects like Themis Protocol.

Now, for the first time, anyone who holds a whitelisted Uniswap v3 NFT can use it as collateral to receive a loan paid out in stablecoins and blue-chip assets.

This allows liquidity providers to unlock the value of their position while the underlying tokens remain in the liquidity pool generating fees for the holder.

Open a position on Uniswap v3 and join Themis in our mission to unlock nearly $4b in TVL for the Metaverse !

About Themis

With Themis, you’ll be able to borrow against your Uniswap v3 NFTs, something no other protocol currently offers.

That way your liquidity remains in the pool generating yield while unlocking additional value to use however you wish — the ultimate money lego!

In addition to collateralizing your LPs, Themis allows you to lend, farm, and even bid on liquidated positions in a Dutch Auction. Themis’ collateralized NFTs will offer much more utility than simply Uniswap v3 in the near future, but stay tuned as we’ll dig into that soon!

Follow Themis on our socials to stay updated:

Twitter | Discord | Medium | Telegram | Website

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Themis is a trustless lending and borrowing application that provides a platform for liquidity providers to collateralize their Uniswap v3 positions in order to borrow stablecoins and blue-chip assets.

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