Curious how Uniswap V3 staking differs from V2 and why liquidity positions are now NFTs instead of ERC20 tokens? This explainer covers the NFT-based liquidity model and how the Staking as a Service contracts let anyone launch a liquidity mining program on V3 pools.
As a part of the third version of the protocol, the Uniswap team has introduced Staking as a Service. This Uniswap staking is a set of already deployed smart contracts which enable anyone to launch liquidity mining programs. These programs help to incentivize liquidity providers and eventually boost the provision of additional liquidity inside the Uniswap v3 pools.
Uniswap v3 vs v2
As we know, the concept of Uniswap v3 liquidity pools has remained the same as in Uniswap v2. What has changed is that liquidity providers do not receive ERC20 tokens anymore. Instead, the Uniswap team has introduced a new concept where the information about liquidity is stored in NFT (ERC721) token, which is minted upon liquidity provision. The instance of this NFT token stores information about how much liquidity has been deposited, who is the owner, and what are the lower and upper price ticks.
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If you’d like to learn more about Uniswap v3 liquidity tokens, make sure to check the Uniswap v3 introduction article.