Providing liquidity for a Uniswap V3 pool can be confusing. Liquidity providers must choose a range of prices to provide liquidity. Instead of an easily tradable representation of their position, they get an NFT. Theoretically, a liquidity provider could earn more fees on Uniswap V3 than for providing liquidity to Uniswap V2. However, there is a risk that they might not earn fees if the price falls outside of their range.
Uniswap V2 offers an easy interface, easily tradable liquidity positions, and liquidity at all ranges. Uniswap V3 offers instant price TWAPs, deep liquidity, and potentially higher income for liquidity providers. Which one is best?
Charm (https://charm.fi) is an automated liquidity management protocol for Uniswap V3. Charm uses only on-chain, decentralized logic, which is a must for any Trustless integration. Charm picks a range around the current price and rebalances whenever the price moves outside that range.
If the price falls outside the range Charm has chosen, there is risk of an oracle attack. So Charm also provides some liquidity along the entire range of possible prices, like in Uniswap V2. Even if the price slips outside the deep liquidity range, there is always some liquidity, preventing easy price manipulation.
Because Charm automates picking price ranges on Uniswap V3, all a user needs to do is provide liquidity. Therefore all liquidity provided is the same! Charm can give liquidity providers an ERC20 representation of their Uniswap V3 liquidity. A liquidity provider can easily trade their position or use it in other defi products.
The Trustless Currency Protocol uses Charm as a wrapper over Uniswap V3 to combine the best parts of Uniswap V2 and Uniswap V3:
• Deep liquidity
• High income for liquidity providers
• Attack-resistant price oracles
• Instant TWAP prices
• ERC20 liquidity position