Uniswap V3

Uniswap v3 is a concentrated-liquidity automated market maker: a set of immutable pool contracts on Ethereum where anyone can swap one ERC-20 token for another against liquidity other users have deposited. There is no operatorAn operator is the entity charged with managing a rollup and progressing its state. A rollup operator can be a centralized sequencer, proposer, prover, challenger, pauser of admin that is able to perform upgrades. in the trading path and user funds sit only in the pools, which have no admin, no pause switch, and no upgrade path. The periphery contracts most users interact with, the routers and the position manager, are conveniences that hold no user funds: any contract that implements the pools’ payment callbacks can trade and provide liquidity without them.

UNI tokenholder governance exists alongside the pools rather than above them. Acting through a 2-day timelock, it can enable new fee tiers and set a protocol fee that pool code hard-caps at one quarter of LP fees; it cannot upgrade or pause a pool, move liquidity providers’ funds, or censor swaps or pool creation.

Pools and concentrated liquidity

Each pool trades one pair of tokens at one fee tier. The price axis is divided into ticks, discrete points spaced 0.01% apart, and a liquidity provider concentrates capital into a chosen tick range instead of spreading it from zero to infinity as in earlier AMM designs. While the market price is inside the range, the position earns fees like a leveraged-up constant-product position; outside it, the position sits idle, fully converted into one of the two tokens. Internally the pool tracks the current price as sqrtPriceX96, the square root of the token1/token0 price in Q64.96 fixed-point form.

The factory currently has 4 swap fee tiers enabled: 0.01%, 0.05%, 0.3%, and 1% of each swap. Those fees accrue to in-range liquidity after any protocol-fee share. Each tier fixes which ticks are usable via a tick spacing, coarser at higher tiers: the 0.05% USDC/WETH pool can use every 10th tick, the 0.3% WBTC/WETH pool every 60th.

Pool creation is permissionlessAnyone willing should be able to join and leave the network at any time, without causing significant disturbance to the network or being detrimental to the party in question. No single entity should have the power to allowlist or blocklist participants.: anyone can have the factory deploy a pool for any token pair at any enabled tier, one pool per pair and tier. Pools are deployed with CREATE2, so a pool’s address is computable in advance from the factory address, the pair, and the fee. Once deployed, a pool never changes: its tokens, fee, and tick spacing are fixed. The only things anyone can later adjust are its oracle buffer size (permissionlessly, described below) and its protocol-fee share (governance-set, described below).

Providing liquidity

Liquidity providers commonly mint through the NonfungiblePositionManager, which wraps each position as a transferable ERC-721 NFT and does the fee accounting per token ID. For positions minted this way, the NFT holder uses the manager to add or remove liquidity and collect fees. The manager is a convenience, not a gatekeeper: a pool’s mint function is open to any contract that pays for the deposit in the pool’s callback, and the owner of a direct pool position can withdraw liquidity and collect fees by calling the pool’s burn and collect functions directly.

Swapping

Swaps normally go through a router: SwapRouter, SwapRouter02 (which also reaches Uniswap v2 pools), or the UniversalRouter, which can pull tokens through Permit2 instead of direct ERC-20 allowances to the router. Which pools a trade crosses is computed off-chain by the interface or a routing API, and the chain never verifies that the chosen route was the best one. Router swap calls encode a minimum output or maximum input, but deadline protection depends on the entrypoint: the original SwapRouter includes a deadline, while SwapRouter02 and UniversalRouter provide deadline-bearing wrappers or overloads alongside paths with no deadline. A transaction sent through a no-deadline path can execute later as long as its amount bound still passes. A bad route can therefore execute anywhere down to the signed minimum, so the slippage tolerance, not the quote, is the real protection; anything below it reverts. Swapping without any router is equally possible for a contract that pays the pool in its swap callback.

The built-in oracle

Every pool doubles as a price oracle: it records cumulative-tick observations from which anyone can read a time-weighted average price over a chosen window, without any off-chain reporter. A pool starts with a single observation slot, and anyone can pay a one-time gasA virtual fuel used to execute smart contracts on a rollup. The EVM (or other VM within the rollup) uses an accounting mechanism to correspond the consumption of gas to the consumption of computing resources, and to limit the consumption of computing resources. cost to grow the observation buffer, lengthening the window the pool can serve.

Governance and the fee switch

Protocol control sits with UNI holders. An address with more than 1,000,000 UNI of delegated votes can submit a proposal to GovernorBravo; voting starts 13,140 blocksAn ordered list of transactions and chain-related metadata that gets bundled together and published to the L1/DA layer. Nodes execute the transactions contained within blocks to change the rollup chain’s state. Protocol rules dictate what constitutes a valid block, and invalid blocks are skipped over. later and runs for 40,320 blocks. Passing takes more for- than against-votes and at least 40,000,000 UNI voting for. A passed proposal is queued in the Timelock and executable 2 days later. The same Timelock is the UNI token’s minter, with new issuance capped at 2% per mint and a minimum interval of 1 year.

Over pool behavior, governance holds exactly two control knobs, both exercised through the factory owner role. It can enable new fee tiers, each permanently bound to its tick spacing and never removable. And it can switch on the protocol fee: pool code requires each side’s share to be zero or between 1/10 and 1/4 of that side’s LP fees, so at most a quarter of swap fees, and never principal, can be diverted.

The protocol fee is switched on: since the UNIfication proposal the factory owner role sits with the V3OpenFeeAdapter, where governance sets the fee schedule (currently 1/4 of LP fees per side by default and 1/6 of LP fees per side on the 0.3% tier). Anyone can apply the scheduled fee to pools and, while the adapter remains factory owner, sweep accrued protocol fees to its hardcoded TokenJar.

Under the current configuration, the Firepit is the TokenJar’s releaser. Anyone can burn the configured threshold of UNI by sending it permanently to 0xdead, then release up to 20 selected TokenJar balances to a chosen recipient. This disposal path is governed rather than immutable: after the timelock, governance can replace the TokenJar releaser, change the Firepit threshold (including to zero), or transfer factory ownership so a new owner can collect accrued protocol fees to another recipient. These controls apply only to protocol-fee accounting and cannot withdraw liquidity providers’ principal.

Governance cannot upgrade, pause, or drain a pool, change a live pool’s swap fee or tick spacing, block a swap, or stop anyone from creating a pool at an enabled tier.