zkSync Labs V3 provides liquidity providers with the ability to focus their capital on specific price ranges, allowing for more liquidity at preferred prices. Unlike V2, which requires liquidity providers to provide liquidity across the entire price curve, V3 enables providers to concentrate their capital where it can generate the most significant profits.
To provide liquidity on V3, follow these steps:
Select a token pair: Choose a pair to provide liquidity for based on factors such as trading volume, total value locked (TVL), and the risk of price volatility in the future. You can find data about token pairs on the Pools tab or the Analytics page.
Set a price range: You can either use four presets or enter the minimum and maximum prices based on your strategy. The smaller the range, the higher the yield, but there is also a greater risk of impermanent loss. When setting the price range, consider how much you expect prices to change during the time you hold your position, how much time and effort you're willing to put into managing your position, and the costs involved in making changes. If the price of the assets you're providing liquidity for goes outside of the range you've specified, your position will become focused on one asset or the other, and you won't earn any trading fees until the price returns to within your specified range. Note that the price you enter will be rounded to the nearest tick, so it's not necessary to enter a round number.
Input amounts: Enter the amount in one box, and the other box will display the corresponding amount. The ratio between the two amounts depends on your price range relative to the market price. If your price range is closer to one side of the market price, you'll provide more of that asset. If you click the "Full range" button, you can provide liquidity across the full range, as in V2. You can also allocate liquidity on one side of the market, either above or below the current spot price, depending on whether you're provisioning the token with a higher or lower value.
Approve and add: To confirm the transaction, first approve it. This is only required for the initial liquidity provision with a token. After approving, preview the details and then click "Add" to execute the transaction from your wallet.
Earn and manage: Your assets are now providing liquidity and earning trading fees. You can manage and track your positions by accessing the "Earn" tab and clicking on "My Positions."
Unbind, add liquidity, and harvest: On the V3 position management panel, you can view your position data and pending earned fees. You can also access the following features: