A liquidity provider on Curve Finance earned $127,000 in fees during a single week in March 2026. Not from trading. Not from leverage. Just from providing liquidity to a stablecoin pool while the market was volatile.
The catch? Most people get this wrong. According to DeFiLlama data, over 68% of first-time liquidity providers lose money within their first three months—not because DeFi is broken, but because they don’t understand impermanent loss, pool selection, or how to read on-chain signals that separate profitable opportunities from value traps.
This guide breaks down exactly how to provide liquidity in DeFi protocols, backed by real data from Uniswap, Curve, PancakeSwap, and other major platforms. You’ll learn how to select pools, calculate actual yields, manage risk, and avoid the mistakes that cost most LPs their capital.
What Is Liquidity Providing in DeFi?
Liquidity providing (LP) means depositing tokens into a decentralized exchange (DEX) pool to enable trading. In return, you earn a portion of trading fees and sometimes additional rewards in the protocol’s governance token.
Here’s how it works mechanically:
Traditional Exchange Model:
- Centralized order book
- Market makers provide liquidity
- High capital requirements
- Professional firms dominate
DeFi Liquidity Pool Model:
- Automated Market Maker (AMM) uses mathematical formulas
- Anyone can provide liquidity with as little as $10
- Liquidity providers earn proportional to their pool share
- Returns come from trading fees + farming rewards
According to DeFiLlama, total value locked (TVL) in DeFi liquidity pools reached $47.8 billion across all chains by Q1 2026. Uniswap alone processed $423 billion in volume during 2025, generating approximately $425 million in LP fees.
The Core Principle:
When you provide liquidity, you deposit two tokens in equal value (usually). The AMM algorithm automatically adjusts prices based on supply and demand. Every trade through the pool pays a fee (typically 0.3% for Uniswap, 0.05-0.3% for Curve), which gets distributed proportionally to all LPs.
Example:
- You deposit $1,000 USDC + $1,000 worth of ETH into a Uniswap pool
- Total pool size: $10 million
- Your share: 0.02%
- If the pool generates $100,000 in fees over a month, you earn $20 (0.02% × $100,000)
The math scales. Larger pools on popular pairs generate millions in fees. The question becomes: can you capture meaningful returns without getting destroyed by impermanent loss?
How DeFi Liquidity Pools Actually Work
Understanding the mechanism separates profitable LPs from those who watch their capital slowly bleed.
Automated Market Maker (AMM) Mechanics
Most DeFi protocols use a constant product formula: x × y = k
Where:
- x = quantity of token A in the pool
- y = quantity of token B in the pool
- k = constant value
When someone trades, they add one token and remove the other. The formula automatically adjusts the price to maintain equilibrium.
Real Example from Uniswap ETH/USDC:
Initial state:
- 10,000 ETH × 30,000,000 USDC = 300,000,000,000 (k constant)
- Price: 30,000,000 ÷ 10,000 = $3,000 per ETH
After someone buys 100 ETH:
- Pool now has 9,900 ETH and more USDC
- New equation: 9,900 × 30,309,091 = 300,000,000,000
- New price: 30,309,091 ÷ 9,900 = $3,061.52 per ETH
- Price slippage: 2.05%
This price movement is how AMMs function without order books. The larger the trade relative to pool size, the more price impact.
Types of Liquidity Pools
Different pool types suit different strategies:
| Pool Type | Risk Level | Typical APY | Best For |
|---|---|---|---|
| Stablecoin pairs (USDC/DAI) | Low | 5-15% | Risk-averse, capital preservation |
| Blue chip pairs (ETH/WBTC) | Medium | 15-40% | Moderate risk, established assets |
| Volatile pairs (ETH/ALT) | High | 40-200%+ | High risk tolerance, active management |
| Concentrated liquidity | Variable | Potentially 100-500%+ | Advanced users, constant monitoring |
| Single-sided staking | Low-Medium | 8-25% | Simplified exposure, no IL |
According to data from Dune Analytics, stablecoin pools on Curve Finance averaged 8.3% APY in early 2026, while volatile pairs on Uniswap v3 with tight ranges achieved 127% APY for active managers.
Fee Tiers and Pool Selection
Uniswap v3 introduced multiple fee tiers, fundamentally changing LP strategy:
Fee Structure Options:
- 0.01% tier: Ultra-stable pairs (stablecoins)
- 0.05% tier: Stable or highly correlated pairs
- 0.3% tier: Most standard pairs (default)
- 1% tier: Exotic or very volatile pairs
The optimal tier depends on volatility and volume. Higher fees don’t automatically mean better returns—lower fees can attract more volume on stable pairs.
Data-Driven Example:
Uniswap v3 USDC/USDT pools in March 2026:
- 0.01% fee tier: $1.2B TVL, $450M daily volume, 6.8% APY
- 0.05% fee tier: $180M TVL, $32M daily volume, 3.2% APY
The lower fee tier captured 14x more volume despite 5x lower fees, resulting in 2.1x higher returns.
Step-by-Step: How to Provide Liquidity on Major DEXs
Let’s walk through the actual process on leading platforms, with real numbers and screenshots of what to expect.
Providing Liquidity on Uniswap v3
1. Connect Your Wallet
Navigate to app.uniswap.org and connect a Web3 wallet (MetaMask, WalletConnect, Coinbase Wallet).
2. Select “Pool” Tab
Click “New Position” to create a liquidity position.
3. Choose Your Token Pair
For this example: ETH/USDC on Ethereum mainnet
- Current ETH price: $3,200
- Your allocation: $5,000 ($2,500 worth of each token)
4. Select Fee Tier
For ETH/USDC, the 0.3% tier historically captures the most volume. In March 2026, this tier processed $89M daily volume with $1.8B TVL.
5. Set Your Price Range (Critical Step)
Uniswap v3 uses concentrated liquidity. You choose a price range where your capital is active:
Conservative Range Example:
- Current price: $3,200
- Range: $2,800 – $3,600 (±12.5%)
- Capital efficiency: 2.3x vs v2
- Expected APY: 18-25%
Aggressive Range Example:
- Current price: $3,200
- Range: $3,100 – $3,300 (±3.125%)
- Capital efficiency: 15.8x vs v2
- Expected APY: 89-127%
- Risk: Position goes inactive if price moves beyond range
According to Revert Finance analytics, positions with ±10% ranges on ETH pairs stayed in range 67% of the time over 90-day periods in 2025-2026.
6. Preview and Confirm
Review gas costs (typically $15-80 on Ethereum, $0.10-2 on L2s like Arbitrum). Confirm the transaction.
7. Receive LP Token (NFT)
Uniswap v3 positions are NFTs representing your unique position. This NFT is your proof of ownership and what you’ll need to remove liquidity later.
Cost Breakdown Example:
- Gas to approve tokens: $18
- Gas to create position: $35
- Total upfront cost: $53
- Breakeven: Need ~$53 in fees (≈11 days at $5/day in fees)
Providing Liquidity on Curve Finance
Curve specializes in stablecoin and similar-asset pairs using a different AMM formula optimized for lower slippage.
Why Curve for Stables:
The StableSwap invariant provides 10-100x better prices for stable pairs compared to constant product AMMs. A $1M USDC→DAI swap on Curve has 0.008% slippage vs 0.3% on Uniswap.
Step-by-Step for Curve:
1. Navigate to Curve Pools
Visit curve.fi → Pools
2. Select Your Pool
For stable yields: 3pool (DAI/USDC/USDT)
- TVL: $847M (March 2026)
- Base APY: 4.2%
- CRV rewards: +3.8%
- CVX boost potential: +2.1%
- Total APY: 10.1%
For more information on maximizing these yields, see our Convex Finance guide.
3. Deposit Assets
Options:
- Balanced deposit (equal parts DAI/USDC/USDT)
- Imbalanced deposit (any combination)
- Single asset deposit (Curve rebalances automatically)
Imbalanced deposits receive a “bonus” for helping rebalance the pool.
4. Stake LP Tokens
After depositing, stake your LP tokens to earn CRV rewards:
- Go to dao.curve.fi
- Find your gauge
- Stake LP tokens
- Rewards accrue continuously
5. Optional: Boost on Convex
Deposit Curve LP tokens on Convex Finance for:
- Automatic CRV claiming and compounding
- Additional CVX token rewards
- veCRV boost without locking CRV yourself
Data from Convex shows LPs earn an average 1.8-2.3x boost on base Curve APYs by staking through their platform.
Providing Liquidity on PancakeSwap (BSC)
Lower gas fees make PancakeSwap ideal for smaller positions.
Key Stats (Q1 2026):
- TVL: $1.87B
- Daily volume: $412M
- Average gas: $0.25-1.50 per transaction
- Most liquid pairs: BNB/BUSD, CAKE/BNB
Process:
- Connect wallet to BSC network
- Navigate to Liquidity → Add Liquidity
- Select pair (e.g., BNB/BUSD)
- Deposit equal value of both tokens
- Receive CAKE-LP tokens
- Stake in Farms for additional CAKE rewards
Fee Structure:
- 0.25% trading fee (0.17% to LPs, 0.08% to treasury)
- Additional farm APRs: 8-45% in CAKE
- Auto-compounding vaults available
Understanding and Calculating Impermanent Loss
The silent killer of liquidity providers. Impermanent loss (IL) occurs when token prices diverge from your entry point, causing your LP position to be worth less than if you’d just held the tokens.
The Math Behind Impermanent Loss
Formula:
IL = 2 × √(price_ratio) / (1 + price_ratio) – 1
Where price_ratio = current_price / entry_price
Real Scenarios:
| Price Change | Impermanent Loss | Notes |
|---|---|---|
| 1.25x (25% up) | -0.6% | Minimal impact |
| 1.5x (50% up) | -2.0% | Noticeable but manageable |
| 2x (100% up) | -5.7% | Significant loss vs holding |
| 3x (200% up) | -13.4% | Major divergence |
| 5x (400% up) | -25.5% | Severe IL risk |
| 10x (900% up) | -42.0% | Catastrophic for volatile pairs |
Critical Insight:
IL is “impermanent” only if prices return to entry levels. If you withdraw when prices have diverged, the loss becomes permanent.
Real Example: ETH/USDC Pool
Entry Position (Day 1):
- Deposit: 1 ETH ($3,000) + 3,000 USDC
- Total value: $6,000
- Pool share: 0.01%
Scenario 1: ETH rises to $4,500 (50% gain)
Without LP (just holding):
- Value: (1 × $4,500) + $3,000 = $7,500
- Gain: $1,500 (25%)
As LP:
- Pool rebalances via arbitrage
- You now hold: 0.816 ETH + 3,674 USDC
- Value: (0.816 × $4,500) + $3,674 = $7,346
- Gain: $1,346 (22.4%)
- Impermanent Loss: $154 (2.0%)
Did you still profit?
If the pool generated $250 in fees during this period:
- Net position: $7,346 + $250 = $7,596
- Better than holding: $7,596 > $7,500 ✓
Scenario 2: ETH drops to $1,500 (50% loss)
Without LP:
- Value: (1 × $1,500) + $3,000 = $4,500
- Loss: -$1,500 (-25%)
As LP:
- You now hold: 1.225 ETH + 2,449 USDC
- Value: (1.225 × $1,500) + $2,449 = $4,286
- Loss: -$1,714 (-28.6%)
- Impermanent Loss: $214 (additional 3.6% loss)
Even with fees, downside IL can exceed earnings.
When IL Doesn’t Matter
1. Stablecoin Pairs
USDC/DAI, USDT/BUSD, and other stable pairs experience minimal IL:
- Price deviation: typically <0.5%
- Impermanent loss: <0.001% in most conditions
- Fee income: pure profit
2. Correlated Assets
ETH/stETH, WBTC/renBTC pairs move together:
- Lower divergence risk
- IL typically <1% even during volatility
- Higher volume often compensates small IL
3. High-Fee Environments
During market volatility, volume spikes dramatically:
- Normal market: $5-10/day per $10k position
- High volatility: $50-200/day per $10k position
- IL becomes irrelevant if fees exceed 15-25% APY
Data from March 2026 showed ETH/USDC LPs on Uniswap earned an average of $89/day per $10k during the FOMC volatility spike, annualizing to 324% APY—far exceeding any IL concerns.
Advanced Strategies for Professional LPs
Moving beyond basic pool selection into tactics that separate consistent earners from the rest.
Concentrated Liquidity Management
Uniswap v3’s concentrated liquidity allows capital efficiency up to 4000x, but requires active management.
Strategy 1: Narrow Range with Active Rebalancing
Setup:
- ETH/USDC pair
- Current price: $3,200
- Position range: $3,100-$3,300 (±3.125%)
- Capital: $10,000
Expected Performance:
- In-range time: ~45% (requires frequent rebalancing)
- APY when active: 127%
- Rebalancing cost: ~$40/month in gas
- Net APY: 89-112%
When to Use:
- You can monitor positions daily
- High volume pairs where fees justify gas costs
- Bullish/bearish conviction on short-term price action
Real Data:
According to Revert Finance, active ±5% range managers on ETH pairs in 2025-2026 outperformed wide-range LPs by an average of 3.2x, but required rebalancing every 4.7 days on average.
Strategy 2: Multiple Positions (Ladder Approach)
Instead of one concentrated range, deploy capital across multiple ranges:
Example with $30,000:
- $10k at $3,000-$3,400 (current, tight)
- $10k at $2,600-$3,800 (medium range)
- $10k at $2,200-$4,200 (wide safety net)
Benefits:
- Always earning something
- Reduced rebalancing frequency
- Captures different volatility scenarios
- Lower stress, more passive
For those interested in related DeFi optimization strategies, our guide to optimizing DeFi yields covers complementary approaches.
Yield Farming on Top of LP Positions
Stack additional returns by farming with your LP tokens.
Layer 1: Base Trading Fees
- ETH/USDC on Uniswap: 15-30% APY
- Source: Trading fees from pool volume
Layer 2: Liquidity Mining Rewards
- Stake LP tokens in protocol farms
- Earn governance tokens (UNI, SUSHI, CAKE)
- Additional 5-40% APY
Layer 3: Gauge Bribes (Curve/Balancer)
- Protocols pay bribes for gauge votes
- Additional 3-8% APY on select pools
- Votium and Hidden Hand aggregate bribes
Example Stack:
Curve 3pool position with full optimization:
- Base trading fees: 4.2% APY
- CRV rewards: 3.8% APY
- CVX boost: 2.1% APY
- Gauge bribes: 1.4% APY
- Total: 11.5% APY on stablecoins
Compare this to TradFi savings accounts at 5% and treasuries at 4.8%.
Cross-Chain Arbitrage
Advanced LPs exploit rate differences across chains.
Opportunity Identification:
In February 2026, USDC/USDT pools showed:
- Ethereum mainnet: 6.2% APY ($1.2B TVL)
- Arbitrum: 12.8% APY ($180M TVL)
- Optimism: 14.1% APY ($95M TVL)
- Polygon: 18.3% APY ($42M TVL)
Why the Differences?
- TVL disparity (less competition on newer chains)
- Incentive programs (protocols bootstrap liquidity)
- Lower gas costs (L2s are cheaper to trade on)
- User behavior (retail prefers low-cost chains)
Strategy:
Deploy $50k across chains proportionally:
- $15k on Ethereum (base layer security)
- $15k on Arbitrum (balanced opportunity)
- $10k on Optimism (higher risk/reward)
- $10k on Polygon (highest APY, most risk)
Risk Considerations:
- Bridge risk (use established bridges: Hop, Stargate)
- Smart contract risk (newer deployments)
- Liquidity risk (exit liquidity on smaller chains)
Risk Management: What Can Go Wrong
Let’s talk about the real risks most guides gloss over.
Smart Contract Exploits
Historical Context:
Major DeFi hacks 2021-2026:
- Poly Network (2021): $611M stolen, returned
- Cream Finance (2021): $130M lost
- Wormhole (2022): $325M lost
- Nomad Bridge (2022): $190M lost
- Euler Finance (2023): $197M stolen, recovered
- Curve reentrancy attack (2023): $73M lost
Mitigation Strategies:
- Audit Priority: Only use protocols with multiple audits from reputable firms (Trail of Bits, ConsenSys Diligence, OpenZeppelin). See our complete smart contract auditors guide.
- Time-Tested Code: Protocols running 2+ years without incidents have proven resilience. Uniswap, Curve, and Aave have multi-year track records.
- TVL as Insurance: Higher TVL attracts more security scrutiny and makes exploits more expensive to execute. A $2B pool is more secure than a $2M pool.
- Insurance Protocols: Consider coverage from Nexus Mutual or InsurAce for high-value positions (typically 2-3% annual premium).
- Position Sizing: Never put more than 15-20% of your portfolio in a single protocol.
Rug Pulls and Scam Pools
Not all pools are legitimate. New protocols offering “500% APY” are often too good to be true.
Red Flags:
- Anonymous team with no verifiable history
- Unaudited code or “audit pending”
- Extremely high APYs (100%+ on stablecoins)
- Low liquidity that can’t support promised returns
- Token with admin keys that can pause withdrawals
- Lack of time-lock on contract upgrades
Due Diligence Checklist:
✓ Team doxxed with LinkedIn profiles? ✓ GitHub repository active and public? ✓ Multiple independent audits completed? ✓ Time-lock (48-72h minimum) on admin functions? ✓ Emergency pause multisig, not single wallet? ✓ Token distribution fair (no massive team allocation)? ✓ Sustainable tokenomics (emissions < fee generation)?
Real Example:
SafeMoon forks proliferated in 2021-2022, each promising 1000%+ APYs. Nearly all rug-pulled within weeks. Tokens with 10% sell fees, team wallets with 30% supply, and “liquidity locked” that expired in 7 days were massive red flags.
Regulatory Risk
DeFi operates in a regulatory gray area that’s becoming less gray.
2026 Regulatory Landscape:
- SEC treating some governance tokens as securities
- EU’s MiCA regulation requiring KYC for DeFi frontends
- US infrastructure bill requiring DeFi frontends to report transactions
- Tornado Cash precedent raises questions about protocol-level sanctions
Practical Implications:
- Tax Reporting: Track every LP position, withdrawal, and claim. Use tools like CoinTracker or Koinly. See our DeFi tax reporting guide.
- Jurisdiction Matters: Some protocols geo-block US users. Consider implications before providing liquidity.
- Governance Token Risk: Holding governance tokens may have securities implications. Consult a tax professional.
- Exit Strategy: Understand how to withdraw if a protocol faces regulatory action. Keep funds accessible.
Selecting the Best Pools: A Data-Driven Framework
Stop guessing. Use these metrics to identify optimal liquidity opportunities.
Key Metrics to Analyze
1. Fee-to-TVL Ratio
Formula: (24h Fees × 365) / TVL = Annual Fee Yield
Example:
- Pool: ETH/USDC on Uniswap
- 24h fees: $89,000
- TVL: $1.2B
- Calculation: ($89,000 × 365) / $1,200,000,000 = 2.7%
This is your baseline APY before farming rewards.
Benchmark:
- Below 2%: Probably not worth it unless you’re farming rewards
- 2-8%: Competitive for established pairs
- 8-20%: Good opportunities, verify sustainability
- 20%+: Exceptional or high-risk (investigate further)
2. Volume-to-TVL Ratio
Higher volume relative to TVL means more fee generation per dollar deployed.
| Pool | Daily Volume | TVL | Volume/TVL Ratio | Interpretation |
|---|---|---|---|---|
| ETH/USDC | $89M | $1.2B | 7.4% | Good turnover |
| WBTC/ETH | $12M | $420M | 2.9% | Moderate |
| SHIB/WETH | $45M | $38M | 118% | Extremely high (volatile) |
| DAI/USDC | $28M | $340M | 8.2% | Good for stables |
Higher ratios indicate active trading and better fee generation. However, extremely high ratios (>100%) often signal volatile meme tokens with high IL risk.
3. 30-Day Fee Trend
Look at fee generation over time, not just snapshots.
Using DeFiLlama or Dune Analytics:
SELECT pool_name, AVG(daily_fees) as avg_fees, STDDEV(daily_fees) as volatility, (MAX(daily_fees) – MIN(daily_fees)) / AVG(daily_fees) as range_ratio FROM pools WHERE date >= CURRENT_DATE – 30 GROUP BY pool_name
Interpretation:
- Consistent fees: Low volatility, predictable returns
- Trending up: Growing adoption, bullish signal
- High volatility: Meme coin or news-driven (risky)
- Declining fees: Protocol losing market share
4. Liquidity Depth Analysis
Check slippage for various trade sizes to gauge real depth.
Tool: DexGuru, Defined.fi, or directly on DEX interfaces
Example Analysis:
ETH/USDC on Uniswap (March 2026):
- $100k trade: 0.08% slippage
- $500k trade: 0.32% slippage
- $1M trade: 0.71% slippage
Acceptable slippage indicates healthy depth. If a $100k trade has 2%+ slippage, the pool lacks real liquidity despite TVL numbers.
Pool Comparison Tool (Build Your Own)
Create a spreadsheet with these columns:
| Pool | Chain | Protocol | Fee Tier | TVL | 24h Vol | Vol/TVL | Base APY | Rewards APY | Total APY | IL Risk | Audit Score |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ETH/USDC | Ethereum | Uniswap | 0.3% | $1.2B | $89M | 7.4% | 18.2% | 4.1% | 22.3% | High | A+ |
| 3pool | Ethereum | Curve | 0.04% | $847M | $28M | 3.3% | 4.2% | 6.9% | 11.1% | Very Low | A+ |
| BNB/BUSD | BSC | PancakeSwap | 0.25% | $310M | $45M | 14.5% | 21.4% | 12.7% | 34.1% | Medium | A |
Update weekly. Sort by total risk-adjusted APY.
Risk-Adjusted APY Formula:
Risk-Adjusted APY = Total APY × (1 – Expected IL%) × Audit Score Multiplier
Where:
- Expected IL% = historical 90-day IL average
- Audit Score Multiplier: A+ = 1.0, A = 0.9, B = 0.75, C or lower = don’t use
Tools and Platforms for Liquidity Providers
Professional LPs use specific tools to monitor positions and find opportunities.
Essential LP Tools
1. DeFiLlama (defilllama.com)
- Free, no account needed
- TVL across all protocols and chains
- Historical data and trends
- Pool comparison features
Key Use: Discovering new opportunities and tracking TVL migration patterns.
2. Dune Analytics (dune.com)
- Community-built dashboards
- On-chain data queries
- LP profitability tracking
- Gas cost analysis
Key Use: Deep-dive analysis on specific pools or protocols. For more on interpreting this data, see our on-chain analysis tutorial.
3. APY.vision (apy.vision)
- Tracks your LP positions across wallets
- Calculates realized vs impermanent loss
- Performance benchmarking
- Pool recommendations
Key Use: Portfolio tracking and IL quantification.
4. Revert Finance (revert.finance)
- Uniswap v3 specific analytics
- Position monitoring and alerts
- Fee earnings tracking
- Optimal range suggestions
Key Use: Managing concentrated liquidity positions.
5. DexGuru (dex.guru)
- Real-time trading charts
- Liquidity depth visualization
- Whale tracking
- Multi-chain support
Key Use: Technical analysis before entering positions.
6. CoinGecko/CoinMarketCap
- Basic price tracking
- Historical volatility data
- Token fundamentals
Key Use: Quick research on unfamiliar tokens.
Position Monitoring Strategy
Daily:
- Check if Uniswap v3 positions are still in range
- Monitor high-volatility pairs for IL development
- Scan for unusual whale movements (potentially front-run an exit)
Weekly:
- Review total fee earnings vs expectations
- Rebalance concentrated liquidity positions
- Check for new pools or incentive programs
- Update pool comparison spreadsheet
Monthly:
- Calculate realized returns vs holding
- Reassess position sizes based on performance
- Research new protocols and opportunities
- Review tax documentation
Automation Options:
Set up alerts through:
- Hal.xyz: Price range notifications, fee milestones
- Telegram bots: Custom alerts for specific conditions
- Zapier + DeFi APIs: Advanced automation for active strategies
Tax Implications and Record Keeping
The IRS treats each liquidity action as a taxable event. Proper tracking is essential.
Taxable Events for LPs
1. Depositing Liquidity
When you add liquidity, you’re deemed to have disposed of 50% of each token and acquired 50% of the other:
Example:
- Add 1 ETH ($3,000) + 3,000 USDC
- IRS treats this as: Sell 0.5 ETH + 1,500 USDC, Buy 0.5 ETH + 1,500 USDC
- Result: Typically no immediate gain/loss if done simultaneously at market price
2. Earning Fees
Trading fees earned = ordinary income at time of accrual
If you earned $500 in fees throughout the year:
- Ordinary income: $500
- Tax rate: Your marginal rate (potentially 24-37%)
3. Farming Rewards
Governance tokens received = ordinary income at fair market value
If you earned 50 UNI tokens worth $300:
- Ordinary income: $300
- Cost basis in UNI: $300 (for future sale)
4. Withdrawing Liquidity
Capital gains event based on change in value since deposit:
Example:
- Deposited: 1 ETH ($3,000) + 3,000 USDC = $6,000
- Withdrew: 0.85 ETH ($3,400) + 3,400 USDC = $6,290
- Capital gain: $