Uniswap is a decentralized token exchange that lets you swap tokens fast and easy.
No signup. No KYC (know-your-customer).
But that is not all. You can also earn exchange fees by contributing liquidity.
For example, if you contribute to ETH <-> DAI trading pair, you will collect fees on any trades made between this pair.
How to add liquidity?
Uniswap has this "Pool" feature that you can add or remove liquidity.
You will need to deposit the same amount of ETH and ERC20 token into a liquidity pool.
But if you use this "Add" feature, the process is kind of tedious here. It takes time and effort AND costs more fees to add liquidity so I use DeFiZap for this process. DeFiZap is a lot easier to use and you can basically add or remove liquidity in one transaction. (saves time and fees)
Once you go to DeFiZap, you just connect your wallet.
I use Coinbase Wallet and it is not listed on Desktop page, but it is listed on mobile page so I just go ahead and connect wallet on mobile.
Once you are connected, click "Explore Zaps" to find a pool that you like to contribute to. https://defizap.com/zaps
There are so many pools, pairs, and platforms to choose from and you can try any pairs.
Pools will show you more detail information about a specific pool. You can even check your shares if you connect your wallet.
But I just pick "DAI Unipool" (ETH/DAI pair on Uniswap) here. (the process is the same for any pool, Zip In or Zap Out.)
This pool shows you that you are going to contribute to ETH <-> DAI pool on Uniswap.
If you were to use Uniswap's "Pool", this process will take about 7 minutes and need to pay fees 3 times, but DeFiZap, you just need to "Zap In".
"INPUT" how much you like to contribute, and pick your "TRANSACTION SPEED" if you like but "Average" is the default and "Zap In" again.
Confirm transaction on your wallet and "Pay"
That is it.
What is going on behind the back when you "Zap In" is this 👇
DeFiZap will take your ETH and divide the amount in half and put those tokens in to the pool you picked.
And then you will collect a small trading fee when ETH <-> DAI swap happens.
How to remove liquidity?
If you decide to remove your contribution, you can "Zap Out" at any time.
Go to the pool you zapped in and click on "Withdraw Maximum" will take out all your contribution from the pool, pick your proceeds option and "Zap Out".
This will take out all your contribution from the pool and get it back to your wallet.