Traditional market making processes had been ripe for innovation and DEX or Decentralized Exchanges with the likes of Uniswap, Kyber Network, Balancer and Curve have improvised it significantly. Despite providing a lot of leverage like automated order book matching, low fees and vast range of liquidity pools, some of the top DEX or Decentralized Exchanges had further room for innovation. Uniswap, as a force to be reckoned with in the DeFi space has helped the concept  of AMM or Automated Market Making reach to its pinnacle via its various version launches. V1 and V2 versions  introduced the concepts of market making, price oracles, flash swaps; V3, a newer one, is all set to introduce transformative improvements that would further bolster the growing DeFi space. 

What Will Be New Introduction In the V3 launch to scale up the DeFi Space and Help Yield Farmers? 

- Capital Efficiency 

Traders can use the same capital for maximum gains in the V3 liquidity pools. Take for example, in the V2 liquidity pools, the LP or Liquidity Providers while providing the liquidity had to face a problem where their liquidity was distributed across a specific price curve. The price curve may execute between 0 and  ∞ threshold. Despite this, trades are generally executed at a specific price range. Thus, making their capitals futile when locked in the smart-contract liquidity pool. With the present Uniswap V3, the LPs can set-up price curves at different levels for trade execution instead of maintaining multiple liquidity pools. 

- Active Liquidity

Active liquidity allows the LPs to better maximize their assets which are falling above their specific price ranges. For example, if the LPs are maintaining an ETH-DAI liquidity pool and DAI is not getting used at a specific price range. Their entire liquidity will move to ETH and DAI will be flushed out of the liquidity pool. In order for DAI to get back to the active liquidity pool, it will have to adjust the prices for facilitating trades. In this way, the LPs will get better scope to maximize their price range and earning potential at different price curves optimizing their capital usage. 

Conclusion 

Such leverages will make staking  more profitable and attractive for the liquidity providers to invest in Uniswap V3 liquidity pools for fees and profits. For the DeFi space to mature and evolve further, concepts of capital efficiency, activity liquidity, range limit orders, multiple positions and NFT liquidity can help further build the staking and yield farming community on Uniswap V3.