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Why Uniswap V3?

A common ERC404 use-case is to utilize Uniswap as both an exchange and mint platform. Common ERC721 projects have long faced issues with price discovery and liquidity, some examples of which are as follows:

  • Mint prices are set too low, forcing slow price discovery on illiquid secondary markets
  • Mint prices are too high killing projects along with all price discovery
  • Bonding curves tend to be too constraining given the above, often resulting projects not minting out
  • Illiquid markets tend to prevent active or engaging speculation
  • Botting / sniping can create unfair releases requiring large technical overhead to remediate

One of the main draws of ERC404’s flexibility has demonstrably been it’s ability to easily integrate with mature DeFi protocols. Utilizing Uniswap V3 as a mint platform and exchange allows projects to see the full spectrum of price discovery, while supporting deep liquidity and higher, consistent royalty earnings (while charging users lower royalty fees). Specifically, Uniswap V3 as a bonding curve, paired with native fractionalization allows projects to launch more flexibly and in a way that removes traditional mint constraints.

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Approaching a Uniswap V3 Launch

It’s important to consider Uniswap V3 as a novel mint mechanism that requires some degree of planning. You’ll want to define a curve along which initial supply is pooled, moving up to a full range LP. An example launch plan for a 10k collection could be as follows:

  1. 2500 tokens provided in a range from 0.01 - 0.02 eth
  2. 2500 tokens provided in a range from 0.02 - 0.05 eth
  3. 5000 tokens provided in a full range of 0.05+ eth

It’s critical to note that this final pool should have an infinite or very high maximum price, effectively serving as a bounded V2 pool; this ensures that the collection has no price “ceiling” whereas the bottom pool ensures a hard, absolute floor price.