Providing liquidity with Uniswap V3 on Arbitrum works in the same manner as Layer 1 Ethereum.
Follow these steps to select a pair, a fee tier, a price range, and a deposit amount. However, network fees associated with pair creation, deposits, and withdrawals will be significantly cheaper than L1.
As a result, active management strategies such as rebalancing or reinvesting fees will be more cost effective for LPs on Arbitrum.
Please be aware that as an Arbitrum LP you will only earn fees from trading volume on Arbitrum. At present, there is no trade routing between L1 and L2 Uniswap protocol deployments so an L2 LP position will not earn fees from L1 trade volume.
Also note that the Arbitrum network is in Beta release according to Offchain Labs. As such, there is a possibility of network downtime occurring without notice.
During periods of downtime:
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No swaps will be executed
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No fees will be earned
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No transactions will be possible. In particular, LPs will be unable to add liquidity, remove liquidity, claim fees, adjust price range, etc.
When the network goes live again, LPs may experience sudden price movements if L1 market prices shifted while Arbitrum was down.
Please consider the risk of network downtime before deciding to provide liquidity to Uniswap v3 on Arbitrum.
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