Uniswap v3 vs v4 Liquidity Provision: Fee Returns Tested

By Chanuka Geekiyanage Oct 21, 2026

Uniswap v3 and v4 both pay liquidity providers (LPs) from swap fees, but the fee rules have split since the fee switch went live. On v3 pools where the switch is on, the protocol takes a share of what LPs earn. On v4 static pools, it adds a separate charge on traders instead, which changes who pays and where volume flows. This article compares what each version pays LPs per dollar of volume, what DeFiLlama shows on October 21, 2026, how hooks add risk, and which LP should use which version.

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The Short Answer

For plain pairs like ETH/USDC, a v4 static pool (no hook) pays LPs roughly 20% to 33% more per dollar of volume than a v3 pool with the fee switch on. That holds only if both pools see equal volume, and they often do not.

I did not run a live position backtest. The figures below come from published fee rules and DeFiLlama data pulled on October 21, 2026, and they change daily.

The Fee Switch: Who Pays the Protocol Cut

On v3, the UNIfication proposal set protocol fees at one quarter of LP fees for the 0.01% and 0.05% pools, and one sixth for the 0.30% and 1% pools. The rollout was staggered. It began on Ethereum on December 28, 2025, and reached other chains in March 2026 and later.

On v4, the design differs. Per Uniswap’s documentation as reported by The Defiant, the protocol fee is charged on the swap input before the LP fee, so a trader in a 30 bps pool pays roughly 35 bps while LPs keep their full 30 bps. It applies only to selected pools: static-fee pools, continuous clearing auction pools, and aggregator-hook pools across seven chains.

Per $1 million of swap volume, assuming equal volume and equal in-range share:

Pool fee tier	v3 LP income (fee switch on)	v4 static pool LP income	Difference
0.05%	$375	About $500	About +33%
0.30%	$2,500	About $2,998	About +20%

The 0.30% v4 row uses the 5 bps protocol fee from Uniswap’s founder’s example. I found no published v4 protocol fee for the 0.05% tier, so the trader’s extra charge there is not priced in.

The catch is routing. A trader pays about 30 bps in the v3 pool and about 35 bps in the v4 pool, so aggregators may favor v3. Critics argue that if aggregators route around pricier pools, LPs must cut their own fee tiers and absorb the protocol fee. The real question is which pool gets the volume.

What the Data Shows Right Now

DeFiLlama shows v4 with $1.572 billion TVL, $35.019 billion of 30-day volume and $69.77 million of 30-day fees. For v3, it shows $1.655 billion TVL, $35.388 billion of volume, and $35.58 million of fees. I annualized the 30-day fees (multiplying by 365/30) and divided by TVL:

Metric (Oct 21, 2026)	v3	v4
Share of 30-day fees from Robinhood Chain	About 25%	About 66%
Annualized fees / TVL, all chains	About 26%	About 54%
Annualized fees / TVL, excluding Robinhood Chain	About 21%	About 21%
Annualized fees / TVL, Ethereum only	About 14%	About 19%

Robinhood Chain explains the headline gap. v4 collected about 33 bps of volume there ($45.92M on $13.9B), against about 7 bps on v3. I could not confirm why, so do not assume it repeats on other chains.

Excluding it, the versions yield about the same. On Ethereum, the main LP venue, v4 leads. These are gross fees, and v4’s figure includes the protocol add-on, so the LP-only gap is smaller. They also ignore impermanent loss, the value you lose when prices move against your position, and they count out-of-range capital that earns nothing.

Image source: defillama.com/protocol/uniswap-v4

What v4 Changes for LPs Beyond Fees

Fees are credited automatically. In v3, you called a separate collect function. In v4, increasing liquidity rolls unclaimed fees into the position, and decreasing it withdraws the proportional fees.
Pool creation is far cheaper. Uniswap says it is up to 99.99% cheaper. I found no official benchmark for LP position gas, so do not assume cheaper management.
Fee tiers are no longer fixed. That likely means more pool variants splitting the same volume, so check depth.
Routing is cross-version. The router compares prices across v2, v3, and v4 liquidity, so volume follows price, not version.
Hooks add custom logic, such as dynamic fees. For details, see how Uniswap v4 hooks affect liquidity providers.

Image source: app.uniswap.org

Hook Risk: What v3 Never Had

Uniswap reported nine audits, a $15.5 million bug bounty, and no critical bugs in its security competition for v4’s core. Hooks sit outside that. Trail of Bits notes that the Cork exploit (about $12 million, May 2025) and the Bunni exploit ($8.4 million, September 2025) came from application-specific logic, not the v4 core.

Bunni’s TVL grew from $2.23 million in June to nearly $80 million in August before a rounding bug drained about $8.4 million. A hook that only sets fees is a smaller risk than one that custodies or rebalances your capital. Before depositing into a hooked pool, check:

Whether the hook itself was audited, and whether the audited code matches the deployed address.
Whether it only adjusts fees or also holds and moves funds.
Who controls it: admin keys, upgradeability, and pause powers.
How long it has run with real TVL. Fast-growing new hooks deserve the most caution.

Range Risk Is the Same on Both Versions

Both use concentrated liquidity, so a position earns nothing when price leaves its range. See this guide on what happens when a Uniswap v3 position goes out of range. The same logic applies on v4.

This matters more than the version. A 2021 study of v3 found $260.1 million of impermanent loss against $199.3 million in fees, with 49.5% of LPs behind simple holding. It was commissioned by Bancor, a competitor, and predates v4, so treat it as direction only.

Which Version Fits Which LP

Situation	Better choice	Why
New capital in a major pair on Ethereum	v4 static pool if depth and 7-day volume match v3	Higher LP income per dollar of volume
Existing in-range v3 position earning well.	Stay on v3	Migrating costs gas and resets your range
Small deposit	Pick the cheaper chain first	Gas differences between chains outweigh the version gap
Long-tail pair	v3 or v4 static, not hooked	Avoid extra contract risk
Want dynamic fees or auto-rebalancing	Audited, long-running hook, small size	Hook risk is not covered by core audits

My Take

For major pairs on Ethereum, I would put new capital into a v4 static pool, but only if it matches the v3 pool on depth and recent volume. LPs earn more per dollar of volume, fees credit automatically, and Ethereum’s gross fee yield is currently higher on v4. The edge vanishes if the router prefers the cheaper v3 pool.

I would keep profitable in-range v3 positions where they are. I would avoid hooked pools unless the hook is audited, has run through real volume, and the deposit is small enough to lose.

Before depositing, compare the pool’s 7- to 30-day fees against in-range liquidity, its trader cost versus the v3 sibling, and the hook address.

Conclusion

On paper, v4 static pools pay LPs more per dollar of volume, because the protocol fee is added to the trader’s cost rather than taken from LPs. Current data shows the versions yielding about the same outside Robinhood Chain, with v4 ahead on Ethereum. The edge depends on volume actually routing to the v4 pool.

The main risks are hooks, range management, and impermanent loss. Your next step is to pull the 30-day fees and in-range liquidity for your exact pool, compare it with its v3 sibling, and start small.

FAQs

1. Does Uniswap take a cut of my fees as a v3 LP?

Yes, on pools where governance enabled the fee switch, the cut is one quarter of LP fees on 0.01% and 0.05% pools and one sixth on 0.30% and 1% pools. Rollout happened chain by chain, so check your specific pool.

2. Do v4 protocol fees reduce what LPs earn?

Under the approved design, the protocol fee is added to the trader’s cost, so LPs in a 30 bps pool still earn 30 bps. The indirect risk is that a higher trader cost can push routed volume to cheaper pools.

3. Is it worth migrating my v3 position to v4?

Usually not for fees alone, because you pay gas, reset your range, and the uplift only holds at equal volume. Migrate when the v4 pool has comparable depth and higher fees per unit of in-range liquidity over the last 7 to 30 days.

4. Are hooked v4 pools safe for LPs?

The v4 core had nine audits, but each hook is separate code with its own risk. Cork lost about $12 million in May 2025, and Bunni lost $8.4 million in September 2025 through hook-level bugs.

5. Why do DeFiLlama yields differ so much between v3 and v4?

DeFiLlama’s average supply APY was 61.67% for v4 and 29.03% for v3 on October 21, 2026, but thousands of tiny pools skew both averages. Use fees per unit of in-range liquidity for your specific pool instead.

References

DeFiLlama, Uniswap V4: https://defillama.com/protocol/uniswap-v4

DeFiLlama, Uniswap V3: https://defillama.com/protocol/uniswap-v3

Uniswap Labs, UNIfication: https://blog.uniswap.org/unification

Uniswap Labs, Uniswap v4 Is Here: https://blog.uniswap.org/uniswap-v4-is-here

Uniswap Docs, v4 SDK fee collection: https://docs.uniswap.org/sdk/v4/guides/liquidity/collect-fees

Trail of Bits, Building secure Uniswap v4 hooks: https://blog.trailofbits.com/2026/07/30/building-secure-uniswap-v4-hooks/

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About the Author: Chanuka Geekiyanage

Chanuka is a content writer, editor and contributor at Panaprium, specializing in long-form editorial articles. He conducts in-depth research and produces well-structured, carefully edited content with a strong focus on clarity, SEO best practices, and consistent formatting. His work spans lifestyle, fashion, wellness, and technical topics, and all articles are reviewed and refined to meet Panaprium’s editorial standards.

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