In this tutorial, we will be using Scaffold-ETH x BuildBear to interactively showcase how to create a liquidity pool on UniSwapV3 on a fork of the Ethereum Mainnet.<h2>What is Uniswap?</h2>Uniswap was the first protocol to take DEX to the next level with an automated market maker (AMM). The AMM eliminates the need for a peer to make a trade, as is the case with traditional order books in today's stock market. Instead, the AMM algorithm gathers liquidity deposited by liquidity providers, who place their own assets and enables traders to use it.<h2>How does the Uniswap protocol work?</h2>With Uniswap, a trader can trade their ERC-20 tokens through pools. These pools consist of token pairs (e.g. USDC/WETH) and a pool fee (0.05%, 0.30%, or 1%). A pool collects a small amount of this fee to support the system. You can create and deploy your own pools, consisting of the pairs you pick and the pool fee you choose.After creating a pool, it needs liquidity so traders can use it. Anyone can deposit their funds into a pool and become a <a href="https://docs.uniswap.org/protocol/concepts/V3-overview/glossary?ref=blog.tenderly.co#liquidity-provider--lp">liquidity provider (LP)</a>.By following this tutorial, you will learn how to set up liquidity pools for new ERC20 tokens, empowering you to participate in decentralized finance on UniSwapV3.Let's get started!Getting StartedTo begin, navigate to the <a href="https://github.com/BuildBearLabs/scaffold-eth">scaffold-eth x BuildBear</a> repository.Here's why we recommend using scaffold-eth x BuildBear:<ul style="list-style-type:disc;"><li>It allows you to easily fork EVM-compatible chains (such as Ethereum, Polygon, Binance Smart Chain, Fantom, Optimism, and Arbitrum Mainnet) directly from the CLI. Saving you valuable time that would otherwise be spent searching for working RPCs.</li><li>You can mint native and ERC20 tokens effortlessly using the CLI, eliminating the need to waste time searching for functional faucets.</li></ul>To get started, click on the "Fork" button to create a copy of the repository on your own GitHub account. Please wait for the forking process to complete before proceeding.Next, open a terminal and clone the forked repository, which includes all the necessary components for building a decentralized application:<pre><code class="language-plaintext">git clone &lt;paste the URL you fork repo&gt;
cd scaffold-eth
</code></pre>To install all the required packages, execute the following command:<pre><code class="language-plaintext">yarn install
</code></pre>To execute the Flashloan Arbitrage, we can leverage the existing Aave Protocol and DEXs by forking the Ethereum Mainnet instead of redeploying these protocols.use the following command:<pre><code class="language-plaintext">yarn fork-bb
</code></pre><figure class="image image_resized" style="width:65.34%;"><img src="https://strapi.buildbear.io/uploads/Untitled_1_437dfdde99.gif" alt="Untitled (1).gif"></figure>Deploying the contracts<pre><code class="language-plaintext">yarn deploy
</code></pre><figure class="image image_resized" style="width:75%;"><img src="https://strapi.buildbear.io/uploads/Untitled_2023_07_31_T142416_579_a0e76d6141.png" alt="Untitled - 2023-07-31T142416.579.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_2023_07_31_T142416_579_a0e76d6141.png 245w,https://strapi.buildbear.io/uploads/small_Untitled_2023_07_31_T142416_579_a0e76d6141.png 500w,https://strapi.buildbear.io/uploads/medium_Untitled_2023_07_31_T142416_579_a0e76d6141.png 750w,https://strapi.buildbear.io/uploads/large_Untitled_2023_07_31_T142416_579_a0e76d6141.png 1000w," sizes="100vw"></figure>🚨&nbsp;If you are using a Node version &lt; v18 you will need to remove&nbsp;<code>openssl-legacy-provider</code>&nbsp;from the&nbsp;<code>start</code>&nbsp;script in&nbsp;<code>package.json</code> Starting the frontend<pre><code class="language-plaintext">yarn start 
</code></pre>Once the application is running, you can access it at <a href="http://localhost:3000">http://localhost:3000</a> and you should see the following:<figure class="image image_resized" style="width:69.78%;"><img src="https://strapi.buildbear.io/uploads/Untitled_2023_07_31_T142447_141_1cf964eeb7.png" alt="Untitled - 2023-07-31T142447.141.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_2023_07_31_T142447_141_1cf964eeb7.png 245w,https://strapi.buildbear.io/uploads/small_Untitled_2023_07_31_T142447_141_1cf964eeb7.png 500w,https://strapi.buildbear.io/uploads/medium_Untitled_2023_07_31_T142447_141_1cf964eeb7.png 750w,https://strapi.buildbear.io/uploads/large_Untitled_2023_07_31_T142447_141_1cf964eeb7.png 1000w," sizes="100vw"></figure>Before diving deeper into the smart contract, let's start by exploring the functionalities of the Create pools on UniSwapV3. To begin, navigate to the Uniswap Pool page.<figure class="image image_resized" style="width:70.86%;"><img src="https://strapi.buildbear.io/uploads/Untitled_2023_07_31_T142518_021_c93abfd405.png" alt="Untitled - 2023-07-31T142518.021.png" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_2023_07_31_T142518_021_c93abfd405.png 245w,https://strapi.buildbear.io/uploads/small_Untitled_2023_07_31_T142518_021_c93abfd405.png 500w,https://strapi.buildbear.io/uploads/medium_Untitled_2023_07_31_T142518_021_c93abfd405.png 750w,https://strapi.buildbear.io/uploads/large_Untitled_2023_07_31_T142518_021_c93abfd405.png 1000w," sizes="100vw"></figure>On the UniSwap Pool Page, you have the option to create a new ERC20 Token.You can then proceed to create a pool with the newly created ERC20 Token and initialize it. Afterward, you will be able to add liquidity to the pool.Let's dive deep into the Smart contractWe can find <code>uniswapPool.sol</code> contract in&nbsp;<code>packages/hardhat/contracts</code>:<figure class="image image_resized" style="width:75%;"><img src="https://strapi.buildbear.io/uploads/carbon_30_ecc926ff8d.png" alt="carbon (30).png" srcset="https://strapi.buildbear.io/uploads/thumbnail_carbon_30_ecc926ff8d.png 129w,https://strapi.buildbear.io/uploads/small_carbon_30_ecc926ff8d.png 414w,https://strapi.buildbear.io/uploads/medium_carbon_30_ecc926ff8d.png 621w,https://strapi.buildbear.io/uploads/large_carbon_30_ecc926ff8d.png 828w," sizes="100vw"></figure><figure class="image image_resized" style="width:75%;"><img src="https://strapi.buildbear.io/uploads/carbon_31_d94b9013dc.png" alt="carbon (31).png" srcset="https://strapi.buildbear.io/uploads/thumbnail_carbon_31_d94b9013dc.png 177w,https://strapi.buildbear.io/uploads/small_carbon_31_d94b9013dc.png 500w,https://strapi.buildbear.io/uploads/medium_carbon_31_d94b9013dc.png 750w,https://strapi.buildbear.io/uploads/large_carbon_31_d94b9013dc.png 1000w," sizes="100vw"></figure>Let's break down the key components and functionalities of the contract:<ul><li><code>CreatePool</code>: Allows users to create a new liquidity pool on UniswapV3 by providing the addresses of two ERC20 tokens. The pool is initialized with an initial price (defined as the ratio of token0 to token1).</li><li><code>initializePool</code>: Allows users to initialize an existing liquidity pool with provided amounts of token0 and token1. The function transfers the specified amounts of token0 and token1 from the user's address to the contract, approves the contract to spend those tokens on the user's behalf, and then mints new liquidity pool tokens (NFTs) through the <code>positionManager.mint</code> function. The minted NFT represents the user's share of the liquidity in the pool.</li><li><code>increase_liquidity</code>: Allows users to increase the liquidity of an existing pool by providing additional amounts of token0 and token1. Similar to <code>initializePool</code>, this function transfers the specified amounts of token0 and token1 from the user's address to the contract, approves the contract to spend those tokens on the user's behalf, and then increases the liquidity of the pool by minting more NFTs using the <code>positionManager.increaseLiquidity</code> function.</li><li>It's important to note that the contract uses the Uniswap V3 <code>INonfungiblePositionManager</code> interface to interact with liquidity positions (represented as NFTs). The <code>tokenId</code> variable is used to keep track of the NFT ID minted during pool initialization, which is later used when increasing the liquidity of the pool.</li><li>The contract uses the <code>TransferHelper</code> library to perform ERC20 token transfers safely, ensuring that the transfers will not fail due to reentrancy issues or lack of approval.</li></ul>Let's create a new pool on UniSwapV3.First, we need to create an ERC20 Token.Please provide the token name and symbol, then click on "Create ERC20 Token."<figure class="image image_resized" style="width:25%;"><img src="https://strapi.buildbear.io/uploads/Untitled_4e6c58f6d2.jpeg" alt="Untitled.jpeg" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_4e6c58f6d2.jpeg 213w," sizes="100vw"></figure>Next, let's create the pool.Paste the newly created token address and select the other token you wish to create a pool with, then click on "Create."Once the pool is created, the address will be shown.<figure class="image image_resized" style="width:25%;"><img src="https://strapi.buildbear.io/uploads/Untitled_1_a77e986f28.jpeg" alt="Untitled (1).jpeg" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_1_a77e986f28.jpeg 123w,https://strapi.buildbear.io/uploads/small_Untitled_1_a77e986f28.jpeg 396w," sizes="100vw"></figure>Now, let's initialize the pool.Enter the token amount you wish to use for initialization, approve the tokens, and click on "Initialize Pool." The pool will be initialized successfully.Time to add liquidity.<figure class="image image_resized" style="width:25%;"><img src="https://strapi.buildbear.io/uploads/Untitled_3_eee7354ee0.jpeg" alt="Untitled (3).jpeg" srcset="https://strapi.buildbear.io/uploads/thumbnail_Untitled_3_eee7354ee0.jpeg 83w,https://strapi.buildbear.io/uploads/small_Untitled_3_eee7354ee0.jpeg 267w,https://strapi.buildbear.io/uploads/medium_Untitled_3_eee7354ee0.jpeg 401w," sizes="100vw"></figure>Enter the token amount you want to add to the pool, approve the tokens, and click on "Add Liquidity."🎉🎉 Congratulations!We have successfully created a new pool on Uniswap V3. This pool can be used by others, and every time someone uses the pool, you will receive a fee as a reward.If you appreciate what we are doing, please follow us on&nbsp;<a href="https://twitter.com/_BuildBear">Twitter</a>, and&nbsp;<a href="https://www.linkedin.com/company/build-bear/">LinkedIn</a>&nbsp;and&nbsp;<a href="https://t.me/+6mjOnBFUR9xjN2U1">Join the Telegram</a>&nbsp;group if you haven’t done yet.Github Repo :&nbsp; <a href="https://github.com/BuildBearLabs/scaffold-eth">scaffold-eth x BuildBear</a>About BuildBear:BuildBear is a platform for testing dApps at scale, for teams. It provides users with their own private Testnet to test their smart contracts and dApps, which can be forked from any EVM chain. It also provides a Faucet, Explorer, and RPC for testing purposes.<blockquote>BuildBear aims to build an ecosystem of tools for testing dApps at scale for the teams.</blockquote>Check out the projects we build on <a href="https://github.com/BuildBearLabs/scaffold-eth">scaffold-eth x BuildBear</a> and keep learning :<ol style="list-style-type:decimal;"><li><a href="https://www.buildbear.io/resources/guides-and-tutorials/Build_Your_Own_Decentralized_Lending_Protocol">Build Your Own Decentralized Lending Protocol</a></li><li><a href="https://www.buildbear.io/resources/guides-and-tutorials/Build_your_own_Decentralized_Exchange">Build your own Decentralized Exchange</a></li><li><a href="https://www.buildbear.io/resources/guides-and-tutorials/Flashloan_Arbitrage_BoT">A Comprehensive Step-by-Step Guide for Building a Flashloan Arbitrage Bot</a></li></ol>

Learn How to Create Liquidity Pools on UniswapV3 for New ERC20 Tokens

Let’s get started then, Shall we?

Let’s get started then, Shall we?

Test DApps at Scale.