This is a great writeup @Getty, clearly outlining the tradeoffs in implementimg a 1bps fee tier. We feel that, since there is little downside, more optionality is better than less, especially considering Uniswap’s current minimum rate of 5% being uncompetitive compared to DODO and Curve. We agree that Uniswap should strive to be the one-stop shop for all swaps, including stablecoins. The mindset of creating a great trading experience to attract large organic volumes, which is recursively followed by more LPs and TVL is one we subscribe to.
Our only reservation is that 1% may be a little too low. A 2% bps rate may allow Uniswap to find a middle ground between competing with Curve and DODO, whilst also having enough margin for LPs to consider this profitable. Indeed, we must think carefully about how this change could affect the market landscape. A race to the bottom in fee levels amongst DEXes is suboptimal. We need to carefully discern what number will create long-term sustainable and organic volume, and sticky TVL from satisfied LPs.
It would be interesting to see some data or backtesting on pricing efficiencies with TVL, fee levels, and order sizes as the independent variables.
We will vote yes on this Consensus Check, but do wish our above suggestions are addressed.