[Discussion] Uniswap Liquidity Incentive Plan

First of all, I think the general feeling (in the Discord server, but elsewhere too) was that incentives were given at a pace too high to be sustainable, creating a sell pressure that was detrimental to the community of UNI holders.

Gauntlet seemed to indicate that their analysis would be complete pretty soon.
They also seemed to hesitate between keeping incentives as-is or reducing them.

From what I understand (referring to OP’s timeline), we are about to witness at least 2.5 weeks of no-incentive.
And then, a proposal might emerge, on which we will get to vote. I think those 2 weeks (a long time in terms of DeFi, as we know) will probably help us decide on the next phase.

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Thanks for the response.

Feelings are great, but we are about to make a major decision regarding a $2 billion DeFi product.

Major companies, organizations, entities, etc do not run on feelings. They run on data. Being a decentralized organization does not lift this burden from us. Business is business. Where is the data?

We are fully capable of gathering the necessary data. But we haven’t yet (unless there is some research being done that I’m not aware of).

If we don’t have the data, then there is no doubt that we should continue doing what is working right now until we have data that shows that a change will actually yield the intended outcome. Whether it’s halving the reward, eliminating the reward, or doubling the reward - we should have strong evidence that it’s going to work before we do it.

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I just realized it - we already have all the data we need.

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Glad to see someone taking the initiative! @monet-supply I know you may have had some doubts in bringing a proposal to the table yourself at the time of the community call, so I really welcome your decision to take the time to build such a comprehensive initial thread.

For anyone who hasn’t listened to the recording of the first unofficial community call, I strongly recommend you to do that before coming to a decision on whether or not this is a good thing for the protocol.

As mentioned in the call, some of the most important factors to the health and continued adoption of Uniswap is the reduction of slippage and the ease of use as far as Uniswap acting as an on-ramp/off-ramp between stablecoins and other tokens - these are good goals to have at this time.

Whilst I agree that the liquidity mining program cannot continue indefinitely, I feel that in the absence of another proposal for developer grants or other programs that add value to Uniswap, continuation of the program for the time being in order to achieve the above goals is a good idea.

I have a couple of questions:

  • First, I’d like to echo Chris’ sentiment - what was reasoning used when making the decision to cut the rewards in half?

  • Second, was any thought given to the idea of reducing the number of incentivized pools? A couple of people raised the idea of dropping down to a single stablecoin-ETH pool along with maintaining the wBTC-ETH pool for the time being during the call, and I’m wondering what your thoughts were on this. If its indeed seen to be that the rate of distribution through this program is too high to be sustainable, could this be a reasonable alternative to cutting the per-pool rate in half?

Thanks again for taking the time to build such a comprehensive offering to the community!

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For those having issues voting on Snapshot, please note that only self-delegated UNI is eligible.

If you have not done so already please visit the Voting tab to Unlock Voting on behalf of your UNI!

What is the point to bribe liquidity providers for yet another 2 months? There are few proven bad actors like Alameda Research who were shorting and market dumping UNI, these whales are moving billions of dollars in a matter of few transactions from Uniswap to Sushiswap and back.

The additional 2 months won’t solve anything, this program doesn’t permanently solve the liquidity problem, but only helps whales to manipulate and short the market.

Instead, as already discussed in various topics in this forum, I think it’s better to fund UNI pools (UNI/USDC, UNI/ETH etc) to motivate liquidity providers to actually hold and add more UNIs to pools, this will also help for distribution because traders will be able to buy UNI with a lower slippage.

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good point… why this / to fund UNI pools (UNI/USDC, UNI/ETH etc) to motivate liquidity providers to actually hold and add more UNIs to pools / is not bring up to discussion? or to vote?

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This is definitely not all the data we should be looking at. The volume is also important. If the liquidity drops 2x, but the volume stays the same, there will be much higher yield from fees for the LPs and that could cause the liquidity to come back.

I think we need 1-2 weeks of data to see how is this going to unfold.

But, there is something important we need to keep in mind here: it is good for the UNI distribution to continue, because we need more UNI out there, which could be used for voting. As we see at the moment quorums can’t be reached and no proposal has even been passed. As amount of circulating UNI increases, it should be easier to reach quorum.

Edit: spelling

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Why you don’t look for UNI/USDC, UNI/ETH UNI/… etc! See the comment from drwx !!! FUND this pools UNI/ and the TVL will increase and the value of protocol / token value will increase! More users will use the protocol.

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I do like this point a lot.
Would rather have some cool real world assets on UNI then just farming more UTXO’s

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Great point. I also think that for the next phase only UNI pools should be incentivized.

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I believe this plan is very good, has maintained liquidity, bought time for the development of uniswap 3.0, and I hope to see the community growth.

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Unicorn and it’s style of governance is relatively lofty and unique but still at its cradle stage, and therefore, needs greater level of participation from a wider community of end-users/contracts to shore it up to its preferred pride-of-place. UNI being released at this nascent stage means greater level of participation and interest in Unicorn governance. I support a second round of liquidity mining with 5M UNI during the pool period.

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Good point. I participated in a liquidity mining on Argent platform using UNI/ETH pair. Liquidity providers can actually plough back UNI into the system.

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@Ezzy Id have to agree. Maybe rewarding smaller lp’s to hold would be more beneficial. I.e. 10% rewards for 100 uni provided. 12% rewards for anything above 100. My only concern is whales providing liquidity in 100 uni increments.

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I believe with the level of governance and community command Unicorn is directly/indirectly representing and the dominance it’s actively attaining towards, whale-like negative effects will have no wider ripple-effect on the ecosystem…no number of :whale2: whale can actively dominate an ocean…lol.

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Subsidizing UNI/ETH is a ponzinomics technique. It is something that degenerate farms are using to build liquidity for their shitcoins. UNI does not need such a thing, as it has enough liquidity for the token. The pools that are subsidized should be the pools that are getting a lot of trading fees, as these are the pools, which bring the most revenue.

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I don’t think creating another liquidity pool UNI distribution program would have long term benefit to the protocol. Keeping LPs that are only looking for distribution of UNI in the protocol to stay in would not benefit the protocol.

I think the better way is to use the funds to advertising, teaching, paying for supporting users, fund development of new protocol built on top of uniswap, in order to increase the trading volume in uniswap which, first, create a higher trading fees in any pools that create an incentive for LPs to provide more liquidity which can lead back to decreasing the slippage. Second, it create a long term sustainable solution and not a solution that UNI holders pay for 2 month and then the liquidity drops and we have to pay for another 2 month.

When UNI token is distributed initially there is 251,534 user addresses, now I believe there is more due to the initial launch also advertise the protocol. I think this is the main reason for the increase in volume is the increase in users.

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It can serve real purposes :

  1. Introduce a lot of UNI airdropped users to the world of LPing (education)
  2. Remove a lot of UNIs from CEX wallets

Sure, pure degen/unsustainable farms use(d) « pool 2 » techniques, as it is widely known.
But it doesn’t necessarily mean that, if UNI was to subsidize a UNI-ETH LP with a factor of 1X (and not 10X+ as seen in degen farming schemes), UNI would become a ponzi.

Anyway, as we’ve said before, UNI-ETH incentivizing isn’t very possible at this state because

  1. We already have a problem getting votes/quorum
  2. Incentivizing UNI-ETH LP would make this problem way worse, because a lot more UNI wouldn’t be able to vote (probably millions more)

A first step would be to propose a way to make LPed UNIs’ vote count. This is a good idea in any case (UNI-ETH incentives or not), because currently a lot of UNI is barred from voting (more than 8 millions as I’m typing this !) The issue here is that this is a non-trivial upgrade that will need fresh code and fresh auditing (so, probably treasury funding).

This is well out of the scope of the proposal we are discussing. What we are proposing here is merely a way to extend incentives for a while, and during the second incentives era, governance will be able to come up with truly novel ideas.

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Probably a dumb question but if I use my uni to vote , I don’t get it back right ?