[Discussion] Uniswap Liquidity Incentive Plan

Hi there,

I’m from the mStable team and we would love to see this happen for mUSD. I want to add that once our new AMM goes live, it will support even more underlying stablecoins, making the value proposition even stronger I would hope :muscle:

Thanks @Etienne1 for the shoutout and your clear headed analysis

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It is not just a feeling while some large LP whales were helping or became aware of this pre-proposal from “Monet-supply” it seems that the market factored in the fact that there would probably be more UNI rewards for LP to dump, and guess what? So too did the UNI price, from over 3.85 USD to ~3.45 USD. Thats why we need a combined proposal something that entices smaller holders that don’t farm UNI liquidity not to dump. Perhaps something similar to that discussed here: https://snapshot.page/#/uniswap/proposal/QmWL6jSeYRKzEaS37GjV96b8sFpLFnmHJG84qvek2speAM

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I like it. Create a temp check for this idea.

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Awesome !
I just created a temperature check.
Here is the governance post: Should we keep only 1 incentivized stablecoin pair?
Here is the snapshot page: https://snapshot.page/#/uniswap/proposal/QmTdDJm7d81TTuHZ1ro7E6LCrFroT74gqdQn2ccc7c7uBU

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Is this meant to be a serious proposal? Reward a market with $1400 volume? Seems nonsensical.

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The temperature check poll has now passed. Details:

We will be pushing the start of the consensus check poll (phase 2 of the Uniswap governance process) until Monday November 23. This will allow additional time for community discussion and analysis before moving forward.

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I don’t think it makes any sense to incentive a pair like mUSD/ETH as it doesn’t generate any volume. If I have to chose a single stablecoin pool that will be DAI/ETH as it generates the most volume from all at the moment. I think DAI/ETH and WBTC/ETH pairs make perfect sense to be incentivized as they are generating large volume and seem to be important for the overall DeFi ecosystem.

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There is no positive effect on giving more UNI to LP.
You just dilute value of all UNI tokens in circulation and give opportunity to whales to buy more cheap UNI tokens.
Better burn than giving $20+ mil per month with no value created for Uniswap.
Today ETH-USDT LP earn 19% APY, who think that’s not enough?

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The thing is you, personally, don’t get to decide if 19% APY is enough. It’s all relative to what the market is offering. If a competitor offers twice that APY by way of subsidizing, well, liquidity providers will more or less slowly flock in that direction. It’s the way things work in a market. So Uniswap is better off subsidizing a bit than not subsidizing at all. Why ? Because with decentralized governance, we move much more slowly (as we can see right now), than say, competition that have a “Chef” approach (centralized, rotating, planned subsidies).

Again, 50% subsidies feels like a good compromise right now. It feels more sustainable. We should have had this whole discussion way earlier. It will be exciting, in the future, to come up with changes to the pairs and other new tokenomics stuff. But right now, we are a bit in a rush even though, as we’ve seen, no incentives is not catastrophic.

PS : yes, I’m aware that APY could be lower than it is today under the first incentives era on the subsidized pairs.

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Has Uniswap actually stopped humming without the UNI subsidies for the past few days? Is there really harm to the user experience from a $10,000 swap on ETH/USDT having 0.01% slippage instead of 0.004%?

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I see it as more of a medium/long term issue. As Sushiswap and other competitors gain liquidity, aggregators and users will slowly shift towards other venues for best execution.

I’m heartened by the amount of liquidity and volume that remains on Uniswap, but I don’t think we can be complacent either.

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To summarize a lot of what has been said previously…

There is a perceived need for UNI subsidies (LP rewarded with UNI) to stop a very real hemorrhage of the total value locked in Uniswap (from DEFI Pulse). This stated need has been resisted by some who hold the view that TVL is not as important as the volume of trades taking place on unicorn swapperino. There has been no data presented (in this forum post) about how trading volume has reacted to the lack of incentives in the liquidity pools; I think because it doesn’t exist at the moment/ people are waiting for gauntlet’s data, which according to @allo will show if it’s worth keeping/reducing incentives.

Some people have also brought up the separate issue that the UNI in liquidity pools would have to be removed from those pools in order to vote on these proposals. Please direct some of your attention to that: https://gov.uniswap.org/t/allow-uni-tokens-locked-in-pools-to-vote/5559/11. To me this problem seems like one to solve quickly whether one supports this proposal about the LP rewards/incentives or not.

To draw a conclusion: I hope that the gauntlet data provides clarity on whether LP rewards are necessary to sustain UNI as a DEX, and I feel as though the TVL drop is not more than an indication of a potential problem, the potential problem being a potential semipermanent drop in trading volume. Additionally, while we wait for November 23rd to roll around please direct attention to the above link. To me, it seems like a complete failure of our decentralized democratic governance system that needs to be addressed.

P.S. It should be known that I’m new to DeFi and could be completely wrong in every way :upside_down_face:. I have done my best to do my due diligence and research. If you think I’ve overlooked something please do me the favor of responding or at the least messaging me.

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Help me out, I was a member of the ETH/DAI pool for over a month, and did not receive any UNI. why was that?

You have to stake the LP tokens to receive UNI. Details here:

You can use the discord chat for support questions: Discord

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so i’m guessing that even though I deposited the liquidity, and have now withdrawn it, that because I did not stake at the time, I cannot now claim the UNI, is that right?

you are right about Sushiswap as a possible threat but you have to remember 2 things:
1- V3 is supposed to be soon so in the long term we don’t need liquidity in V2 pools as long as we have enough right now
2- Sushiswap is paying 15% of their total governance tokens each month… they won’t be able to continue like this for a long time

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1 - We can’t count on V3 being soon. It’s speculation at this point. It could be Q4 2021 for all we know. Also, V2 liquidity will easily migrate to V3 as it was the case for V1. So I don’t understand the point you’re making here.

2 - The danger of a liquidity drain is real. There is big capital at work behind the clones/vampire attacks. Funders with very deep pockets (CEXes) could pump more money into it and support a floor price for the competitor’s token and make it seem sustainable or more attractive. Yeah, it does look are burning all their matches at once. But to me, that only means we shouldn’t let our guard down during this time.

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Stop the incentives. Let’s come up with alternatives ways to incentivize liquidity.

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if we reach a dangerous level of liquidity drain then we can activate the incentives… we might need the incentives or we might not… why the hurry? when (if) we need more liquidity we can always reactivate the incentive program

in the mean time let’s enjoy seeing our competitors burn their treasuries trying to catch up with us

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Or instead of having an incentive to increase liquidity, perhaps a disincentive to remove liquidity could be added?