[Discussion] Uniswap Liquidity Incentive Plan

ETH/BTC is actually one of the most correlated pair of assets so it has one of the lowest risk of impermanent loss.

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It seems that our approaches’ main difference is that @monet-supply and @tarun seem to focus more on the absolute numbers in liquidity growth, and I’m more focused on the retention rates of liquidity and volume.

Here’s some numbers to consider:

The way I see it, both the liquidity programs Uniswap LPs enjoyed are quite successful overall.

The main achievement of the UNI liquidity mining program (LMP) is that it brought DAI and WBTC on par with the other two of the top-4 pairs on the exchange.

However, it appears that there’s not much room to grow from here, especially with 50% of the incentives.

If we consider liquidity before and after UNI LMP (see “4 difference with 2” column), it signals that rewarding USDC and USDT was less beneficial in comparison to rewarding WBTC and DAI.

The volume’s retention rate is quite impressive post LMP, but it looks like the volume is close to its cap at this point in time. So additional subsidies are unlikely to be efficient for the most part (see: “3 difference with 2”).

As for liquidity, as you can see in the “Difference with 3” column, WBTC and USDC have lower liquidity retention rates than the other two pairs so far. It could signal that a bigger percentage of money in these pairs stayed there temporarily to enjoy the farming incentives.


I think it makes sense to bring the discussion more to the quantitative realm, so we can figure out how good this decision is from the business perspective. It seems that there are some models to explore to guesstimate what we’re trying to achieve with the program - and what efficiency we expect.

Of course, even if all the metrics say that the continuation of LMP is inefficient as a business proposal, it doesn’t mean that the community shouldn’t accept it due to other reasons.

Some of the possible reasons to continue distribution are:

  1. enough self-rewarding interest in the community, i.e. there are enough UNI holders who want to participate in LMP and rip the benefits of it.
    If we view LMP from the self-interest perspective, the current proposal seems like a good middle-ground between the part of the community that wants to mine and the part that doesn’t.
  2. the distribution argument I’ve stated above
  3. other strategic considerations, some of which are more quantifiable, some are less.

Calculate the jumps. Be sure its not a stable relation. (150% swing potential)

I totally agree to your conclusion that right now incentive isn’t necessary to catch volume. Anyway, if there is some I will be happy to take it, but imho the UNI can better be hold till there is a good rational to spend it.

In comparison to ETH/USD it is a lot more correlated though, particularly over the long term. LPing in ETH/USD is more risky.

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Let’s further explore the metrics that could help our judgment in terms of uneven incentivization of the pools at hand.

One thing to look at is how traders utilize the increased liquidity.

I suggest considering two queries for that that reflect 50th and 95th Percentiles of Trades over time:

As we can see from the 50th Percentile query, the increased liquidity hasn’t raised the average trade size during LMP.

The 95th Percentile query is a bit more differentiating.

We can see that WBTC liquidity is better utilized by large traders.

Among the USD pairs DAI showed the best utilization rate, USDT the worst, but they’re close overall.

USD numbers start to make more sense if we take a look at the volumes of respective pairs compared to the leader / 2nd best option on the market (data from Coinmarketcap):

Uniswap Market leadership

If we want to optimize the distributions to reduce the slippage for large traders, it makes sense to bring more weight to the WBTC pool.

If we think about competition, it is not clear if the program is needed at this point in time.
Uniswap either has dominance or no chance for dominance when it comes to volume share in the market for the respective pairs.


Thanks for the numbers, they changed my thinking at least a little cause they give an argument for btc incentive. Besides the gain in fees, as a lp I see one other major aspect in the liquidity pools: they are a buffer against price manipulation on cex. And ofc this is also important for btc and cause of the high market cap a higher liquidity volume on dex might be justified to achieve this. Another question is if uni shall pay for this and reward higher incentive for wbtc.

This dune analytics dashboard is pretty informative about the state of liquidity mining. WBTC, USDC, and USDT have see far higher outflows to Sushiswap than DAI, so optimizing the incentive program with a small reallocation from DAI/ETH to WBTC/ETH seems reasonable.

In the interest of expediency and moving the process forward, I will be submitting a Consensus Check poll tomorrow based on the updated incentives distribution plan:

The poll will run for 5 days, with a majority of at least 50,000 UNI required to move forward to a full on chain governance proposal.


This outflow is not sustainable, though. It looks a lot like manipulation. So it doesn’t seem like a good idea to make changes to the LMP based on this data. Or maybe to continue the LMP in the first place.

It’s money that wants to farm UNI signaling the outflow to make Uniswap governance panic and restart the program. There’s likely more than $20M up for grabs for this money if the program is to be restarted, and increasing the WBTC rewards is just feeding it more.
It is also probable that these $20M worth of UNI will be sold into the market.

If we take a closer look at the incentives LPs get on Sushi, they’re below the APYs Uniswap LPs are having.

And there presumably is a lot of fake volume as well, given the risk/reward of this move.

Just look at the charts similar to the ones I posted above, but for Sushi:

Here are the queries: 50th, 95th.

When you own the liquidity, it is really cheap to fake it.

Sushiswap is not a competitor to Uniswap on these pairs.

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You do not need to do anything, as an LP, you were collecting fees during the UNI reward program and you will continue to do so as long as your an LP.

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Here’s a snapshot of the liquidity and APYs for the tokens incentivized on Sushiswap:

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I am curious why we are just considering staying with the four original liquidity pools and not evaluating whether it will be more beneficial to distribute the liquidity mining rewards to more trading pairs. I took the last 7 days liquidity and trading volume from many of the popular pairs, and i believe a strong argument can be made to evenly distribute mining rewards based on liquidity provided to a larger list of community “green listed” pairs.


Another interesting and relevant metric can be found on Uniswap Community Dashboard: it’s Uniswap LPs per pool. This same metric can be helpful in the future when we decide to incentivize other pools.

Uniswap LPs per pool table

Out of all the pools DAI is the second largest community of LPs after UNI.
And out of all incentivized pools WBTC has the least amount of members.

So if we want to decentralize the distribution, taking away from DAI and giving it to WBTC does the opposite of what we want.

It is a deal-breaker for me for the modified proposal.

Cutting the rewards from the bigger community and giving them to the smaller just makes no sense to me, and reduced slippage for large traders doesn’t justify it in my mind.

I’m not convinced that Sushiswap presents a threat to Uniswap because Uniswap is simply richer, has an all-star development team, and a large user base.

I think it’s good for the DeFi ecosystem that Sushiswap subsidizes liquidity and we should let it do that. I don’t think there is a reason to compete. At any given moment, Uniswap can get the dominant position in any Sushi market it wants.


a few days ago Sushiswap TVL almost passed Uniswap TVL… today Uniswap has double the TVL in Sushiswap… I guess we don’t need farming incentives after all

let Sushiswap burn their treasury… they are spending 15% of their total token supply every month to perform this vampire attack and they are failing to takeover Uniswap TVL not to mention its volume.


When does the Consensus Check begin?

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With Vampire attack and with help of big LP (Liquidiry Providers) Uniswap is still the biggest DEX (Decentralized Exchange) in almost every metric.

There is no need for any new Liquidity Incentive Plan at the moment!


tBTC might be the better option than wBTC, but I think we should focus on the incentivized liquidity subject matter first, put too much discussion on the mix and this quorum will be even harder to reach.


Just no need of new tokens as it will only get dumped. Just spread the fees to LPs


I think its a good idea, but the short answer is - governance here is too dysfunctional at the moment and we are still trying to agree on simpler things before tackling more difficult decisions :slight_smile:

tBTC is great, but I think still too unproven and does not have enough traction in the market yet. Hopefully it will get there.