Fee switch date approaching, time to act

Temperature Check
65

For me a sell of UNI, would aim at finnancing a project of the governance, not selling stuff just to sell stuff.

Except than a buyback, do you have any plans for the money of the buy back ?

66

The problem with your plan is that you create sell pressure with a promise of turning it into buy pressure in the future.

The buyback programme in turn creates buy pressure with a promise of turning it into sell pressure in the future.

The difference is that with the buyback programme, the gain realized is much bigger. You have to account for the fact that the UNI token has 2 % inflation after 4 years. So basically, the ammunition in the treasury is infinite. Its better to utilize buy pressure now, sell pressure later than vice versa.

67

Why bother selling liquidity away ?
If there are people willing to buy the liquidty with UNI that mean they except to make money with this.

Why not just add liquidity it self and use the 35% APY we were seeing on stable / ETH on V2 for example (I donā€™t give APY example for V3 due to ranging you know).

68

Look, if you can demonstrate how it would create more buy pressure for the UNI token compared to a direct buyback, then Im all ears.

69

This will likely not create much buy pressure (if any at all).

But this will make the governance more rich.

Thoses are just 2 different targets. I donā€™t think a buyback for the sake of a buyback achieve much of anything that the providing of LP doesnā€™t (from point of view of LP, from point of view of your wallet I can understand that a buyback is tempting), for me this sounds a lot like the charity coin you described earlier.
Providing liquidity makes :

  • a diversified portfolio.
  • more profits (as you keep them long term)
  • move some liquidty from V2 to V3.
  • bigger TVL (less price impact more swaps)
  • more stable liquidity
70

Well, see, in your proposal. There is no incentive to hold UNI. Why would you hold UNI?

We need to create incentives for LPs to get involved in the governance and thats why providing a buyback for the sake of a buyback is the perfect way to do it.

As I was informed, you hold no UNI yourself Jorropo so its time to change it and join the governance of the protocol :smiley:

Im glad we can both agree on the fact that the buyback provides more benefit for both the protocol and the token holders + forces LPs to get involved as well otherwise theyĀ“ll lose out on the income.

Win - win!

71

I heard it with my own ears from you in the Jun UNI community call (as well as saw it in the call chat), that you donā€™t hold any UNI and for you it is way too expensive. You even managed to co-host that meeting and it was blatantly one sided because of this. It is obvious you are trying to thwart/bypass the main governance mechanism which resides in the value in the UNI GOVERNANCE token. I donā€™t care if you are the largest LP in the world, if UNISWAP is to be stay the #1 decentralized exchange its governance token must not loose value the way you pretend by wiping your bottom with it as if it were paper money.

2 Likes
72

Itā€™s not an argument, I can not hold any UNI and still think I have better options than a buyback, if you think buyback or distributing fee switch is a good idea just propose let a vote happen and we will see the results.

73

Lets not turn this into personal attacks, but it is true that in order to post relevant comments on such matters one should own the UNI tokenā€¦otherwise, it is highly suspicious whether the actorĀ“s intent is truly for the cause of the protocol.

The UNI fee switch topic will be dealt with. UNI holders do not worry.

1 Like
74

Distributive fee switch is overated, his ~6% apy is nothing

I really think distributive fee switch maximalist over estimate the fee switch. This also applies to buyback fee switch maximalist.
Let me share this tiny equation Iā€™ve just made to proove my point:

(dailyVolume*feeTierRatio*feeSwitchRatio*numberOfDays)/(expectedUniAffectedByIt*UniPrice)
  • dailyVolume is the daily volume on uniswap, the goal is to extract the fees we are gonna capture from it, Iā€™ll take 1b5 as this is clearly on the upper hand of what fees uniswap have seen, this doesnā€™t make a huge difference anyway as it only scales linearly (you would need a *20 to start see some good numbers anyway)
  • feeTierRatio is the fee tier used by pools, idealy you would not use the volume but the number of fees but I was too lazy to find it as this wasnā€™t obvious to me. Iā€™ll then consider that all swaps on uniswap are made at 1% fee tier (the biggest).
  • feeSwitchRatio the part of that fees that are going for fee switch, Iā€™ll take 1/6 as this is the only possible value on V2.
  • numberOfDays is how long thoses fees acumulate, I use a plain multiplication and not proper APY as fee switch has no compounding feature, unless you manually go add them back yourself as LP (or other invesment) but this depends on case per case and complicates a lot for not a huge difference.
  • expectedUniAffectedByIt is the number of shares the fee switch is gonna be broken into, Iā€™ll take 564m970k520 as this is the current circulating supply of uni (according to coinmarketcap) and you can resonably expect it to be lower (as not all people would likely stake their UNI into a fee switch distributor contract)
  • UniPrice is the price of uni, this is used to normalise this with the volume with have on the left hand of the division (you could remove this to have a share per UNI)

Distributive fee switch

Just trying to see how much USD would be yielded over one year per UNI gives use : (1500000000*0.01/6*365)/(564970520) = 1$60, remember that Iā€™ve already over estimated that likely.
We can also include the current price too: (1500000000*0.01/6*365)/(564970520*27.27) we then see that per $ invested we produced 5.9 cents over 1 year (so ~6%).
Fun thing then, given my estimation, how much should the price of UNI should be for the feeswitch yields to be equaly 40% apy (which was a high but still realistic target for V2), we then replace the price by x and ask to solve for x given a target of 40 cents produced per year: solve (1500000000*0.01/6*365)/(564970520*x)=0.4 for x = 4$.

Iā€™m not saying that the price is gonna jump by 4$, nor that itā€™s gonna lower it self at 4$.
Itā€™s just that in comparision to the current price, if a distributive fee switch was enabled, the UNI price is very likely not gonna be effected much by it (it might actually crash if most people are here for the money, as if you want only money, a distributive fee switch makes no sense, sell your UNI and provide LP, use charm.fi and get way more money that way).

Buyback

To compare this to a buyback itā€™s a bit more hard, as this is a slow steady flow of money, I canā€™t just go input that into 1inch and say ā€œwell the price impact is xx%ā€ as there is lots of trading on CEX such as binance too. So Iā€™ll just compare the number of money that this would generate per day to the trading volume of UNI. This is simply : dailyVolume*feeTierRatio*feeSwitchRatio as we donā€™t try to correct for any length of time nor share between uni holders.
This is 1500000000*0.01/6 = 2m5$ compare this to the ~400m of $ traded in the past 24h, and note that 400m$ is in the very low average compare to the past, if you go back 1 week we were arround 1b$.

Overestimation

Remember that this is a huge overestimation since I donā€™t even need precise value to proove my point, the 2m5 of fee switch money is already about twice the actual fees to LP in the past day (the main part is likely that most volume is made on 0.3% and 0.05%, not 1% like I estimated).

75

Your assumptions lack a forward projectment of UNIĀ“s fees and volume; therefore, they are both invalid. However, Im glad we both agree on the fact that the buyback is the way to do things. Its unfortunate that you cant vote on it.

The buyback analysis is done really poorly. Sorry, but I might have missed it: what relevance does the volume analysis have to the price?

76

Your assumptions lack a forward projectment of UNIĀ“s fees and volume

The current reality are somewhere between 2% and 1% of APY. This is already accounting for a huge increase.

The buyback analysis is done really poorly

The buyback I know but I just donā€™t have any better solution, comparing it to UNIā€™s volume is just to show that itā€™s nearly nothing and thus we canā€™t really expect it to have much impact (it could double the price for example).

If you have any better idea about the buyback, then share it.

77

Liquidity holders hold UNI too. Pull the switch all the way

1 Like
78

See, increase does not equal to proper forward projection of fees and volume. Not all of UNI would be accounted for in the first example, but I will not delve deeper there because nearly everybody agrees its not the optimal way to do things.

In order to do a solid analysis of the buyback programme, youĀ“d have to analyse sell volume and buy volume for the entire day and then add on top of the buy volume the amount which would the money coming from the fee contribute. Saying the contribution would be low is just outright irresponsible without conducting a proper analysis with deeper meaning. Another factors which cannot be accounted for via a simple analysis are the psychological effects of the market participants: there might be a switch of behavior when it comes to the supply of UNI which is totally left out. Such superficial estimates do not even provide a raw estimate of the effect the buyback programme would have.

1 Like
79

thats whats i think i was totally agree. feel worth even forcing myself to read it all and try to digest as much as can, simplify what should be. in fact, the improvement should have happened earlier. less debating things that shouldnā€™t need to be debated, focusing on joint development, directly attracting others to get involved. but unfortunately, it never happened as expected.

80

After the Community Call on the 16th of June, the topic of the fee switch being turned on as a, ā€œBuyback and Keepā€ model was thoroughly discussed with the community being overwhelmingly in favor of implementing such a proposal.

Some key delegates also expressed their approval of such a proposal and the next steps will be discussed on the PenguinĀ“s Party discord.

IĀ“ll keep you in the loop.

1 Like
81

Has there been any update on this?

82

The topic of the fee switch has died down with the SEC conducting a formal probe of the Uniswap Labs so its hard to say whats gonna happen when.

If I were you, IĀ“d not count on the fee switch turning on anytime soon.

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83

Timeline aside, have we settled on the way of turning the fee switch on? Would it be buy back and burn if that days arrive? Presumably after SEC probe

84

Im not sure an agreement was made, but buy and burn/buy and keep works either way. Just depends on what the delegates prefer.

The last time the delegates preferred buy and keep.

1 Like