Disclaimer: this comment was co-authored by Alana Levin and Derek Walkush, investment partners at Variant. Variant is an investor in the UNI token and Uniswap Labs, Inc.
TLDR:
- In favor of experimentation
- The experiment should test non-core pools for data points that map to the rest of Uni pairs; strong candidates include WBTC/USDC, DAI/ETH, and USDC/ETH
- The first fee switch worth testing may be one that generates non-UNI assets for the treasury; these funds should be used to incentivize ecosystem growth among other Uni stakeholders
Derek and I are in favor of experimentation with fee splits, and think the proposal outlined is incredibly thoughtful and a strong step in the right direction.
Pool Analysis
We agree that the biggest risk, as pointed out by several commentators, is a liquidity drain among core pools. As such, there’s likely a good middle ground of pools to test – ones that are not core pools (e.g., USDT/USDC and USDC/ETH, as pointed out by Monet Supply) but are still sufficiently large to gather data points that map to the rest of Uni pairs. Having relevant data points will help better understand the potential impact of broader / more widespread fee switch implementations.
The optimal pool should satisfy the following conditions:
- Relatively high Volume / TVL (APY) so LPing still remains profitable
- Relatively deep liquidity to not potentially drain important liquidity
- Ideally relatively similar valued assets to avoid potential IL increases
Below is an analysis of Uni V3 pools 11th-20th in TVL:
From the analysis, WBTC/USDC, DAI/ETH, and USDC/ETH (1% tier) seem to be suitable pools for experimentation.
Fee Switch Design
We’re supportive of directing a portion of the fees toward building non-UNI reserves in the treasury (with funds potentially stored in stables), in line with Toby’s comment. We agree that those funds should be invested in continued growth, e.g., funding grants, incentivizing integrations, and whatever else the community determines may help Uniswap grow.