We appreciate the initiative from @leighton and @guil-lambert moving this pilot program forward. In general, Alastor supports moving forward with a fee switch pilot program, even if it doesn’t necessarily match our specific recommendations verbatim. A few additional thoughts from the Alastor side of things:
Regarding Pilot Pools - While we stand by our stance that implementing the fee switch on lower fee tier pools creates perverse incentives for LPs relative to the overall goals of the community, we are not against including one of these pools in a pilot to test this thesis. That said, we would recommend using the 0.05% ETH-DAI pool rather than 0.05% ETH-USDT pool as the 0.05% test case. Our rationale:
-
ETH-USDT makes up the largest ETH-Stable spot-trading market in the world today (~3x the volume of ETH-USDC across both DEX/CEX competitors), of all ETH pairs Uniswap should be targeting this volume rather than disincentivizing its most efficient liquidity
-
Relatedly, Uniswap decentralized market share in ETH-USDT is much lower than that of the other two ETH-Stable pairs being considered (~50% against, versus >90% in both ETH-USDC and ETH-DAI)
-
While the ETH-DAI pools do indeed have smaller TVL than ETH-USDT, they are similar when normalized against volume serviced
Ultimately, we believe that it would behoove the community to utilize ETH-USDT as the primary test case to see if market share can truly be improved by utilizing the fee switch as an LP incentivization tool given the market share runway that currently exists.
Regarding Tracking & Measurement - To echo @msilb7, we would strongly encourage defining decentralized volume market share as the primary measurement of success for this pilot. We also would recommend (at a bare minimum) tracking order volume prior to and during the pilot program as well as tracking TVL flow, on both an aggregate and on an individual level in the days and weeks following implementation. It is important that the ramifications of this pilot not simply be considered anecdotally.