I recommend listening to the 2nd Uniswap community call to everyone who missed it. There’s some quality discussion there. After hearing additional arguments, I’d like to adjust my stance.
I acknowledge that there is a strategic value to incentivizing the WBTC pool in the near future.
Addressing my previous arguments:
- The market leadership argument is not entirely correct.
Uniswap is the leader in volume on WBTC/ETH pair, but it’s far away from leadership on BTC/ETH pair, of course - and this is a top-3 market in crypto space. - In terms of slippage on large trades, WBTC is the only pool that it makes sense to incentivize comparatively:
0,01% slippage seems like a good target to strive for.
As WBTC traders utilize the liquidity more in terms of trade sizes, additional incentivization would bring the experience on par with top USD pairs.
- WBTC has the smallest number of makers and takers among the top-4 pairs.
This fact doesn’t imply the direction of incentivization, though.
Do we want to reward a pair with more makers and takers to decentralize the distribution? Or a pair with fewer makers and takers in hopes that the number grows?
- WBTC-ETH pair is indeed the most responsive to liquidity incentives, likely due to the lower volatility.
Even though the retention of liquidity after the program is only 31%, the growth in Liquidity/Volume ratio compared to the period before the program is still quite substantial:
Another notable pair in this table is DAI.
As we can see, DAI gained the most out of the UNI program in terms of Liquidity/Volume ratio growth.
How we interpret these results is up to us.
In my opinion, the key difference between Sushi and UNI programs is that the first one incentivized a lot of pools, and the latter only 4.
Being one of the top four pools brought a lot of legitimacy to DAI and WBTC, which had positive feedback loops regarding LPs’ comfort to park their money.
The least successful pair in terms of gaining retention effects from the program is USDC.
- The money that will go to the WBTC-ETH pool will likely stay there only temporarily for the program’s duration. And the large portion of the distribution will likely be received by large funds.
It then comes down to the decision we need to make - how strategically important it is for us to have big liquidity on the BTC pair.
If we find it crucial, we can opt to renew WBTC incentives repeatedly and keep that temporary liquidity.
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The reasoning above would make me vote for the proposal that would incentivize only the WBTC pair.
There is no significant drawback on USD pairs in trading experience, they perform well without the program, and Uniswap doesn’t have a new niche to take with them. So I would vote against restarting LMP for them.
If I were to modify the initial proposal, I would take an even amount out of all USD pairs, not just DAI.
DAI pair in the initial program invited a bigger number of new LPs to Uniswap - and was a quite successful investment in general.
Overall it makes me neutral, so I will actively abstain from voting .
I believe both outcomes have their own merits and drawbacks, and I approve of both of them.