Hi all, Honn from the Uniswap Foundation here. Over the past few weeks, we have completed Phase 2 of the Optimism Uniswap Protocol Liquidity Mining Program. With the help of community members, we conducted a retrospective analysis on this phase, further exploring the impact Phase 2 had on Uniswap, Optimism, and the pools at hand.
Below, we summarize a few key takeaways of the program’s impact:
liquidity in all pools noticeably increased, except OP-USDC 0.05% (which may have been a result of fragmented liquidity w/ a competing pool)
All trading pools other than USDC-DAI increased in swapping activity
The wstETH-ETH pool became very active due to people needing to buy the tokens to provide liquidity
Trading slippage for all pools is significantly lower in time and volume
The tokens involved with the program were heavily bridged over to Optimism after the program started
With that, the Uniswap Foundation’s recommendations for Phase 3 include, but are not limited to:
Add a long tail asset to assess whether the volume in tokens bridged over are attributed to the Liquidity Mining Program or general popularity of the asset
Remove the OP-USDC 0.05% pool as it did not result in increased liquidity. This may be due to the presence of OP-USDC 0.3% pool in the same program, fragmenting liquidity
Cover more ground by avoiding overlap with other ongoing liquidity mining programs
With the success of the previous phases of the Optimism-Uniswap Protocol Liquidity Mining program, we would like to continue empowering the community and liquidity managers to own initiatives on behalf of the ecosystem. For Phase 3, each liquidity manager (Arrakis, DeFi Edge, Gamma, and xToken) will be running point on an equal portion of the remaining 650K OP tokens, with the UF helping to coordinate and minimize overlap.
Hi @honn24x, thanks for the proposal and continued recommendation for liquidity mining on Optimism.
I’m the founder of Revert (https://revert.finance/) we are an analytics and management tool for LPs in Uniswapv3 (and other AMM protocols). Part of our suite of products is an auto-compounder for UniV3 positions, which has been deployed and in use since July 2022.
We would like to throw our hat into the ring and propose that individual LPs be also incentivized to provide liquidity via the auto-compounder. We have experience doing this as we have already done an incentives program funded directly with the Optimism Collective.
We have built a landing page to distribute the rewards via Merkel distributor contract which could be reused for another period if the community supports this idea. You can check it out here.
Worth noting that it in this case the incentives would only apply to the suggested pools, which would not be a problem, but one big advantage of including this is that incentives would also go to individual LPs instead of only trough liquidity managers. As you know individual LPs represent a majority of the liquidity in the protocol so it would be great to include them.
Hi everyone, this is Paul Sengh from Delta One. It’s great to see some analytics on the performance of LM! We commend the liquidity managers for making the process of LP’ing easier for end users, especially on promising new venues like Optimism.
Still, I believe there is substantial room for growth in UF outlining a clearer set of KPIs for the incentives. The analysis linked here shows a fairly trivial outcome: rewards can successfully rent liquidity. I urge us as a community to push further. Some data I’d like to see: volume and liquidity per dollar of incentive spend (along with simulations), competitive analysis to other DEXs, LP profitability compared to the other protocols on Optimism (risk-adjusted), LP behavior from receiving rewards (i.e. selling of rewards), and much more.
As someone who has worked in the liquidity management space for 2+ years, I’d be happy to dive deeper into this analysis if the community believes it is worthwhile.
From the Gamma side, these are the following pools we will be incentivizing:
OP-USDT - 0.3%
OP-USDC - 0.3%
WETH-USDT - 0.05%
USDC-SNX - 0.3%
WETH-SNX - 0.3%
Rationale for choosing these pools:
At a high-level, we’re really looking at where there’s underutilized volumes on Uniswap.
OP is a high volume token with not enough trade routes to other bluechip tokens. Additionally given the high amount of OP rewards being distributed by the ecosystem, we can have pretty good volumes for a multitude of trade routes.
SNX is mostly traded on full-range liquidity, and I think Uniswap can capture a lot of that market share of volume with just a bit of concentration.
We think also think that WETH/USDT has great volume potential with more liquidity
Happy to take feedback from the community, and I believe Arrakis, xToken, and DefiEdge are all doing different pairs, so we don’t overlap and cover a good number of pairs to attract volumes for Uniswap!
For the 3rd Phase of the Uniswap Optimism Liquidity Mining Grant, we (Arrakis Finance) would like to present the pools we Arrakis Finance believe would make the most sense to reward as well as the reasoning for them.
Pools to Incentivize:
Rationale:
LUSD has been picking up in volumes on all networks, and has been seeing a lot of adoption so we believe it makes sense to move more of this community over to Optimism.
Optimism is already incentivizing wstETH/ETH directly to Arrakis, so in our eyes it makes sense to also incentivize the other largest LSD rETH.
The wstETH/USDC pair is a interesting pair, especially as the average trade size on Optimism is $50, it makes sense to give people on Optimism an easy opportunity to access wstETH.
The UNIDX rational is that it has been seeing a lot of activity and volumes on Optimism, we think its a project that could be beneficial to the Optimism ecosystem.
Incentive Structure:
The pools will all be incentivized equally, over a period of 3 months.
Hey everyone - xToken proposes the following pools:
sUSD-USDC 0.01%(highly concentrated range)
With recent increased activity on Synthetix’s Perps v2 product, sUSD liquidity on Optimism is in high demand. sUSD liquidity on Optimism is currently dominated by Velodrome, representing an opportunity for Uniswap LPs. We’ll be incentivizing the lowest fee pool to drive volume.
OP-WETH 1%(full range)
On the back of our highly successful OP-governance-funded 6 month LM program for the OP-WETH 0.3% pool, we wanted to experiment with a different approach for another OP LM program. We noticed there were several periods of very high volatility for the OP token over the life of the previous program. As such, for this program, we will be incentivizing the 1% pool instead of the 0.3% pool to generate some primary data on whether the 1% pool on this pair may be more profitable for LPs.
wstETH-DAI(full range)
We envision a future where ETH liquid staking derivatives become the dominant liquidity pair in DeFi, instead of ETH. For LPs, earning the ~4% or so annualized return from ETH staking – on top of any trading fees and rewards – will become the default. Right now, there is currently some risk surrounding liquid staking solutions, but we believe LPs will begin trending towards LSDs now that the Shanghai upgrade is live. Programs like this one can help establish wstETH and other LSDs as key trading pairs.
Incentive Structure
Rewards will be divided equally among the pools over a 12 week period.
Rationale for these pools:
The choice of our above tokens is to choose the high TVL pools with different
co-relations while targeting the tokens that usually are held generally outside
UniswapV3 as well, e.g. WETH, WBTC, etc. The diversity ensures to attract users of
different risk appetites with Stable-Stable, Stable-Volatile and Volatile-Volatile pairs
both with high and low correlations between the two pools tokens.
We would love the suggestions/feedback from the community for our selected pools.
We have tried to keep a good balance between blue chip pairs and good established pairs. To ensure manifold benefits to the OP ecosystem along with providing diverse choice of pools for the DeFi community.
Hi @wario and @paulsengh, thank you for your interest and ideas in the Uniswap Optimism Liquidity Mining Program. We are always looking to iterate and experiment with new ideas that could further increase the effectiveness of liquidity mining programs.
We believe that these would be great ideas to explore with the Uniswap DAO’s Arbitrum Airdrop from the Arbitrum Protocol Airdrop Program! Conversations regarding how to best utilize the airdrop will begin soon so please keep an eye out for that in the forums.
Thank you to everyone who provided feedback and to the Liquidity Managers for posting the pools they plan to incentivize along with their rationale. We are working to disperse the remaining 650K OP tokens to the liquidity managers.
With that, we will be beginning the last phase of the Liquidity Mining Program on Wednesday, May 3rd. The program will last approximately 12 weeks and end around the first week of August. The following pools will be incentivized:
