[SURVEY] Liquidity mining program: continuation and restructuring

For the first two months, the rate of distribution for the liquidity mining program is 10 million UNI per month. For the first year, the governance assets vault will be receiving 14.33 mil UNI/month, so there’s an opportunity for continuation.

This topic is meant to give us an initial idea of what’s the community sentiment is.

1. Should the liquidy mining program be continued at all?
  • Yes
  • No
  • Not sure

0 voters

2. In comparison to the initial liquidity mining program, should we:
  • Increase the budget
  • Keep the budget as it is
  • Reduce the budget
  • Not sure

0 voters

3. When it comes to the pools that participate in liquidity mining program, should we:
  • Keep them as they are
  • Change them
  • Not sure

0 voters

4. If we were only to restructure the existing pools, should we:
  • Keep them as they are (4 pools, even split, uneven APYs)
  • Make one shared pool with even APYs
  • Make one shared pool and replicate the current APY ratios
  • Make one shared pool with different APY ratios
  • Other
  • Neutral
  • Not sure

0 voters

If you’d like a deep dive into the implications of one shared pool system, here’s the topic.

5. Presently UNI tokens that are locked in liquidity pools are not allowed to vote. Should we include UNI/ETH pair to the liquidity mining program?
  • Yes, add it as soon as possible.
  • Yes, but only after we allow pooled UNI to vote
  • No
  • Neutral
  • Not sure

0 voters

6. Should we include anything other than ETH, USD, UNI, BTC to the liquidity mining program?
  • Yes
  • No
  • Neutral
  • Not sure

0 voters

7. Should we add USD-USD pairs to the program?
  • Yes, on even terms with other pairs
  • Yes, on worse terms than other pairs
  • No
  • Neutral
  • Not sure

0 voters

Cheers.

4 Likes

I’ve been thinking about the UNI liquidity mining program. And, I came to the following conclusions:

  • Ultimately, we want more liquidity on Uniswap for all pairs. Not just a few of them. That being said, I’d love for any liquidity pool token to be used for the UNI liquidity mining program.
  • Budget could be the same, or could be reduced. In case there’s more pairs, there’d also be much more liquidity locked for UNI farming, so it’d make sense to keep the budget the same (for now).
  • It would be nice to have ‘locked’ UNI be eligible for voting. After all, it’s part of the ecosystem and it would (hopefully) increase voting participation. Again, Uniswap governance should only be used where needed and not just for small topics - but these ones seem major enough to me.

Just my 2 cents on this topic.

Edit, would encourage anyone to continue the conversation at : An upgrade for UNI liquidity mining distributions system [similar tokic]

10 Likes

I think we should reward pools were we want to be competitive. This includes all common base pairs (USDT, DAI, USDC, WBTC).

And might eventually include all most traded pairs. The reward should be much lower and coupled to the volume.

For example: liquidity pools receive 2% of the value of received fees in UNI as an extra reward. This stages us to turn on the fee switch in the future.

3 Likes

I agree completely! We must realize how liquidity mining rewards are an extremely powerful tool to incentivize liquidity. However, we should us it tactically and sparingly; rewards should be increased to ward off competitors and, likewise, should be decreased when there is no immediate threat (down to a baseline level to further decentralize and distribute UNIs). If a competing DEX dominates a certain pair, then liquidity mining rewards should be used to incentivize the same pair on Uniswap to gain market share (provided the pair involves respectable tokens).

6 Likes

If we don’t add UNI/ETH to the pools it will continue dumping. Every other farming protocol includes an incentive for the farmed coin so that you can shield yourself from the inflation by staying in the pool. There is no mechanism in UNI to shield yourself from the inflation. HODLers of UNI subsidize the farmers who dump and have no intention in ever participating in governance, and lack of liquidity in the coin means that these large market sell orders cause bigger impact.

Which delegate can I add my votes to for getting this pool operational ASAP?

5 Likes

Filled in the questionaire mr Po good job on making something real!

I understand your worry, but I would emphasize two things about UNI:

  1. Not everything is about the price! UNI is first and foremost a governance token, not a farming token. This is not a token that will 10x in a week, nor should it be. Speculators might hope it will, but speculation creates bubbles and hurts the protocol. I know it feels bad for someone to have bought at ATH and to see the token slowly decrease in value, but it is what it is.
  2. If you are indeed worried about the price, then fear not! Once the dividend scheme is clarified and implemented, UNI will stabilize to a level in line with the return from the dividends. It’s not adding UNI/ETH to the mining rewards that will make Uniswap more valuable as a protocol. If anything, this will just increase speculation. Dividends will come and the price will adjust accordingly.

You point out that other farming protocols give out additional rewards for those that provide liquidity for the protocol’s token. As I mentioned, UNI is not a farming token. But even if it were, these schemes are not at all sustainable and we’ve already seen many rug pulls.

Think of UNI as a stock. Companies issue new shares all the time to raise money, so stocks could be said to be subject to some form of “inflation”. However, if the money raised with these new shares is used to invest in the company and to make it more valuable such that the company grows in value more than it is diluted, then the company’s stock price will rise.

You must remember that most (if not all) of the 2% yearly inflation will go to the community treasury. If that money is invested properly to grow the protocol’s value (through proper governance) such that the protocol grows in value by more than 2% per year, then inflation will not hurt the price!

5 Likes

Yeah i see that perspective. That seems to be the consensus here which worries me. The token model clearly has no support for holders right now. All benefits go to the LPs. I will just provide the liquidity in subsidized pool and sell my UNI to reinvest until we can get a change in the token model or the price drops to a level where the P/E ratio of the treasury is below 10.

UNI/ETH to be added to the pools

2 Likes

I think we should reward pools were we want to be competitive.

I Also strongly agree with this. The question is what pairs to target, where UNI can provide value.

Imo, stable coin pairs such as usdt/usdc pairs should be out, as curve and other platforms have better dynamics in place for that.

I think wbtc pairs should be targeted, as wbtc will continue to grow as eth grows.

We need to find pairs with sustained long-term volume not chasing flash-in-the-pan new coins. Introducing more wrapped coins (not sure who will be custodian - perhaps even uniswap could), might be beneficial to tackle incoming competition from platforms such as pols.

Regardless, we should definitely use the funds to continue to give uniswap a competitive edge over competition and maintain its role as DEX market leader. We’d need to think up some business strategies for this.

4 Likes

That didn’t help any of those protocols though, I mean look at sushiswap and it’s price.

I don’t think a UNI/ETH pool really helps the platform. We need to use the rewards to continue to keep uniswap as market leader. A UNI/ETH pool will only reward UNI holders and will crash the price after rewards end. It seems kind of short-shighted.

2 Likes

What about WBTC and fiat pairs? So, WTBC/DAI, WBTC/USDC, WBTC/USDT?

Volume is low for these pairs, but I’m wondering if it’s a chicken and egg situation. If we lead with higher liquidity in these pools volume could follow.

4 Likes

I think we should let the market decide in real-time as to where the rewards should go. Governors simply decide on how much should be distributed. Inspired by The Graph’s curation bonding curves:

I think those are great pairs to target, and competitive pairs that will drive more volume to the protocol.

Increased liquidity is a good thing overall, as reduced slippage tends to increase the volume and, therefore, the protocol’s profitability.

But there is no profitability for UNI holders here. They do not get any benefit from the increased volume until the fee switch is activated.

Currently, the UNI holder’s only reason to vote for liquidity mining program continuation is if he/she wants to participate in it directly.

With all other things being equal, it would be much more fruitful for UNI holders to wait with liquidity mining program continuation until the fee switch is activated.

1 Like

What about liquidity mining for pairs with low liquidity, and tokens that are vested as not scams by curation lists? Purely as an example, we could have 100k UNI per month for liquidity under a certain amount, and once the liquidity is reached and the month window over, the UNI rewards automatically cease.

what are the pros and cons of activating the switch and why arent we doing it yet?

There are another five months before the fee switch can get activated.
It is also much more fruitful to wait until Uniswap V3 is released before activating it, as the rewards distribution will get much cheaper.

The main pro of activating the fee switch is that UNI holders will get part of Uniswap’s fees. The main con is they take that money from the 0.3% commission LPs currently get.

So any liquidity mining program becomes much more fruitful for UNI holders after that event happens.

Before that, I find it highly unlikely that small pools could participate in the program.

As I’ve said earlier, presently, the only reason to vote for a pool getting additional UNI rewards is if you are an LP in the pair you vote for.

So only big pairs have a chance to get the rewards in the near future.

hmmm…IMO I think that UNI holders rewards should be pretty small even though this is against my own interests. Liquidity providers are risking their cash quite a bit. Maybe 5-10% of fees to UNI holders.

It is hardcoded that UNI holders can take a maximum of 0.05% of the volume.

When it comes to the LP newcomers, that will bring them from 0.3% to 0.25% fees. These are still very high fees.

For LPs, the main problem is not the commissions they receive. These commissions are these high in the first place to compensate for the high risks they take due to the impermanent loss problem.

As a matter of fact, there are technical solutions that help deal with the IL problem. And if they’re successfully implemented in Uniswap V3, the risks LPs take will get drastically lower.

And with drastically lowered risks, it makes sense to reduce the reward as well. In this scenario, I’d argue that reducing the overall fee is reasonable too, but it’s not something we got control of.